DDIT, New Delhi V. JC Bamford Investments, England

CO 160/DEL/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9676 (ITAT-DELHI)
• Duration Of Justice: 18 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-07-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 16-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJEEV SHARMA
• Assessee Lawyers: G C SRIVASTAVA
• Keywords: Residential status; Double taxation relief; Right to appeal
• Section: 143(3); 234B; 145; 154; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : D : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI C.M. GARG, JM ITA NO.80/DEL/2013 ASSESSMENT YEAR : 2008-09 J C BAMFORD INVESTMENTS ROCESTER, UTTOXETER, ST 145 JP, STAFFORDSHIRE ENGLAND. PAN : AACCJ0726B VS. DD IT, CIRCLE-3(1), INTERNATIONAL TAXATION, NEW DELHI. CO NO.160/DEL/2014 (ITA NO.80/DEL/2013) ASSESSMENT YEAR : 2008-09 DDIT, CIRCLE-3(1), INTERNATIONAL TAXATION, NEW DELHI. VS. JC BAMFORD INVESTMENTS ROCESTER, UTTOXETER, ST 145 JP, STAFFORDSHIRE ENGLAND. PAN : AACCJ0726B ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI G.C. SRIVASTAVA, CA DEPARTMENT BY : S HRI S ANJEEV SHARMA, DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE AND THE CROSS OBJECTIO N BY THE REVENUE ARISE OUT OF THE ORDER PASSED BY THE AO U/S 143(3) READ ITA NO.80/DEL/2013 CO NO.160/DEL/2014 2 WITH SECTION 144C(13) OF THE INCOME-TAX ACT, 1961 ( HEREINAFTER ALSO CALLED THE ACT) IN RELATION TO THE ASSESSMEN T YEAR 2008-09. 2. GROUND NOS. 1 AND 2 OF THE ASSESSEES APPEAL ARE AGAINST THE HOLDING THAT THE ASSESSEE HAS A SERVICE PERMANENT E STABLISHMENT (PE) IN INDIA WITHIN THE MEANING OF ARTICLE 5 OF IN DO-UK DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). 3.1. BRIEFLY STATED, THE FACTS OF THE CASE ARE TH AT THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE LAWS OF AND IS TAX R ESIDENT OF UK. THE ASSESSEE DERIVED INCOME IN THE NATURE OF ROYALT Y/FEES FOR TECHNICAL SERVICES (HEREINAFTER ALSO REFERRED TO AS ROYALTY), WHICH WAS OFFERED TO TAX @ 15% ON GROSS BASIS IN INDIA AS PER TAX RATES SPECIFIED IN THE DTAA. BEFORE PROCEEDING FURTHER, I T IS RELEVANT TO MENTION THAT JC BAMFORD EXCAVATORS LTD., UK (JCBE), ANOTHER GROUP COMPANY, WAS ALSO INCORPORATED UNDER THE LAW S OF AND IS TAX RESIDENT OF UK. ON 05.03.04, JCBE ENTERED INTO TECHNOLOGY TRANSFER AGREEMENT (TTA) WITH JC BAMFORD INDIA LTD. (JCBI) TO LICENSE THE KNOW-HOW AND RELATED TECHNICAL DOCUMENT S CONSISTING OF ALL DRAWINGS AND DESIGNS WITH AN EXCLUSIVE RIGHT TO MANUFACTURE AND MARKET EXCAVATOR LOADER (P-92 VERSION) IN THE T ERRITORY OF ITA NO.80/DEL/2013 CO NO.160/DEL/2014 3 INDIA UNDER THE BRAND NAME 3DX. ON 17.12.07, JCBE, JCBI AND THE ASSESSEE ENTERED INTO A TRIPARTITE INTELLECTUAL PRO PERTY AGREEMENT, PURSUANT TO WHICH JCBES LICENCE OF INTELLECTUAL PR OPERTY, GIVEN TO JCBI FOR MANUFACTURING AND MARKETING 3DX IN INDIA, WAS SUB- LICENSED TO THE ASSESSEE COMPANY IN CONSIDERATION O F THE PAYMENT OF ROYALTY BY THE ASSESSEE TO JCBE. UNDER THE NEW AGREEMENT, THE LICENCE WAS TO BE COMMERCIALLY EXPLO ITED BY JCBI AS WAS DONE EARLIER, BUT THE ROYALTY FOR SUCH USER WAS TO BE PAID BY JCBI TO THE ASSESSEE, WHO WAS TO PASS ON 99.5% OF THE SAME TO JCBE. THAT IS HOW, THE ASSESSEE DERIVED INCOME IN THE NATURE OF ROYALTIES/FEES FOR TECHNICAL SERVICES FROM JCBI WHICH WAS OFFERED TO TAX @ 15% IN INDIA ON GROSS BASIS BY TRE ATING THE RECEIPT AS ROYALTIES AND FEES FOR TECHNICAL SERVIC ES COVERED UNDER ARTICLE 13(2) OF THE DTAA. 3.2. THE AO OBSERVED THAT IN THE EARLIER YEARS, VIZ., AYS 2006- 07 AND 2007-08, HE HAD HELD IN THE CASE OF JCBE THA T THEIR EMPLOYEES SECONDED TO JCBI ON ASSIGNMENT BASIS IN I NDIA RESULTED INTO CONSTITUTING SERVICE P.E OF JCBE IN INDIA IN TERMS