9911796707
TMI Blog2019 (2) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the correct amount of income chargeable to tax - guarantee fee not approved by the Reserve Bank of India (RBI) not be charged to tax in the hands of the assessee - claim of the assessee is that the RBI accorded approval for a sum of ₹ 17.99 lakhs after the filing of return and conclusion of assessment and hence, necessary relief should be given - Held that:- It goes without saying that, if a particular sum is not and cannot be lawfully received by the assessee, the same cannot be charged to tax. However, before allowing any such reduction in income, it is essential to verify that the full amount of ₹ 25.39 lakh was offered for taxation at the first instance. Since the facts have not been examined by the authorities below, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee is a company located in Italy, having several other group concerns around the globe. During the year under consideration, it received Royalty and Technical Fee for the services rendered for SAP implementation and Fees for TP Consultancy rendered in India to its Associated Enterprise (AE), namely, Piaggio Vehicles Pvt. Ltd., Baramati, India, which was offered for tax. The dispute in the instant appeal is on the rate of tax on the Royalty on three wheelers amounting to ₹ 46,47,20,859/- received by the assessee from is Indian AE. The assessee offered such income to tax at 10.5060% u/s.115A of the Income-tax Act, 1961 (hereinafter also called as the Act ) r.w.s. 195A. This was done on the basis of an agreement between the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he rate of 10% under sub-clause (AA), : if such royalty is received in pursuance of an agreement made on or after 1st day of June, 2005 . Sub-clause (A) provides that the income-tax shall be calculated on Royalty income at 20% where Royalty is received in pursuance of an agreement made after 31-05-1997 but before 01-06-2005. Whereas the case of the assessee is that it is covered under sub-clause (AA) of section 115A(1)(b), the Revenue has categorized the assessee as falling in sub-clause (A). 5. If the case really falls under sub-clause (A), then the rate of tax on Royalty income should be 20% plus surcharge etc. At this juncture, it is relevant to note that the DTAA between India and Italy provides for taxability of royalty income at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TAA shall prevail over the Act and work as an exception to or modification of sections 4 and 5. Similar view has been taken by the Hon ble Bombay High Court in CIT v. Siemens Aktiongesellschaft (2009) 310 ITR 320 (Bom.) . In the light of the above discussion, it becomes vivid that if the provisions of the Treaty are more beneficial to the assessee vis-a-vis its counterpart in the Act, then the assessee shall be entitled to be ruled by the provisions of the Treaty. 6. Reverting to the present context, when we read the DTAA with Italy in conjunction with section 115A(1)(b)(A), it emerges that Royalty income in respect of agreements entered into after 31-05-1997 and before 01-06-2005 should be charged to tax at the straight rate of 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AE is chargeable to tax at 10.5060%. The impugned order is vacated to this extent. 8. The assessee has raised an additional ground as per which an amount of ₹ 7,40,616/- out of total guarantee fee of ₹ 25,39,810/-, not approved by the Reserve Bank of India (RBI), should not be charged to tax in the hands of the assessee. 9. The factual matrix of this ground is that assessee stood guarantor for PVPL, its Indian entity and the guarantee fee was settled at ₹ 25,39,810/-. The Indian entity filed an application with the RBI seeking permission for the remittance of the aforesaid amount of guarantee fee to the assessee. During the pendency of such application, the assessee, a resident of Italy, filed its return including gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entual receipt of lower sum of ₹ 17.99 lakh. In case, it is found that the assessee included guarantee fee of ₹ 25.39 lakhs in his total income and further the RBI did not accord approval for a sum of ₹ 7.40 lakh, which was not received also, then the said sum of ₹ 7.40 lakhs should be reduced from the total income of the assessee. Needless to say, the assessee will be accorded an opportunity of hearing in determining such issue. 11. Ground regarding charging of interest u/s 234B of the Act is consequential. A.Y. 2013-14 : 12. The only issue raised in this appeal is against the rate at which the royalty income of at ₹ 45,83,52,382/- earned by the assessee from its Indian Associated Enterprises, pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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