ADDLCIT, SPECIAL RANGE-9,, NEW DELHI vs. VSERVE BUSINESS SOLUTION P.LTD, GURGAON
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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’ NEW DELHI
Before: SHRI SAKTIJIT DEY & DR. B.R.R. KUMAR
PER SAKTIJIT DEY, JM:
This is an appeal by the Revenue against order dated
21.02.2017 of learned Commissioner of Income Tax (Appeals)-13,
New Delhi, for the assessment year 2011-12.
The grounds raised by the Revenue are as under:
On the facts and circumstances of the case the Ld. CIT(A) has erred in directing the AO to allow relief u/s 90 of the I.T. Act without appreciating the fact that the assessee never claimed such relief in the income filed and never revised the return.
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On the facts and circumstances of the case the Ld. CIT(A) has erred in ignoring the fact that the assessee never furnished any details/evidences required for claiming relief u/s 90 of the I.T. Act before the AO. 3. On the facts and circumstances of the case the Ld. CIT(A) has erred in deleting the additions made u/s 2 (22)(e) of the I.T. Act without appreciating the fact that interest free loan was received by the assessee company and all the conditions stipulated in sec. 2 (22)(e) are fulfilled.
The first issue which arises for consideration is, whether the
assessee is eligible to claim deduction/set off of income tax paid
in Unites States of America (USA) against the tax payable in India.
Briefly the facts are, the assessee is a resident company
stated to be engaged in the business of development of software.
During the year under consideration the assessee had rendered
software development services to customers in USA and earned
Revenue. Since, a part of such services was rendered by the
assessee onsite, corresponding income was offered to tax in USA
and tax at the appropriate rate was also paid in USA. In the
return of income filed for the impugned assessment year in India,
the assessee declared nil income under the normal provisions
after claiming deduction under section 10A of the Act. However,
assessee declared book profit of Rs.4,94,18,810/- under section
115JB of the Act and paid tax thereon. In course of assessment
proceeding, the assessee in written submission filed before the
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Assessing Officer claimed relief from double taxation under Article
25 of India – USA Double Taxation Avoidance Agreement (DTAA),
insofar as the tax paid in USA. However, the Assessing Officer
rejected assessee’s claim on the ground that such claim was not
made either in the original return of income or by way of filing
revised return of income. Further, he observed, the assessee did
not furnish any certificate from the foreign tax authorities in
terms with section 90 of the Act. Accordingly, he rejected
assessee’s claim.
Learned Commissioner (Appeals) having appreciated
assessee’s submissions, observed that the assessee could not
have claimed the relief in the original return of income as the
assessee had filed its return of income in USA and paid tax
thereon on 27.08.2013. Whereas, the original return of income
was filed in India on 30.11.2011. Further, noticing that the
assessee has paid tax on the same income both in USA and in
India, learned Commissioner (Appeals) held that assessee is
entitled to relief from double taxation under Article 25 of the India
– USA DTAA. While coming to such conclusion, he also observed
that in assessment year 2012-13, the Assessing Officer has
himself allowed relief from double taxation to the extent of taxes
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paid in USA while passing the assessment order under section
143(3) of the Act under identical facts and circumstances.
Accordingly, he accepted assessee’s claim.
Before us, learned Departmental Representative submitted,
the assessee has to claim credit for double taxation by filing Form
No. 67 before the Assessing Officer, which assessee did not file.
Further, he submitted, the assessee has not paid any tax on the
income which is exempt under section 10A. Therefore, question of
allowing relief from double taxation does not arise. Without
prejudice, he submitted, in assessee’s case there cannot be any
double taxation as assessee’s tax has been computed under
section 115JB and the assessee is eligible to claim credit of such
tax in future. Thus, he submitted, assessee’s claim cannot be
allowed.
