9911796707
TMI Blog2023 (8) TMI 333X X X X Extracts X X X X X X X X Extracts X X X X ..... ABB Technology Limited (Now known as ABB Switzerland Ltd - the Appellant) was assessed at Bangalore, by the DCIT (International Taxation), Bangalore for AY 2014-15 who passed assessment order dated 22.12.2017 u/s. 143(3) 143(3) r.w.s 92CA of the Income-tax Act, 1961 ('the Act'). Aggrieved with the adjustment made in the Order, ABB Technology Ltd filed an appeal before the Commissioner of Income-tax (Appeals) -12, Bangalore. While the appeal was pending to be heard before the Commissioner of Income-tax (Appeals), Bangalore, M/s ABB Technology Limited, Switzerland (Bangalore entity) was merged into ABB Switzerland Ltd (Mumbai entity). In the meanwhile, the Commissioner of Income-tax (Appeals) -12, Bangalore passed the order dated 29.03.2019, upholding the adjustment made in the assessment order. Since the merged entity i.e., ABB Switzerland Ltd, was getting assessed at Mumbai, the assessee filed the appeal before the ITAT, Mumbai, on 12.09.2019. There was a delay of 100 (one hundred) days while filing this appeal before the ITAT, Mumbai. The assessee also filed condonation petition along with the affidavit while filing the appeal stating the reasons for the delay that due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (SC), Lala Mata Din vs. A. Narayan AIR (1970) (AIR 1953) (SC) and Suhas Suresh Shet v. ITO, International Taxation (140 taxmann.com 96)(Bang. Trib). It was submitted that no prejudice would be caused to Revenue by admitting the instant appeal. In view of the above, condonation of delay was prayed for. 5. After hearing both the parties and considering the reasons for delay explained by the assessee, respectfully following the Hon'ble Supreme Court judgment in the case of Collector, Land Acquisition v. Mst. Katiji Ors. (1987) 167 ITR 471 (SC), we are of opinion that there was reasonable cause for delay in filing the appeal before the Tribunal and condone the delay. 6. The assessee has raised the following grounds of appeal:- "1. The orders passed by learned Deputy Commissioner of Income-tax (International Taxation), Circle-1(1), Bangalore ("learned AO") under section 143(3) read with Section 92 CA of the Act and the learned CIT(A) under Section 250 of the Act to be struck down as invalid, as the orders are based on surmises and conjectures, and hence are bad in law and facts. 2. The learned AO and the learned CIT(A) have erred in law and facts by assessing the total income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Form 3CEB that assessee had received Rs. 185,69,65,563 as royalty from M/s. ABB India Ltd. but in the return of income the assessee had offered only Rs. 184,07,46,730. A show cause notice was issued to the assessee on the difference of Rs. 1,62,18,833 in respect of royalty income. In response, the assessee submitted that ABB India Ltd. had unilaterally created a provision of Rs. 1,62,18,833 in respect of royalty payments and since no corresponding invoices to such provision was raised by the assessee company, it did not declare this royalty income. Further, it was stated that royalty is taxed in the year in which consideration towards the same is received. The AO held that royalty arises in India and therefore such royalty income is duly taxable in India as per Indian Taxation laws. He referred to Article 12(2) of India-Switzerland DTAA and noted it is apparent that royalty income may be taxed in the Contracting State in which they arise and according to the laws of that State. Where the meaning of a term is not defined in the Treaty, the domestic Act may be referred and u/s. 9(1)(vi) of the I.T. Act, 1961, royalty income is charged on accrual basis and not on receipt basis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the Bombay High Court judgment in the case of DIT(IT) v. Siemens Aktiengesellschaft (ITA No. 124 of 2010 dated 22.10.2012), the issue of fees for technical services in India-Germany DTAA was decided in favour of the assessee. He submitted that provisions of Article 12 of DTAA for royalty and fees for technical services between India- Switzerland and India-Germany are similar and therefore the decision of the coordinate Bench is squarely applicable to the assessee's case. He also relied on the following decisions:- DCIT v. Uhde Gmbh (1996) 54 TTJ 355 (Mum. Trib) DIT(IT) v. Siemens Aktiengesellschaft (ITA No. 124 of 2010 dated 22.10.2012) Johnson & Johnson v. ADIT (IT-3) (2013) 32 taxmann.com 102 (Mum. Trib) Booz Allen & Hamilton (I) Ltd. & Co. Kg. v. ADIT(IT)1(1) (2012) 28 taxmann.com 245 (Mum. Trib). CSC Technology Singapore Pte Ltd. v. ADIT Cir. 1(1) [2012] 19 taxmann.com 123 (Del Trib) 12. The ld. DR relied on the orders of lower authorities and submitted that as per Article 12 of the DTAA provisions, royalty and fees for technical services arising in India and paid to non-resident should be taxed on accrual basis. Therefore the royalty arises in India in the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racting State may be taxed in that other State." The Mumbai Bench of Tribunal in the case of UHDE GMBH (supra) has examined the issue as to whether the royalties of FTS is taxable on receipt basis or accrual basis. For the sake of convenience we extract below the operative portion of the order:- "3. The AO, inter alia, relying on the Madras High Court decision in the case of CIT vs. Standard Triumph Co. Ltd. (1979) 119 ITR 573 (Mad), had held that the income by way of fees for technical services was liable to be taxed on accrual basis and not on receipt basis. When the matter was carried in Appeal, the CIT(A) relying on art. VIIIA of the Agreement for the Avoidance of Double Income-tax between India and the Federal Republic of Germany, held that the same was liable to be taxed on receipt basis. It is, this controversy, we are required to resolve in this appeal. 4. After hearing the parties to the dispute, we are of the view, that the order passed by the CIT(A) does not suffer from any legal infirmity. There cannot be any dispute that where there is a conflict between the agreement for avoidance of double taxation and the domestic laws relating to taxation of income arising in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of s. 5(2)(b) of the IT Act and art. VIIIA of the treaty for avoidance of double taxation and we have also adverted to the accepted principle of interpretation that when there is such a conflict, the provisions of the treaty would have to prevail. In the light of this discussion, what emerges is that in the case of a non-resident, who is a resident of Germany, income arising to him in India by way of royalties or technical charges could be taxed in India but that could be only on the receipt basis." 10. The Hon'ble Bombay High Court has also considered an identical issue in the case of M/s. Siemens Aktiengesellschaft (supra) and it was held as under: 2. As regards first question is concerned, the Income Tax Appellate Tribunal referring to para 1 to 3 under Article XII -A of the Double Taxation Avoidance Treaty with the Federal Germany Republic as per notification dated 26th August 1985 held that the assessment of royalty or any fees for technical services should be made in the year in which the amounts are received and not otherwise. Counsel for the Revenue relied upon the Special Bench decision of the Tribunal in the assessee's own case, which in our opinion, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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