OF ARTICLE 5(2)(K)(I) OF THE DTAA. HE FURTHER NOTICED THAT THE PAYMENT OF ITA NO.80/DEL/2013 CO NO.160/DEL/2014 4 ROYALTY BY JCBI TO JCBE IN RESPECT OF RIGHTS UNDER THE TECHNOLOGY TRANSFER AGREEMENT (TTA) AND INTERNATIONAL PERSONNE L ASSIGN AGREEMENT (IPAA) IN THESE EARLIER YEARS WAS HELD TO BE EFFECTIVELY CONNECTED WITH THE SAID SERVICE PE OF THE ASSESSEE IN INDIA. RELYING ON PARA 6 OF ARTICLE 13, THE ASSESSING OFFI CER TOOK THE VIEW IN THE EARLIER YEARS THAT SUCH ROYALTIES/FEES FOR TECHNICAL SERVICES WAS LIABLE TO BE CONSIDERED AS BUSINESS P ROFITS UNDER ARTICLE 7 OF THE DTAA AS IT WAS EFFECTIVELY CONNECT ED WITH THE P.E. AFTER GROSSING UP THE RECEIPT OF ROYALTY IN TERMS O F SEC. 195A AND ALLOWING DEDUCTION FOR EXPENSES AT THE RATE OF 20% OF SUCH AMOUNT OF ROYALTIES/FEES FOR TECHNICAL SERVICES, HE HAD COMPUTED TOTAL INCOME OF THE ASSESSEE. 3.3. THE AO NOTICED IN THE PROCEEDINGS FOR THE INSTANT YEAR THAT JCBE CONTINUED TO SECOND ITS EMPLOYEES TO JCBI AS W AS DONE IN THE EARLIER YEARS. THE DETAILS OF SUCH EMPLOYEES HA VE BEEN REFLECTED ON PAGES 3 AND 4 OF THE ASSESSMENT ORDER. HE FURTHER OBSERVED THAT ALL THE TERMS AND CONDITIONS FOR THE USE OF THE LICENCE BY JCBI WERE SIMILAR TO THOSE OF THE EARLIE R AGREEMENT. THE ONLY DIFFERENCE IN THIS YEAR WAS THAT UNDER THE NEW AGREEMENT ITA NO.80/DEL/2013 CO NO.160/DEL/2014 5 DATED 17.12.2007, ROYALTY WAS FIRST PAID BY JCBI TO THE ASSESSEE AND THE ASSESSEE, IN TURN, PAID IT TO JCBE IN FULL LESS 0.5%. HE FOUND THAT THE ROYALTY ULTIMATELY REACHED JCBE BUT THROUGH THE ASSESSEE. AFTER GOING THROUGH VARIOUS TERMS OF THE NEW AGREEMENT IN CONJUNCTION WITH THE EARLIER AGREEMENT , IT WAS OPINED BY HIM THAT TTA, IPAA AND THE PRESENT AGREEM ENT UNDER CONSIDERATION WERE NOT TO BE LOOKED INTO ISOLATION FROM ONE ANOTHER. IN THIS BACKDROP OF THE FACTS, HE HELD THA T THE EMPLOYEES OF JCBE AS SECONDED TO JCBI CONSTITUTED A SERVICE P E OF THE ASSESEE AS THEY WERE COVERED UNDER THE EXPRESSION OR OTHER PERSONNEL IN ARTICLE 5(2)(K) OF THE DTAA. THE ASS ESSEE IS AGGRIEVED AGAINST THE HOLDING OF ITS SERVICE PE IN INDIA. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT I N THE EARLIER YEARS, JCBE LICENSED INTELLECTUAL PROPERTY RIGHTS F OR MANUFACTURE OF EXCAVATORS UNDER THE BRAND NAME 3DX TO JCBI. HO WEVER, BY VIRTUE OF NEW AGREEMENT ENTERED ON 17.12.07 W.E.F. 01.04.07 AMONGST THE ASSESSEE, JCBE AND JCBI, THE INTELLECTU AL PROPERTY RIGHTS CAME TO BE SUB-LICENSED TO THE ASSESSEE WITH OUT INTERFERING ITA NO.80/DEL/2013 CO NO.160/DEL/2014 6 IN ANY MANNER ITS ACTUAL EXPLOITATION BY JCBI. ALL THE TERMS AND CONDITIONS FOR THE USE OF SUCH RIGHTS BY JCBI UNDER TTA AND IPAA ARE SAME. THE ONLY DIFFERENCE THAT CAME INTO THE HI THERTO ARRANGEMENT WAS THAT WHEREAS EARLIER JCBI WAS PAYIN G ROYALTY DIRECTLY TO JCBE, NOW IT IS BEING ROUTED THROUGH TH E ASSESSEE WITH THE DEDUCTION OF 0.05%. THE QUESTION OF A SERVICE P E OF JCBE IN INDIA CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL FOR ASSESSMENT YEARS 2006-07 AND 2007-08. VIDE ITS ORDE R FOR THE AY 2006-07, THE TRIBUNAL CATEGORIZED EMPLOYEES OF JCBE ON DEPUTATION TO INDIA ON ASSIGNMENT BASIS IN THE FIRS T CATEGORY AND THOSE DOING STEWARDSHIP ACTIVITIES AND INSPECTION A ND TESTING IN THE SECOND CATEGORY. JCBI HAS BEEN HELD TO BE CONST ITUTING A SERVICE PE OF JCBE IN INDIA BECAUSE OF THE EMPLOYEE S OF THE FIRST CATEGORY. THE MATTER OF THE ESTABLISHMENT OF PE FOR THE CURRENT YEAR WOULD HAVE BECOME A COVERED MATTER FOR THE CUR RENT YEAR IF THERE HAD NOT BEEN THE NEW FACTOR OF THE TRIPARTITE AGREEMENT DATED 17.12.2007, UNDER WHICH JCBE SUB-LICENSED THE INTELLECTUAL PROPERTY RIGHT TO THE ASSESSEE TO MANAGE THE LICEN SING OF JCB UKS INTELLECTUAL PROPERTY TO JCB INDIA GOING