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TMI Blog2022 (12) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant and hence erred in not granting credit to the Appellant of such taxes already deposited by JAL. 2. On the facts and in the circumstances of the case and in law, the learned AO while arriving at the tax liability of the Appellant, erred in not granting credit of taxes already deposited by JAL into the Indian Government Treasury with respect to income earned by the Appellant from JAL as per the provisions of Section 199 read with Section 205 of the Act. 3. On the facts and in the circumstances of the case and in law, the learned AO erred in not granting the refund due to the Appellant, of excess taxes paid/deposited for the subject AY. 3. Briefly the facts are, the assessee is a non-resident corporate entity incorporated in United Kingdom (UK) and a tax resident of UK. Therefore, the assessee is eligible to claim benefit under India - UK Double Taxation Avoidance Agreement (DTAA). The assessee is the commercial rights holder of Formula One World Championship. The assessee is exclusively entitled to award event promoters with the right to host, stage and promote Grand Prix on various Circuits worldwide and in that capacity entered into a Race Promotion Contract (RPC) wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer held that the consideration received by the assessee with the Indian Grand Prix represented its profit with 56% of the said profit being attributable to the PE in India. 4. Before us, Sh. Percy Pardiwalla, learned Senior Counsel appearing for the assessee submitted that as per the notices of demand issued by the Assessing Officer in pursuance to the final assessment orders the assessee had deposited tax in all these years. He submitted, pursuant to the decision of the Hon'ble Delhi High Court, JAL deposited the TDS amount in respect of RPC fees paid in all the assessment years under dispute which are in addition to the taxes already paid by the assessee on such income. Thus, he submitted, as per the statutory principle laid down under section 205 of the Act as well as settled legal principle, taxes cannot be recovered twice on same item of income. He submitted, though, the assessee filed rectification applications before the Assessing Officer, they were dismissed after repeated follow up action by the assessee on the following grounds: * FOWC did not claim tax credit at the time of filing the return of income/ during the assessment proceedings; * tax credit claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed credit for the TDS amount. Therefore the Assessing Officer had no occasion to grant credit for such TDS. He submitted, JAL has not issued Form 16A to assessee. Further, he submitted, the assessee cannot be granted TDS credit as the TDS amount did not form part of assessee's income. 7. In rejoinder, learned counsel submitted, at the time of actual payment/credit of RPC fee, both the assessee and JAL had a bona fide belief that the payment made was not in the nature of royalty but in the nature of business income. Being of the view that business income is not taxable in India JAL decided not to withhold taxes at the time of actual payment to the assessee. The position adopted by the assessee and JAL was reversed by the Hon'ble Delhi High Court in 2016, by holding that the assessee had a PE in India. Thus, as a result of the decision of the Hon'ble Delhi High Court, JAL was subjected to proceeding under section 201 read with section 195 of the Act by treating JAL as an assessee in default and in pursuance to such proceeding the JAL deposited the TDS amount in Government account. Therefore, non-deduction of tax at source at the time of actual payment cannot be a reason to deny refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re of royalty in terms of Article 13 of India - UK Tax Treaty. Thus, AAR held that JAL was obliged to deduct tax at source on the RPC fee paid to the assessee. Being aggrieved with the AAR Ruling, both the assessee and JAL filed Writ Application before the Hon'ble Delhi High Court. In their judgment, the Hon'ble Delhi High Court overruled the decision of AAR by holding that RPC fee is not in the nature of royalty. However, the Hon'ble High Court held that the assessee had a fixed placed PE in India; hence, the RPC fee is taxable in India. Thus, the Hon'ble High Court held that the JAL was bound to make appropriate deduction under section 195 of the Act from the RPC fee paid to the assessee. Admittedly, by the time, the decision of the Hon'ble Delhi High Court came, which ultimately got confirmed by Hon'ble Supreme Court, JAL has paid the RPC fee to the assessee without withholding tax under section 195 of the Act. Thus, it is a fact on record that the RPC fee received by the assessee was the full amount without suffering any withholding of tax at source. This is the reason, why the assessee did not claim credit for TDS in return of income. Subsequently, as a consequence of the judg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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