PRINCIPAL COMMISSIONER OF INCOME TAX vs. DAECHANG SEAT CO LTD

TCA/160/2024HC Madras04 September 2024Bench: Honourable Mr Justice R. SURESH KUMAR5 pages

AI SummaryDismissed

What did the High Court hold?

The Tribunal held that Article 23 of the Indo-Korea DTAA specifically provides that 'other income' is taxable only in the contracting state. In this case, the contracting state is Korea, not India. Therefore, taxability under the Income Tax Act in India was not desirable. The Tribunal deleted the addition made by the AO and allowed the assessee's appeal on this issue. The High Court found no error in the Tribunal's reasoning and concluded that no substantial question of law arose for consideration. Consequently, the High Court dismissed the appeal filed by the revenue.

What were the facts?

The assessee, Daechang Seat Co., Ltd, is in appeal before the High Court against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had allowed the assessee's appeal, overturning an order by the Assessing Officer (AO) which, based on directions from the Dispute Resolution Panel (DRP), had held that a guarantee fee of Rs. 4,22,88,362/- received by the assessee was taxable in India. The dispute hinges on the interpretation of Article 23 of the Double Taxation Avoidance Agreement (DTAA) between India and the Republic of Korea.

What were the issues?

1. Whether the guarantee fee of Rs. 4,22,88,362/- received by the assessee is taxable in India, considering Article 23 of the India-Korea DTAA. Assessee's contention: The assessee argued that under Article 23 of the Indo-Korea DTAA, income not dealt with in other articles is taxable only in the contracting state where the recipient is a resident. Since the assessee is a resident of Korea, the guarantee fee should only be taxable in Korea and not in India. The Tribunal's decision to delete the addition was based on this interpretation. Revenue's contention: The revenue did not record any specific contentions in the provided judgment excerpt. The appeal before the High Court is against the ITAT's order allowing the assessee's appeal.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.160 of 2024 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 04.09.2024 CORAM THE HON'BLE MR.JUSTICE R.SURESH KUMAR AND THE HON'BLE MR.JUSTICE C.SARAVANAN Tax Case Appeal No.160 of 2024 Principal Commissioner of Income Tax International Taxation, Chennai. ... Appellant Vs. Daechang Seat Co., Ltd C/o M/s.Daechang India Seat Co., Pvt Ltd No.491, Mannur Village, Sriperumbudur Village, Kanchipuram -105. ... Respondent ----- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Chennai dated 05.07.2023 in I.T(TP) A.No.101/CHNY/2018. For Appellant : Mr.Karthik Ranganathan ---- J U D G M E N T (Delivered by C.SARAVANAN,J.) The appellant is before this Court challenging the impugned order dated 05.07.2023 passed by the Income Tax Appellate Tribunal in I.T(TP) A.No.101/CHNY/2018. By the impugned order, the appellate Tribunal has allowed the appeal filed by the respondent assessee. The issue raised in the https://www.mhc.tn.gov.in/judis T.C.A.No.160 of 2024 appeal of the assessee was as regards to the order of the Assessing Officer passed on the directions of the Dispute Resolution Panel concluding that the guarantee fee received by the assessee to the extent of Rs.4,22,88,362/- is liable to tax in India. 2. The dispute arose on account of the interpretation of Clause 23 of the Double Taxation Avoidance Agreement (DTAA) between India and Replublic of Korea. The said clause reads as under: " Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention, shall be taxable only in that State." 3. The Tribunal has answered the issue as follows: "17. In view of the above and following Article 23 of Indo-Korea DTAA which specifically provides that taxability of 'other income' is only in the contracting State and in the present case, the contracting State is Korea and not India, hence taxability under the Income Tax Act is not at all desirable. Hence, we delete the addition and allow this appeal of assessee on this very issue. The appeal of the assessee is allowed. https://www.mhc.tn.gov.in/judis T.C.A.No.160 of 2024 4. We find no error in the reasoning adopted by the Tribunal. As such, no substantial question of law arises for consideration in this appeal. The appeal is liable to be dismissed and it is accordingly dismissed. No costs. (R.S.K.,J.) (C.S.N.,J.) 04.09.2024 NCS : Yes/No Index : Yes/No KST https://www.mhc.tn.gov.in/judis T.C.A.No.160 of 2024 R. SURESH KUMAR, J. AND C.SARAVANAN, J. KST T.C.A.No.160 of 2024 04.09.2024 https://www.mhc.tn.gov.in/judis T.C.A.No.160 of 2024 https://www.mhc.tn.gov.in/judis

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