FORWA RD.. TO BUTTRESS THE VIEW THAT THE EMPLOYEES OF JCBE CONSTITUTED SER VICE PE OF THE ITA NO.80/DEL/2013 CO NO.160/DEL/2014 7 ASSESSEE IN INDIA, THE AO HAS OBSERVED THAT THE EMP LOYEES OF JCBE, EARLIER SECONDED TO JCBI, CONTINUED TO RENDER SERVICES TO JCBI DURING THE YEAR IN QUESTION IN THE SAME WAY AS THEY WERE DOING IN THE PAST. THIS POSITION WAS NOTICED BY VI RTUE OF CLAUSE (D) OF THE NEW AGREEMENT AND CLAUSE 4.2 OF THIS AGR EEMENT WHICH CLARIFIES THAT THE DELIVERY OF TECHNICAL DOCUMENTAT ION AND MAKING AVAILABLE OF TECHNICAL PERSONNEL AS SET OUT IN EARL IER CLAUSES III AND IV OF THE TECHNOLOGY AGREEMENT SHALL REMAIN UNAFFEC TED BY THIS AGREEMENT AND SHALL CONTINUE AS RIGHTS AND OBLIGATI ONS BETWEEN JCBE AND JCBI UNDER THE TECHNOLOGY AGREEMENT. THE AO HELD THAT THE ABOVE DETAILS COUPLED WITH THE FACT THAT JCBE R ECEIVED 99.5% OF ROYALTY FROM THE ASSESSEE LEFT NOTHING TO DOUBT THAT THERE WAS SERVICE PE OF THE ASSESSEE AS PER ARTICLE 5(2)(K) O F THE DTAA COVERED WITHIN THE AMBIT OF OTHER PERSONNEL. SIN CE THIS POSITION HAS BEEN CANDIDLY ACCEPTED BY THE LD. AR AS WELL, W E, THEREFORE, REFRAIN FROM ANY INDEPENDENT EVALUATION OF THIS ASP ECT. THE LD. AR ACCENTUATED THAT HIS OBJECTIONS AGAINST THE HOLD ING OF THE SERVICE PE OF THE ASSESSEE IN INDIA WERE PRACTICALL Y THE SAME WHICH WERE TAKEN FOR THE EARLIER YEARS. THE TRIBUNA L HAS DISCUSSED AND JETTISONED SUCH OBJECTIONS IN ITS ORDER FOR THE A.Y. 2006-07. ITA NO.80/DEL/2013 CO NO.160/DEL/2014 8 UNDER SUCH CIRCUMSTANCES AND FOLLOWING THE PRECEDEN T, WE HOLD THAT ALL THE REQUISITE CONDITIONS FOR ATTRACTING TH E MANDATE OF ARTICLE 5(2)(K) ARE SATISFIED INASMUCH AS (I) THER E IS FURNISHING OF SERVICES INCLUDING MANAGERIAL SERVICES; (II) SUCH S ERVICES ARE OTHER THAN THOSE TAXABLE UNDER ARTICLE 13 (ROYALTIES AND FEES FOR TECHNICAL SERVICES); (III) SUCH SERVICES ARE RENDER ED OUT OF INDIA; (IV) SUCH SERVICES ARE RENDERED BY OTHER PERSONNEL ; AND (V) SUCH ACTIVITIES CONTINUED FOR A PERIOD OF MORE THAN 90 D AYS WITHIN 12 MONTHS PERIOD. IT IS THUS HELD THAT THE SERVICE P E OF THE ASSESSEE IS ESTABLISHED IN INDIA. THESE GROUNDS ARE, THEREF ORE, NOT ALLOWED. 5. THE NEXT MAJOR ISSUE RAISED THROUGH VARIOUS GROU NDS IS AGAINST THE HOLDING BY THE AO THAT THE ROYALTY EARN ED BY THE ASSESSEE WAS EFFECTIVELY CONNECTED WITH THE SERVICE PE OF THE ASSESSEE IN INDIA. WE FIND THAT SIMILAR ISSUE WAS THERE AND HAS BEEN ELABORATELY DISCUSSED IN THE AFORE STATED ORDE R OF THE TRIBUNAL FOR THE EARLIER YEARS. THE TRIBUNAL HAS HE LD THAT THE TOTAL AMOUNT CONSISTING LUMPSUM LICENCE/KNOW-HOW FEES AND ALSO ROYALTY AS MENTIONED IN PARA 2.2 OF TTA WAS CONSIDE RATION FOR THE TRANSFER OF IP RIGHTS SIMPLICITOR AND ALSO THE SERV ICE RENDERED BY ITA NO.80/DEL/2013 CO NO.160/DEL/2014 9 THE EMPLOYEES OF THE SECOND CATEGORY. THE TRIBUNAL FURTHER HELD THAT IN SO FAR AS THE QUESTION OF ROYALTY REPRESENT ING CONSIDERATION FOR THE TRANSFER OF IP RIGHTS SIMPLICITOR WAS CONCE RNED, THE SERVICE PE REPRESENTING THE DEPUTATIONISTS HAD NO ROLE TO P LAY EITHER IN CREATING OR MAKING IT AVAILABLE TO JCB INDIA. THAT IS HOW THE TRIBUNAL CAME TO HOLD THAT THE SAME WAS NOT EFFECTI VELY CONNECTED WITH THE SERVICE PE OF THE ASSESSEE IN IN DIA. THE AMOUNT OF ROYALTY AND CONSIDERATION FOR RENDERING O F SERVICES BY THE EMPLOYEES OF SECOND CATEGORY HAS BEEN HELD TO B E NOT FALLING IN PARA 6 OF ARTICLE 13 AND HENCE CHARGEABLE TO TAX AS PER PARA 2 OF ARTICLE 13 OF THE DTAA. HOWEVER, AS REGARDS THE FEES FOR TECHNICAL SERVICES RESULTING FROM THE RENDERING OF SERVICES BY THE EMPLOYEES OF THE SECOND CATEGORY, THE TRIBUNAL HAS HELD THAT THE SAME DID NOT FALL IN PARA 6 OF ARTICLE 13 AND WAS, HENCE, CHARGEABLE TO TAX AS PER PARA 2 OF THE ARTICLE 13 O F THE DTAA. AS REGARDS THE CONSIDERATION FOR THE EMPLOYEES OF THE FIRST CATEGORY, THE TRIBUNAL HAS HELD THAT THE FEES FOR TECHNICAL S ERVICES IN RELATION TO SUCH EMPLOYEES WAS COVERED WITHIN PARA 6 OF ARTICLE 13 OF THE DTAA. THAT IS HOW, THE TRIBUNAL CONCLUDED THAT THE CONSIDERATION FOR RENDERING OF SERVICES BY THE EMPL OYEES OF FIRST ITA NO.80/DEL/2013 CO NO.160/DEL/2014 10 CATEGORY WAS CHARGEABLE TO TAX UNDER ARTICLE 7 OF T HE DTAA. THE AO WAS DIRECTED TO DETERMINE THE AMOUNT OF INCOME I N TERMS OF ARTICLE 7. AS THE FACTS FOR THE INSTANT YEAR ARE A DMITTEDLY SIMILAR TO THOSE OF THE PRECEDING YEARS ON THIS ISSUE, RESP ECTFULLY FOLLOWING THE PRECEDENT FOR A.Y. 2006-07, WE SET AS IDE THE IMPUGNED ORDER AND SEND THE MATTER BACK TO THE FILE OF AO FOR DETERMINING INCOME IN CONSONANCE WITH THE DIRECTION S GIVEN FOR THE EARLIER YEAR. 6. THE LAST GROUND OF THE ASSESSEES APPEAL AGAINST THE CHARGING OF INTEREST U/S 234B IS ALSO DECIDED IN AS SESSEES FAVOUR BY FOLLOWING THE VIEW TAKEN IN THE ORDER FOR AY 200 6-07. RELEVANT DISCUSSION HAS BEEN MADE IN PARA 20.2 OF THE ORDER BY WHICH IT WAS HELD THAT THE LIABILITY OF INTEREST U/S 234B DI D NOT ARISE AS THE ASSESSEE HAD INCLUDED THE AMOUNT OF ROYALTY AND FEE S FOR TECHNICAL SERVICES IN ITS TOTAL INCOME. 7. THE REVENUE HAS FILED A CROSS OBJECTION (CO) BY RAISING THE FOLLOWING GROUND :- CONSIDERING THE FACT THAT ARTICLE 13(2) IS NOT AP PLICABLE IN THIS CASE AND THE RATE OF ROYALTY AGREEMENT AS 5/03/2004, ROYALTIES ARE SUBJECT TO TAX @ 20% PLUS ITA NO.80/DEL/2013 CO NO.160/DEL/2014 11 SURCHARGE, EDUCATION CESS UNDER THE PROVISIONS OF SECTION 115A(1)(B) OF THE INCOME TAX ACT, 1961. 8. THE LD. DR ARGUED THAT THE RATE OF TAX AT 15% OF THE GROSS AMOUNT AS PROVIDED UNDER ARTICLE 13(2) OF THE DTAA CANT BE APPLIED TO THE ROYALTY INCOME AND THUS THE AMOUNT O F ROYALTY SHOULD BE SUBJECTED TO TAX @ 20% U/S 115A(1)(B) OF THE ACT. IT WAS SO ARGUED AS IN THE OPINION OF THE DEPARTMENT, THE ASSESSEE IS NOT THE BENEFICIAL OWNER OF THE ROYALTY PAID BY JCBI, WHICH HAS BEEN PASSED ON TO JCBE IN FULL AFTER DEDUCTION OF 0 .5%. IN OTHER WORDS, THE CONTENTION WAS THAT SINCE IT WAS JCBE WH O WAS THE BENEFICIAL OWNER OF THE ROYALTY RECEIVED FROM JCBI AND NOT THE ASSESSEE, ARTICLE 13(2) OF THE DTAA WILL CEASE TO A PPLY AND RESULTANTLY, THE ASSESSEE SHOULD BE SUBJECTED TO TA X AS PROVIDED UNDER THE DOMESTIC LAW. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN OUR CONSIDERED OPI NION, THE CO DESERVES TO BE DISMISSED ON TWO DISTINCT COUNTS. 10. THE FIRST REASON IS THAT THE CO OF THE REVENU E IS NOT MAINTAINABLE AS PER LAW. SECTION 253(1) OF THE ACT DEALS WITH THE ITA NO.80/DEL/2013 CO NO.160/DEL/2014 12 FILING OF APPEALS BY THE ASSESSEE BEFORE THE TRIBUN AL AGAINST THE ORDERS SPECIFIED THEREIN. SUB-SECTION (2) OF SECTIO N 253 EMPOWERS THE REVENUE TO FILE APPEAL BEFORE THE TRIBUNAL. THI S SECTION PROVIDES THAT THE CIT MAY, IF HE OBJECTS TO ANY ORD ER PASSED BY THE CIT(A) U/S 154 OR 250, DIRECT THE ASSESSING OF FICER TO APPEAL TO THE APPELLATE TRIBUNAL AGAINST THE ORDER. THIS S ECTION DOES NOT EMBRACE CASES WHERE THE FIRST APPEAL LIES TO THE TR IBUNAL AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER U/S 144C( 13) PURSUANT TO THE DIRECTION GIVEN BY THE DISPUTE RESOLUTION PA NEL (DRP) U/S 144C(5) OF THE ACT. THIS IS IN A SHARP CONTRAST TO THE SPECIFIC ENTITLEMENT OF THE ASSESSEE UNDER CLAUSE (D) OF SEC TION 253(1) TO APPEAL AGAINST THE ORDER PASSED BY THE ASSESSING OF FICER IN PURSUANCE OF THE DIRECTIONS OF THE DRP. THE REASON APPEARS TO BE THAT WHEN THE DRP HAS SCRUTINIZED THE DRAFT ORDER O F THE ASSESSING OFFICER AND GIVEN THE APPROPRIATE DIRECTI ON TO MODIFY IT, IF NECESSARY, THEN THERE IS NO LOGIC IN EMPOWERING THE CIT TO RESCRUTINIZE SUCH ORDER OF THE ASSESSING OFFICER AN D HAVE ANY GRIEVANCE AGAINST THE SAME. IT IS MORE SO BECAUSE T HE ORDER OF THE AO HAS ALREADY BEEN CHECKED BY A GROUP OF THREE CITS CONSTITUTING THE DRP. HOWEVER, LATER IT WAS REALIZE D THAT THE ITA NO.80/DEL/2013 CO NO.160/DEL/2014 13 INTEREST OF THE REVENUE WAS SUFFERING BECAUSE OF CE RTAIN DIRECTIONS GIVEN BY THE DRP PREJUDICIAL TO THE INTE REST OF THE REVENUE, WHICH THE ASSESSING OFFICER CANNOT TINKER WITH AND BECOME BINDING ON HIM. WITH A VIEW TO EMPOWER THE C IT TO CHALLENGE SUCH ADVERSE DIRECTIONS GIVEN BY THE DRP PURSUANT TO WHICH THE ASSESSING OFFICER HAS PASSED ORDER U/S 14 4C, THE LEGISLATURE STEPPED IN BY INTRODUCING SUB-SECTION ( 2A) TO SECTION 253 W.E.F. 1.7.2012, WHICH PROVIDES THAT THE : TH E COMMISSIONER MAY, IF HE OBJECTS TO ANY DIRECTION ISSUED BY THE D ISPUTE RESOLUTION PANEL UNDER SUB-SECTION (5) OF SECTION 1 44C IN RESPECT OF ANY OBJECTION FILED ON OR AFTER THE 1ST DAY OF J ULY, 2012, BY THE ASSESSEE UNDER SUB-SECTION (2) OF SECTION 144C IN PURSUANCE OF WHICH THE ASSESSING OFFICER HAS PASSED AN ORDER COM PLETING THE ASSESSMENT OR REASSESSMENT, DIRECT THE ASSESSING OF FICER TO APPEAL TO THE APPELLATE TRIBUNAL AGAINST THE ORDER. SUB-SECTION (4) OF SECTION 253 EMPOWERING THE ASSESSEE OR THE A SSESSING OFFICER TO FILE CROSS OBJECTION WAS ALSO SUITABLY A MENDED BY THE FINANCE ACT, 2012 TO, INTER ALIA, PROVIDE THAT THE ASSESSING OFFICER MAY, ON RECEIPT OF NOTICE THAT AN APPEAL AGAINST TH E ORDER OF THE ASSESSING OFFICER IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE ITA NO.80/DEL/2013 CO NO.160/DEL/2014 14 RESOLUTION PANEL HAS BEEN PREFERRED BY THE ASSESSEE UNDER SUB- SECTION (1), FILE A CROSS-OBJECTIONS AGAINST ANY P ART OF THE ORDER OF THE ASSESSING OFFICER (IN PURSUANCE OF THE DIRECTIO NS OF THE DISPUTE RESOLUTION PANEL). WHEN WE READ SUB-SECTION (1) OF SECTION 253 IN JUXTAPOSITION TO SUB-SECTION (2A) OF SECTION 253, THE POSITION WHICH EMERGES IS THAT WHEREAS THE ASSESSEE WAS EARLIER ALSO ENTITLED TO FILE APPEAL AGAINST THE ORDER PASS ED BY THE AO PURSUANT TO THE DIRECTION OF THE DRP, THE REVENUE H AS BEEN CLOTHED WITH SUCH POWER BY THE FINANCE ACT, 2012, P ROVIDED THE OBJECTION WAS FILED BY THE ASSESSEE BEFORE THE DRP ON OR AFTER 01.07.12. THUS, IT BECOMES PALPABLE THAT THE DEPAR TMENT HAS NO POWER TO FILE APPEAL OR OBJECT TO THE ANY DIRECTION ISSUED BY THE DRP IN PURSUANCE OF WHICH THE ASSESSING OFFICER PAS SED ORDER U/S 144C, IF THE ASSESSEE FILED OBJECTION BEFORE THE DR P BEFORE THIS CUT-OFF DATE OF 1.7.2012. ADVERTING TO THE FACTS OF THE INSTANT CASE, WE FIND THAT THE ASSESSEE FILED OBJECTION AGAINST T HE DRAFT ASSESSMENT ORDER BEFORE THE DRP ON 30.01.2012. SIN CE THE OBJECTION IN THIS CASE WAS FILED BY THE ASSESSEE BE FORE THE DRP PRIOR TO 01.07.12, THE REVENUE COULD HAVE NEITHER F ILED APPEAL NOR CROSS OBJECTION AGAINST THE ORDER OF THE ASSESSING OFFICER. WE, ITA NO.80/DEL/2013 CO NO.160/DEL/2014 15 THEREFORE, HOLD THAT THE CROSS OBJECTION FILED BY T HE REVENUE IS NOT MAINTAINABLE AS PER LAW. 11. THE SECOND REASON FOR WHICH THE CO OF THE RE VENUE DESERVES THE FATE OF DISMISSAL IS THE LANGUAGE OF S ECTION 253 OF THE ACT WHICH PERMITS THE CIT TO AUTHORIZE THE ASSE SSING OFFICER TO FILE APPEAL U/S SUB-SECTION (2A) IF HE OBJECTS TO ANY DIRECTION ISSUED BY THE DISPUTE RESOLUTION PANEL UNDER SUB-SE CTION (5) OF SECTION 144C . IN THE LIKE MANNER, CROSS OBJECTION CAN BE FILED UNDER SUB-SECTION (4) OF SECTION 253 OF THE ACT WHI CH PROVIDES THAT : THE ASSESSING OFFICER . ON RECEIPT OF NOTI CE THAT AN APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESOLUTION PANEL HAS BEEN PREFERRED UNDER SUB-SECTION (1) . HE MAY FILE A MEMORANDUM OF CROSS- OBJECTIONS AGAINST ANY PART OF THE ORDER OF THE ASSESSING OFFI CER (IN PURSUANCE OF THE DIRECTIONS OF THE DISPUTE RESO LUTION PANEL) . THE CRUX OF THE MATTER IS THAT THE APPEAL OR T HE CROSS OBJECTION CAN BE FILED BY THE REVENUE ONLY IF THE C IT OBJECTS TO ANY DIRECTION ISSUED BY THE DRP OR AGAINST ANY PART OF THE ORDER OF THE ASSESSING OFFICER (IN PURSUANCE OF THE DIRECTIONS OF THE DRP) . THUS IT IS MANIFEST THAT THE APPEAL CAN BE FILED ONLY ITA NO.80/DEL/2013 CO NO.160/DEL/2014 16 AGAINST DIRECTION ISSUED BY THE DRP AND THE CO CAN BE FILED AGAINST ANY PART OF THE ORDER OF THE ASSESSING OFFI CER PASSED IN PURSUANCE TO THE DIRECTION OF THE DRP. THE NITTY-GR ITTY OF THE MATTER IS THAT REVENUE SHOULD HAVE OBJECTION EITHER AGAINST THE DIRECTION OF THE DRP OR AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER. IN OTHER WORDS, THE SCOPE OF THE APPEAL OR CROSS OBJECTION BY THE REVENUE IS CONFINED TO THE SOME ADVERSE FIND ING RENDERED BY EITHER OF THE AUTHORITIES, AS THE CASE MAY BE. 12. LET US BRIEFLY RECAPITULATE THE FACTS OF THE EXTANT CASE. THE ASSESSEE DERIVED INCOME IN THE NATURE OF ROYALTIES AND OFFERED THE SAME TO TAX @ 15% ON GROSS BASIS AS PER SUCH LOWER RATE OF TAX PROVIDED UNDER ARTICLE 13(2) OF THE DTAA. THE AO H ELD THAT THE ASSESSEE HAS A SERVICE PE IN INDIA AND SINCE SUCH ROYALTY WAS EFFECTIVELY CONNECTED WITH THE PE, THE ENTIRE INCOM E WOULD FALL UNDER ARTICLE 7 AS THE CASE WAS COVERED UNDER PARA 6 OF THE ARTICLE 13. AFTER ALLOWING DEDUCTION AT THE RATE OF 20% OF THE ROYALTY INCOME, HE DETERMINED TOTAL INCOME AND CHAR GED TAX AT THE RATE OF 40% PLUS SURCHARGE AND EDUCATION CESS. THE DRP UPHELD THE DRAFT ASSESSMENT ORDER ON SUCH ISSUE EXC EPT NOT ITA NO.80/DEL/2013 CO NO.160/DEL/2014 17 ALLOWING THE GROSSING UP OF THE ROYALTY INCOME. NOW , THE DEPARTMENT IS CONTENDING THROUGH ITS CO THAT ARTICL E 13(2) IS NOT APPLICABLE BECAUSE THE ASSESSEE IS NOT THE BENEFICI AL OWNER OF THE ROYALTY RECEIVED BY IT FROM JCBI. IT CAN BE NOTICED FROM THE ABOVE JOTTED FACTS THAT NEITHER THE ASSESSING OFFICER NOR THE DRP HAS HELD THAT THE ASSESSEE IS A BENEFICIAL OWNER OF THE ROYALTY AND HENCE THE SAME SHOULD BE CHARGED TO TAX AT THE LOWE R RATE OF 15% AS PROVIDED UNDER THE DTAA. WHEN THE POSITION IS SO , WE FAIL TO SEE AS TO HOW THE REVENUE CAN RAKE UP SUCH ISSUE TH ROUGH THE CO. IT GOES WITHOUT SAYING THAT RIGHT TO APPEAL IS A STATUTORY RIGHT PROVIDED TO THE AGGRIEVED PARTY. THE SAME CAN BE EX ERCISED STRICTLY IN ACCORDANCE WITH AND AS PER THE TERMS OF THE RELEVANT PROVISION. IF THE LAW DOES NOT SPECIFICALLY OR GENE RALLY CONFER SUCH A RIGHT AGAINST A PARTICULAR ACTION OF THE AUTHORIT IES, THEN THE SAME CANNOT BE INFERRED. TURNING TO THE FACTS OF TH E INSTANT CASE, WE FIND THAT THE SECTION 253 OF THE ACT DOES NOT GI VE ANY RIGHT TO THE REVENUE TO APPEAL AGAINST A NON-FINDING OF THE ASSESSING OFFICER OR THE DRP, AS THE CASE MAY BE. THE NATURA L COROLLARY WHICH ERGO FOLLOWS IS THAT THE INSTANT CO OF THE RE VENUE LACKS THE ITA NO.80/DEL/2013 CO NO.160/DEL/2014 18 NECESSARY MANDATE SO AS TO BECOME ELIGIBLE FOR CONS IDERATION AND ADJUDICATION. 13. WE, THEREFORE, HOLD THAT THE CO FILED BY TH E REVENUE IS NOT MAINTAINABLE. THE SAME IS LIABLE TO BE AND IS HEREB Y DISMISSED. 