9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (8) TMI 333 - AT - Income TaxIncome accrued in India - Taxability of foreign income in India - Royalty receipt - Fees for Technical Services on accrual basis - differential amount of actual receipt and amount as accrued - determination of actual receipt in accordance with the India- Switzerland Tax Treaty - HELD THAT - The assessee is a NRI and has received royalty from ABB Technology Ltd. of Rs. 184,07,46,730 which has been offered to tax @ 10% and the same is reflected in Form 26AS. The assessee is offering income since AY 2011-12 on cash basis. From the Form 3CEB the AO found a difference - AR assessee submitted this amount has not been received by the assessee. The facts of the above decision on fees for technical services in M/s. ABB AG ( 2020 (12) TMI 74 - ITAT BANGALORE relating to India-Germany DTAA are similar to present case as held that FTS is taxable only in the year of receipt as per the provisions of DTAA. Accordingly, we are of the view that the tax authorities are not justified in assessing the impugned income on accrual basis. Only difference is that it relates to royalty under India- Switzerland DTAA, and Article 12 of DTAA defines royalty and fees for technical services in the same manner and also the DTAA provisions of India-Germany and India-Switzerland are similar. Therefore, respectfully following the above judgment, we allow the appeal of the assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Validity of the assessment orders. 3. Addition of INR 1,62,18,833 to the returned income. 4. Taxation of royalty income on accrual vs. receipt basis. 5. Double taxation of royalty income. 6. Levy of interest under Section 234B. 7. Initiation of penalty proceedings under Section 271(1)(c). Summary: 1. Condonation of Delay: The assessee's appeal was initially filed before ITAT Mumbai, which was later withdrawn and refiled at ITAT Bangalore due to jurisdictional issues clarified by the Supreme Court in PCIT v. ABC Papers Ltd. The delay of 1,377 days was condoned following the principles laid down by the Supreme Court in Collector, Land Acquisition v. Mst. Katiji Ors., recognizing reasonable cause for the delay. 2. Validity of Assessment Orders: Ground No. 1, challenging the validity of the assessment orders, was not pressed by the assessee and was dismissed as not pressed. 3. Addition of INR 1,62,18,833: The main issue was the addition of INR 1,62,18,833, which the AO included as royalty income based on Form 3CEB. The assessee argued that this amount was not received and thus not declared. 4. Taxation of Royalty Income: The assessee contended that royalty income should be taxed on a receipt basis as per the India-Switzerland DTAA. The AO and CIT(A) held it should be taxed on an accrual basis. The Tribunal, referencing the case of M/s. ABB AG and similar provisions in the India-Germany DTAA, ruled in favor of the assessee, stating royalty should be taxed on a receipt basis. 5. Double Taxation: The assessee argued that taxing the royalty on an accrual basis would result in double taxation as it was already taxed on a receipt basis in a subsequent year. The Tribunal directed the AO to verify if the impugned income was offered to tax in the subsequent year. 6. Levy of Interest: Ground No. 7 regarding the levy of interest under Section 234B was deemed consequential and not separately adjudicated. 7. Penalty Proceedings: Ground No. 8 concerning the initiation of penalty proceedings under Section 271(1)(c) was also deemed consequential and not separately adjudicated. Conclusion: The Tribunal allowed the appeal, setting aside the additions made by the AO and CIT(A), and directed the AO to verify the taxation of the impugned income in subsequent years. The decision emphasized the precedence of DTAA provisions over domestic law in cases of conflict, specifically regarding the taxation of royalty income on a receipt basis.
|
