DCIT (INTERNATIONAL TAXATION), GURGAON vs. M/S MOL CORPORATION, GURGAON

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ITA 106/DEL/2016Status: DisposedITAT Delhi26 December 2018AY 2008-095 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal agreed with both parties to set aside the issue to the AO for fresh adjudication. The AO was directed to decide the issue of granting TDS benefit and re-compute interest under sections 234A and 234B within three months.

What were the facts?

The assessee, MOL Corporation, a US-based company, filed NIL income for AY 2008-09. The Assessing Officer (AO) assessed a substantial income and demanded tax, including interest. The CIT(A) directed the AO to grant TDS credit claimed by another entity (MRSC) to the assessee and re-compute interest.

What were the issues?

Whether TDS credit deducted in the case of MRSC should be granted to the assessee, and consequently, the correct computation of interest under sections 234A and 234B.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 144C(13),Section 154,Section 155,Section 234A,Section 234B,Section 199

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Income Tax Appellate Tribunal, DELHI BENCH ‘D’, NEW DELHI

Before: SH. R.K. PAND & MS. SUCHITRA KAMBLE

Hearing: 03/10/2018Pronounced: 26/11/2018

This appeal filed by the revenue is directed against the order dated 19.10.2015 passed by the CIT (A)-43, New Delhi relating to A. Y. 2008-09.

Facts of the case, in brief, are that the assessee MOL Corporation 2. (‘MOLC’ in short) is a company incorporated in the United States of America, having its registered, office at 2215-B Renaissance Drive, Las Vegas NV 89119, USA. Microsoft Corporation, USA ("MS-Corp”) is the ultimate parent entity of MOLC. MOLC is a tax resident of USA and therefore, it is entitled to claim the applicability of beneficial provisions of the Double Taxation Avoidance Agreement entered into between India and US (“India-US tax treaty”) vis-a-vis the provisions of the Income-tax Act, 1961 ("the Act”). MS Corp, has granted exclusive rights to MOLC for manufacturing and distribution of Microsoft Retail Software Products. MOLC has granted non-exclusive rights to Microsoft Operations Pte Ltd {‘MO1} (a tax resident of Singapore) for manufacturing and distribution of MS Retail Software Products. MO has in turn sold those MS Retail Software Products to Microsoft Regional Sales Corporation (MRSC) for distribution. MRSC has sold the MS Retail Software Products to Indian distributors outside India.

3.

The assessee filed its return of income on 29th May, 2009 declaring NIL total income, as the amount received by MOLC was not taxable in India. Subsequently, a notice u/s 148 was issued by the Assessing Officer on 25th November, 2010. The assessee filed detailed objections on the non- maintainability of the notice under law and technical submission on the merits of the case with AO on 21st January 2011 and 12th December 2011 respectively. The AO however rejected the objections of the assessee and completed the assessment u/s 144C (13) of the Act read with section 147 and 143(3) of the Act, vide order dated 30 October, 2012. In the said assessment order, the AO assessed the total income of the assessee at INR 18,49,67,42,612/- as against ‘NIL' income returned by the assessee which resulted into a demand amounting to INR 3,02,79,68,508/- [including interest of INR 1,07,44,40,438/- under section 234B of the Act] on the assessee. The same income has been taxed in the hands of MRSC on protective basis.

4.

Subsequently, the AO issued, a notice u/s 154/155 dated 6th February, 2014 proposing to rectify the assessment order dated 30 October 2012 on account of non-levy of interest u/s 234A of the Act. The assessee, in response to the same, filed a detailed submission dated 28th February 2014 on the non-levy/applicability of interest u/s 234A. However, the AO rejected the same and passed an order u/s 154 dated 26 March 2014 which was served upon the assessee on 6th May 2014.

5.

Aggrieved by the order passed by the AO, the assessee preferred appeal before the CIT (A).

6.

Based on the arguments advanced by the assessee, the Ld. CIT(A) held that TDS credit claimed by the assessee in return of income for A. Y. 2008-09 should have been granted to the assessee. He accordingly directed the Assessing Officer to re-compute the interest u/s 234A, if any, after transferring the TDS credit to the assessee, which was claimed by MRSC in its return of income for A. Y. 2008-09.

7.

Aggrieved with such order of the CIT(A), the revenue is in appeal before the Tribunal by raising following grounds of appeal :-

1. “On the facts and circumstances of the case Ld. CIT(A)-43, New Delhi has erred in deleting the interest amounting to Rs. 3,67,46,965/- u/s 234 A of the IT Act 1961 levied on the taxpayer on assessed income of Rs.18,49,67,42,612/-.

2.

On the facts and circumstances of the case Ld. CIT(A)-43, New Delhi has erred in directing the Assessing Officer to grant the benefit of the TDS deducted in the case of M/s. MRSC in its return of income for A. Y 2008-09 to the assessee against the provisions of section 199 of the I. T. Act, 1961. 3. The appellant craves to add, amend modify or after any grounds of appeal at the time or before the hearing the appeal.”

8. We have considered the rival arguments made by both the sides. It was agreed by both the sides that the matter needs to be set aside to the file of the Assessing Officer with a direction to decide the issue afresh in the light of decision of Hon’ble Supreme Court in the case of ITO Vs. Bachu Lal Kapoor Kewal Ram reported in 60 ITR 74. The Ld. Counsel for the assessee stated that specific time limit should be prescribed to the Assessing Officer for deciding the issue. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore the issue to the file of the Assessing Officer with a direction to adjudicate the issue regarding granting of TDS benefit deducted in the case of M/s. MSRC in its return of income in A. Y. 2008-09 to the assessee and to re-compute the interest u/s 234 A & 234 B of the IT Act. The Assessing Officer shall decide the issue as per fact and law after giving due opportunity of being heard to the assessee within a period of 3 months from the date of receiving of this order by him. We hold and direct accordingly. The grounds raised by the revenue are accordingly allowed for statistical purpose.

9.

In the result, the appeal filed by the revenue is allowed for statistical purpose. Order pronounced in the open court on 26.12.2018.

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