14. AT THIS JUNCTURE, IT IS RELEVANT TO NOTE THA T THE ASSESSEE CLAIMED THE ENTIRE RECEIPT AS ROYALTY CHARGEABLE TO TAX AS PER ARTICLE 13(2) OF THE DTAA. THE ASSESSING OFFICER HE LD THE ENTIRE AMOUNT AS CHARGEABLE UNDER ARTICLE 7 AS BUSINESS P ROFITS. NOW, WE HAVE HELD SUPRA THAT SOME PART OF THE ASSESEES RECEIPTS IS CHARGEABLE TO TAX AS ROYALTY AND SOME PART AS BU SINESS PROFIT. IN SUCH CIRCUMSTANCES, THE QUESTION OF THE RATE AT WHICH TAX SHOULD BE CHARGED ON SUCH ROYALTY, ASSUMES SIGNIFIC ANCE. THE ASSESSEE CLAIMED THE ROYALTY AS COVERED UNDER ARTIC LE 13(2) OF THE DTAA. SINCE THE ASSESSING OFFICER HELD THAT THE ENT IRE RECEIPT WAS CHARGEABLE TO TAX AS BUSINESS PROFITS, NATURALLY HE HAD NO OCCASION TO APPLY HIS MIND ON THE CORRECTNESS OF TH E ASSESSEES CLAIM OF THE RATE OF TAX. NOW, SINCE THE ASSESSING OFFICERS VIEW HAS BEEN PARTLY OVERTURNED AND THAT OF THE ASSESSEE RESTORED PRO TANTO , IT WOULD BECOME ESSENTIAL FOR THE ASSESSING OFFIC ER TO ITA NO.80/DEL/2013 CO NO.160/DEL/2014 19 CALCULATE TAX ON SUCH AMOUNT IN CONFORMITY WITH OUR DECISION, BY FIRSTLY, ASCERTAINING THE QUANTUM OF SUCH ROYALTY A ND THEN APPLYING THE CORRECT RATE OF TAX. WE HAVE RENDERED OUR DECISION ONLY ON THE QUANTUM ASPECT WHICH WAS AGITATED BEFOR E US, AND NOT ON THE ASPECT OF THE RATE OF TAX TO BE APPLIED, WHICH WAS NOT SPECIFICALLY ASSAILED. IN SUCH CIRCUMSTANCES, ONE OPTION CAN BE TO LEAVE SUCH ASPECT TO BE DECIDED AFRESH BY THE ASSES SING OFFICER IN THE ORDER GIVING EFFECT TO THE TRIBUNAL ORDER, AND THE OTHER OPTION CAN BE TO DECIDE IT HERE AND NOW. AS THE LD. DR HAS RAISED SUCH ISSUE AND THE LD. AR HAS ALSO REQUESTED TO ADJUDICA TE THE SAME RIGHT IN THESE PROCEEDINGS, WE ARE TAKING UP THE SA ME FOR DECISION ON MERITS. 15. IT CAN BE OBSERVED FROM THE FACTUAL NARRATI ON GIVEN ABOVE THAT JCBE WAS RECEIVING ROYALTY FROM JCBI IN EARLIE R YEARS. AS PER THE NEW AGREEMENT ENTERED INTO AMONGST JCBE, JCBI A ND THE ASSESSEE, THE AMOUNT OF ROYALTY WAS FIRST PAID BY J CBI TO THE ASSESSEE, WHO, IN TURN, PASSED ON THE SAME TO JCBE IN FULL LESS 0.50%. THE CASE OF THE REVENUE IS THAT SINCE 99.5% OF THE ROYALTY RECEIVED BY THE ASSESSEE HAS BEEN PASSED ON TO JCBE, THE ITA NO.80/DEL/2013 CO NO.160/DEL/2014 20 ASSESSEE CEASED TO BE THE BENEFICIAL OWNER OF THE R OYALTY PAID BY JCBI. THE LD. DR FERVENTLY ARGUED THAT THE BENEFIT OF LOW RATE OF TAXATION AS PROVIDED UNDER ARTICLE 13(2) OF THE DTA A CAN BE ALLOWED ONLY IF THE ASSESSEE IS A BENEFICIAL OWNER OF THE ROYALTY. HE ARGUED THAT SINCE, IN THIS CASE, THE ASSESSEE SI MPLY ACTED AS A CONDUIT BETWEEN THE JCBI AND JCBE, THE BENEFIT OF A RTICLE 13(2) CANNOT BE EXTENDED TO IT AS IT IS NOT BENEFICIAL OW NER AND, HENCE, THE TAXABILITY OF ROYALTY SHOULD BE DETERMINED AS P ER SECTION 115A(1)(B) OF THE ACT. 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND P ERUSING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT SECTION 9 0(2) OF THE ACT PROVIDES THAT : WHERE THE CENTRAL GOVERNMENT HAS E NTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUT SIDE INDIA OR SPECIFIED TERRITORY OUTSIDE INDIA, AS THE CASE M AY BE, UNDER SUB-SECTION (1) FOR GRANTING RELIEF OF TAX, OR AS T HE CASE MAY BE, AVOIDANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PROVISIONS OF THIS ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THA T ASSESSEE .. THE EFFECT OF THIS SECTION IN UNEQUIVOCAL TERMS IS THAT THE ITA NO.80/DEL/2013 CO NO.160/DEL/2014 21 PROVISIONS OF THE ACT OR THE DTAA, WHICH EVER ARE M ORE BENEFICIAL TO THE ASSESSEE, APPLY. IN SO FAR AS THE INSTANT I SSUE IS CONCERNED, THE PROVISIONS OF ART. 13(2) OF THE DTAA PROVIDING FOR LOWER RATE OF TAX, BEING MORE BENEFICIAL TO THE ASSESSEE, SHALL APPLY IF IT IS FOUND TO BE COVERED WITHIN THE MANDATE OF PARA 2 OF THE ARTICLE 13 OF THE DTAA. IN THE OTHERWISE SITUATION, THE ISSUE WOULD BE DECIDED IN THE FAVOUR OF THE REVENUE FOR THE CHARGI NG TAX AT THE RATE PRESCRIBED U/S 115A OF THE ACT. 17. THE WHOLE CASE OF THE REVENUE RESTS ON THE BE DROCK THAT THE BENEFIT OF LOWER RATE AS PROVIDED UNDER ARTICLE 13( 2) CANT BE EXTENDED TO THE ASSESSEE SINCE IT IS NOT THE BENEFI CIAL OWNER OF THE AMOUNT OF ROYALTY, WHICH EFFECTIVELY BELONGS TO JCBE AND THE