Learned counsel for the assessee submitted, the assessee
did furnish Form No. 67 before the Assessing Officer in course of
assessment proceeding. He submitted, the only reason the
Assessing Officer did not allow assessee’s claim is, it was not
claimed in the return of income. As regards the submissions of
learned Departmental Representative that the assessee had not
paid tax on the income assessed in USA, learned counsel
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submitted, assessee has claimed proportionate tax credit in
respect of income taxable in India. Finally, he submitted, under
identical facts and circumstances, the Assessing Officer himself
has allowed foreign tax credit while completing assessment in
assessment year 2012-13.
We have considered rival submissions and perused
materials on record. Undisputedly, in course of assessment
proceedings, the assessee did make a claim for availing credit of
tax paid in USA under Article 25 of India – USA DTAA. The
Assessing Officer has rejected assessee’s claim on the following
three reasons:
(1) The relief was not claimed either in the original return of income or by filing revised return of income. (2) No certificate/order from the foreign authorities in terms of section 90 was furnished. (3) The assessee has paid tax under section 115JB of the Act.
In so far as the first reasoning of the Assessing Officer is
concerned, now it is fairly sell settled that, though, the Assessing
Officer may not entertain any fresh claim of the assessee which is
not made either in the return of income or by way of revised
return of income, however, the appellate authorities can entertain
such claim. Therefore, in our view, learned Commissioner
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(Appeals) was justified in entertaining assessee’s claim in this
regard. So far as the second reasoning is concerned, learned
Commissioner (Appeals) has recorded a factual finding that the
assessee has paid tax on the same income, both in USA and
India. The aforesaid finding of the learned Commissioner
(Appeals) remains uncontroverted. As regards the third reasoning
of the Assessing Officer, on a reading of Article 25 of India – USA
DTAA, we do not find any difference between the tax paid on
normal provisions and under section 115JB of the Act.
Undisputedly, while completing the assessment, the Assessing
Officer has computed tax liability under section 115JB of the Act
at 18%. Thus, the assessee has paid tax in India irrespective of
the fact, whether in respect of income assessed under normal
provisions or under section 115JB. Therefore, going by the letter
and spirit of Article 25 of India – USA DTAA, assessee remains
entitled to claim benefit on double taxation. In any case of the
matter, the second proviso to section 115JAA(2A) of the Act,
subsequently introduced in the statute with effect from
01.04.2018 clears the doubt. Viewed from aforesaid perspective,
we do not find any infirmity in the decision of learned
Commissioner (Appeals).
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The next issue which arises for consideration is deletion of
addition made under section 2(22)(e) of the Act allegedly
representing deemed dividend.
Briefly the facts are, in course of assessment proceeding, the
Assessing Officer noticed that in the year under consideration, the
assessee has received interest free unsecured loan from Intersoft
Data Labs Pvt. Ltd., wherein a shareholder is common. Thus,
invoking the provisions of section 2(22)(e) of the Act, the
Assessing Officer treated the interest free loan of Rs.11,05,240/-
as the deemed dividend and added back to the income of the
assessee.
Learned Commissioner (Appeals) being convinced with the
fact that the assessee is not a share holder in the company from
which the interest free loan was received deleted the addition.
Having considered rival submissions and perused the
materials on record, we wholly agree with the decisions of learned
Commissioner (Appeals) that the interest free loan received by the
assessee cannot be treated as deemed dividend under section
2(22)(e) of the Act. Facts on record clearly reveal that the
Assessing Officer has not disputed the fact that the assessee is
not a share holder in Intersoft Data Labs Labs Pvt. Ltd. which
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provided interest free loans to the assessee only because the
assessee as well as lender entity are having a common
shareholder the Assessing Officer has treated the amount received
as deemed dividend. Now, it is fairly well settled that the
provisions of section 2(22)(e) of the Act can be invoked in respect
of shareholder. In view of the aforesaid, we uphold the decision of
learned Commissioner (Appeals).
In the result, the appeal is dismissed.
Order pronounced in the open court on 31st May, 2022
Sd/- Sd/- (DR. B.R.R. KUMAR) (SAKTIJIT DEY) ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 31st May, 2022. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi
