DY.C.I.T., BANGALORE vs. M/S IBM WORLD TRADE CORPORATION, BANGALORE

PDF · subscribers
ITA 728/BANG/2015Status: DisposedITAT Bangalore20 October 2015AY 2010-114 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee was entitled to apply different tax rates for different sources of income, relying on a previous decision in its own case. Therefore, the assessee could avail benefits of the DTAA for certain income and the IT Act for others.

What were the facts?

The assessee, a non-resident, received royalty income from agreements entered into before and after June 1, 2005. The assessee applied the beneficial provisions of the Indo-US DTAA for older agreements and Section 115A of the IT Act for newer agreements.

What were the issues?

Whether an assessee can cherry-pick provisions from both the Income Tax Act and a Double Taxation Avoidance Agreement (DTAA) to minimize tax liability. Whether interest under Section 234B is leviable when tax is deductible at source under Section 195.

Which sections of the Income-tax Act were involved?

Section 115A,Section 90(2),Section 195,Section 234B,Section 210,Section 209

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.

Income Tax Appellate Tribunal, BANGALORE BENCH C, BANGALORE

Before: SMT. ASHA VIJAYARAGHAVAN & SHRI. ABRAHAM P. GEORGE

For Appellant: Shri. Ankur Pai, CA

Assessee by : Shri. Ankur Pai, CA Revenue by : Shri. Sunil Kumar Agarwala, JCIT Heard on : 13.10.2015 Pronounced on : .10.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :

In this appeal filed by Revenue, it has taken the following grounds :

1. The Hon'ble CIT(A) has erred in holding that the assessee is entitled to adopt provisions of Section 115A(1)(b)(AA) of the Income Tax for computing the tax payable on royalty income received in pursuance of agreements entered into after 1.6.2005 and provisions of Article 12 of the Indo-US DTAA for computing the tax payable on royalty income received in pursuance of agreements entered into after 1.6.2005.

ITA.728/Bang/2015 Page - 2 2. The Hon'ble CIT(A) has erred in holding that the assessee can avail the benefit of Sec. 90(2), when it is not legally permissible for the assessee to have a mix of both DTAA and a portion of the Income Tax Act in order to minize that tax.

3. The Honble CIT(A) has erred in holding that the assessee being non-resident is not liable for payment of advance tax as its total chargeable income is liable for TDS u/s 195, and hence not liable for levy of interest u/s 234B of the IT Act.

4.

The Hon'ble CIT(A) has failed to appreciate that the deduction of tax at source u/s 195, and payment of advance tax u/s 210 are not mutually exclusive.

5. The Hon'ble CIT(A) has failed to appreciate that Sec. 209 is a computation section of advance tax on assessment of future tax liability and these words would not have been construed to mean that neither the advance tax provisions are applicable to the cases covered u/s 195 nor the assessee are at liberty to evade their tax liability even though TDS is effected.

6.

The Hon'ble CIT(A) has erred in holding that the assessee is not liable for levy of interest u/s 234B even though charging of interest is mandatory and consequential as per the Status. 7. For these and such other grounds that may be urged at the time of hearing it is prayed that the order of the CIT(A) may be annulled and that of the A.O. be restored.

2.

Assessee had entered into agreement with IBM India Pvt. Ltd (‘IBM India’) as well as three other parties for sale of licence and usage of intellectual property knowhow and software which were owned and developed by the assessee. Assessee was receiving royalty income from IBM India. Part of the Royalty receipts were, as per the Marketing Royalty Agreement dt.01.04.2005 and part of the royalty received was on account of agreement entered prior to 01.04.2005. Assessee while offering income from royalty / fee for technical services, took umbrage u/s.115A of the Income-tax ITA.728/Bang/2015 Page - 3 Act, 1961 (‘the Act’ in short), for a part of its income, whereas other income as per rates provided in Indo US DTAA on certain other income. In other words, income arising out of agreements entered prior to 01.06.2005 were offered under the provisions of DTAA at the rate of 15% and income arising on account of agreements entered after 01.06.2005, were offered for taxas per the provisions of Section 115A of the Act, at 10%. AO held that assessee could not apply different rates for different payments.

3.

Assessee’s appeal in this regard was successful. CIT (A) relied on a decision of coordinate bench in assessee’s own case for A. Y. 2007-08 and held that an assessee was entitled to the benefit of DTAA for certain sources of income and application of the IT Act for certain other sources of income. Now Revenue is in appeal before us.

4. We find that the issue raised by the Revenue in this appeal is squarely covered by the decision of the coordinate bench in IBM World Trade Corporation v. DDI [(2012) 20 taxmann.com 728]. CIT (A) has reproduced this decision in its entirely in his order. Nothing has been brought before us by the Revenue to take a different view. Especially so since the decision relied on by the CIT (A) was that of the assessee itself for an earlier year on the same set of facts.

ITA.728/Bang/2015 Page - 4

5.

In the result appeal filed by the Revenue stands dismissed.

More judgments on Section 115A

All 417 judgments and leading authorities on Section 115A →

Recent GST High Court judgments

Search GST case law →