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TMI Blog2022 (6) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... present case, all the operations of the assessee were carried out outside India, therefore, in such circumstances offshore distribution commission income earned by the assessee cannot be treated as being reasonably attributable‟ to any operation carried out in India. As the assessee conducts portfolio investments in Indian securities in its capacity as SEBI registered FII/FPI, conclusion of the learned CIT(A) that the offshore distribution commission income is in the nature of business income of the assessee does not require any interference. Thus, in view of the above factual and legal position, we do not find any infirmity in the impugned order passed by the learned CIT(A). As a result, grounds raised by the Revenue are dismissed. Applicability of correct rate of tax on interest income - Charging of tax on interest income received on rupee denominated bonds/government securities at correct rate - HELD THAT:- As the issue pertains to applicability of correct rate of tax on interest income earned by the assessee and since the AO without recording any reasons has applied the rate of 15% under Article 11(2) of DTAA and has also not examined the basic facts regarding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia- Singapore treaty? 3. The Appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. 4. The only issue arising in appeal for assessment year 2014 15 pertains to deletion of addition of commission income received by the assessee from HDFC Asset Management Co Ltd. 5. The brief facts of the case pertaining to this issue, as emanating from record are: The assessee is a company incorporated in Singapore under the Singapore Companies Act. The assessee is a tax resident of Singapore and accordingly, is entitled to the beneficial provisions of India Singapore Double Taxation Avoidance Agreement ( DTAA ). The assessee is registered as Foreign Institutional Investor ( FII‟) with Securities and Exchange Board of India ( SEBI ) and conducts portfolio investments in Indian securities in its capacity as SEBI registered FII/FPI. For assessment year 2014 15, assessee filed its return of income on 29/11/2014 declaring total income of Rs. 26,05,54,889. During the year under consideration, the assessee has carried out transactions in equity shares, GDRs, FCCBs, IDRs, Exchange Traded Derivatives, Debt Securities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at commission paid to assessee cannot be treated as fees for technical services as the assessee is getting a fixed ratio of commission on quarterly basis for rendering the services. The Assessing Officer further held that as the assessee is operating as a distributor/lead manager of HDFC Mutual Fund, an Indian fund, which is controlled and regulated by SEBI and RBI in India, therefore, location control and management of the fund is situated in India, which constitutes a business connection in India and creates a sufficient nexus of the offshore distribution income with India. Accordingly the Assessing Officer taxed the commission income received by the assessee under Article 23 of DTAA r.w.s. 5(2) of the Act. 7. The learned CIT(A) vide impugned order dated 29/07/2019 upheld the conclusion of the Assessing Officer that the offshore distribution income is not fees for technical services. The learned CIT(A) further held that offshore distribution income earned by the assessee is in the nature of business income and in the absence of permanent establishment is not taxable in accordance with Article 7 of DTAA. The learned CIT(A) by further referring to the decision of Co-ordinate Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Explanation 1 to section 9(1)(i) of the Act, further provides as under: (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India; Thus, as per the aforesaid provision of Explanation 1(a) to section 9(1)(i) of the Act, it is only that portion of the income which is reasonably attributable to the operations carried out in India shall be deemed to accrue or arise in India for the purpose of taxation under the Act. 11. In the present case, it is not in dispute that the assessee is non-resident for the purpose of the Act. It is also not in dispute that the assessee earns offshore distribution commission income by distributing Mutual Fund schemes launched by HDFC Asset Management Co Ltd, with a view to procure subscriptions for such schemes from investors outside India. It is further not in dispute that assessee does not carry out any operation within India for the purpose of earning offshore distribution commission income. The Revenue has sought to tax the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble territories, the profits and gains of business deemed to accrue in India through and from business connection in India shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in the taxable territories. If no operations of business are carried out in the taxable territories, it follows that the income accruing or arising abroad through or from any business connection in India cannot be deemed to accrue or arise in India (See CIT v. R.D. Aggarwal and Co. [1965] 56 ITR 20 (SC) and Carborundum Co. v. CIT [1977] 108 ITR 335 (SC) which are decided on the basis of s. 42 of the Indian I.T. Act, 1922, which corresponds to s. 9(1)(i ) of the Act). In the instant case, the non-resident assessees did not carry on any business operations in the taxable territories. They acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by cl. (a) of the Explanation to s. 9(1)(i) of the Act. The commission amounts which were earned by the non-resident assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o setting aside the issue for which the Ld. CIT(A) is not authorized. 3. The Appellant prays that the order of the Ld. CIT(A) on the above grounds be set aside and that of the Assessing Officer restored. 16. The issue arising in ground nos. 1 and 2 raised in Revenue s appeal pertaining to deletion of addition of commission income received by the assessee from HDFC Asset Management Co Ltd. is similar to Revenue s appeal for assessment year 2014-15. Thus, our findings/conclusion in Revenue s appeal being ITA No. 6098/Mum/2019 for assessment year 2014-15 shall apply mutatis mutandis. Accordingly, ground nos. 1 and 2 raised in Revenue s appeal are dismissed. 17. The issue arising in ground No. 3 pertains to charging of tax on interest income received on rupee denominated bonds/government securities at correct rate. 18. The brief facts of the case pertaining to this issue, as emanating from record are: The assessee had offered interest income of Rs. 15,82,11,520 received on rupee denominated bonds/government securities to tax at the rate of 5% under section 115 AD read with section 194 LD of the Act. However, the Assessing Officer vide order dated 29/01/2019 passed under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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