ASSESSEE ONLY ACTED AS AN INTERMEDIARY BETWEEN JCBI AND JCBE IN COLLECTING AND HANDING OVER THE SAME. 18. AT THIS STAGE, WE WANT TO CLARIFY THAT THE AS SESSEE OFFERED THE ENTIRE AMOUNT AS ROYALTY INCOME IN ITS HANDS AN D ADMITTEDLY JCBE DID NOT. THE ASSESSMENT OF SUCH ROYALTY INCOM E HAS BEEN MADE ON SUBSTANTIVE BASIS IN THE HANDS OF THE ASSES SEE AND THERE ITA NO.80/DEL/2013 CO NO.160/DEL/2014 22 IS NO ASSESSMENT OF SUCH ROYALTY INCOME IN THE HAND S OF THE JCBE. IT IS NOT THE CASE OF THE PARTIES BEFORE US THAT TH E AMOUNT RECEIVED BY THE ASSESEE SHOULD HAVE BEEN CHARGED TO TAX IN THE HANDS OF JCBE AS IT WAS THE REAL AND THE BENEFICIAL OWNER OF THE AMOUNT RECEIVED BY THE ASSESSEE WHO MERELY ACTED AS A MEDIATOR BETWEEN JCBI AND JCBE. AS SUCH, WE ARE NOT GOING IN TO THIS ASPECT. 19. COMING BACK TO THE EXAMINATION AND EVALUATI ON OF THE POINT OF VIEW OF THE REVENUE THAT THE BENEFIT OF ARTICLE 13(2) CANNOT BE MADE AVAILABLE TO THE ASSESSEE, WE CONSIDER IT EXPE DIENT TO TAKE STOCK OF THE PRESCRIPTION OF THE RELEVANT PART OF P ARA 2 OF ARTICLE 13 WHICH IS AS UNDER:- 2. HOWEVER, AS THE ROYALTIES AND FEES FOR TECHNICA L SERVICES MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE AND ACCORDING TO LAWS OF THAT STAT E; BUT IF THE BENEFICIAL OWNER OF THE ROYALTIES OR FEES FOR TECHNICAL SERVICES IS A RESIDENT OF THE OTHER CONTRACTING STATE, THE TAX SO CHARGED SHALL NOT EXCEED. . 20. THE ESSENCE OF THIS PROVISION IS THAT ROYALTY A ND FEES FOR TECHNICAL SERVICES EARNED BY A RESIDENT OF UK FROM A RESIDENT OF INDIA MAY ALSO BE TAXED IN INDIA AS PER THE DOMESTI C TAXATION LAW OF INDIA, THAT IS, IN THE PRESENT CONTEXT AS PER T HE RATE OF TAX ITA NO.80/DEL/2013 CO NO.160/DEL/2014 23 PROVIDED IN SECTION 115A OF THE ACT. HOWEVER, THE L ATER PART OF PARA 2 OF THE ARTICLE 13 CLARIFIES THAT ROYALTIES O R FEES FOR TECHNICAL SERVICES SHALL BE CHARGED TO TAX AT LOWER RATE STIP ULATED IN THIS ARTICLE, IF THE BENEFICIAL OWNER OF SUCH ROYALTY ET C. IS THE RESIDENT OF UK. THE LD. DR HAS VIGOROUSLY CONTENDED THAT SI NCE THE BENEFICIAL OWNER OF THE ROYALTY IN THE INSTANT CASE IS NOT THE ASSESSEE, BUT JCBE, THE LOWER RATE OF TAX AS PROVI DED UNDER PARA 2 OF ARTICLE 13 WOULD NOT BE AVAILABLE. 21. BEFORE GOING AHEAD, WE NEED TO ASCERTAIN THE MEANING OF THE TERM BENEFICIAL OWNER, WHICH HAS NEITHER BEEN DEF INED UNDER THE ACT NOR THE DTAA. IN COMMON PARLANCE, A BENEFICIAL OWNER OF A PARTICULAR INCOME IS THE ONE WHO IS ENTITLED TO SUC H INCOME IN HIS OWN RIGHT. SOMETIMES, A BENEFICIAL OWNER MAY TURN O UT TO BE A PERSON DIFFERENT FROM THE IMMEDIATE RECIPIENT OR FO RMAL OWNER OR RECIPIENT OF INCOME. COMMENTARY ON THE DOUBLE TAXAT ION CONVENTION STATES THAT THE BENEFICIAL OWNERSHIP I S AN OWNERSHIP WHICH IS NOT MERELY THE LEGAL OWNERSHIP BY THE MERE FACT OF BEING ON THE REGISTER BUT THE RIGHT AT LEAST TO SOME EXTE NT TO DEAL WITH THE PROPERTY AS YOUR OWN. HENCE THE BENEFICIAL OW NER IS HE WHO ITA NO.80/DEL/2013 CO NO.160/DEL/2014 24 IS FREE TO DECIDE (I) WHETHER OR NOT THE CAPITAL OR OTHER ASSETS SHOULD BE USED OR MADE AVAILABLE FOR USE BY OTHERS OR (II) ON HOW THE YIELDS THERE FROM BE USED OR (III) BOTH. THE D TAA APPLIES TO PERSONS WHO ARE RESIDENTS OF ONE OR BOTH OF THE CON TRACTING STATES. AS SUCH, THE BENEFITS OF THE TREATY ARE MEA NT TO BE GIVEN ONLY TO THE RESIDENTS OF SUCH STATES AND NOT TO THE RESIDENTS OF THE THIRD STATE. IN A PARTICULAR CASE, THE FORMAL RECI PIENT OF INCOME MAY BE RESIDENT OF ONE OF THE CONTRACTING STATE BUT THE BENEFICIAL OWNER OF SUCH INCOME MAY BE THE RESIDENT OF SOME T HIRD STATE AND VICE VERSA . TAX RELIEF IN THE SOURCE STATE DEPENDS ON WHETHE R THE BENEFICIAL OWNER, NOT THE FORMAL RECIPIENT OF T HE AMOUNT, IS RESIDENT OF THE OTHER CONTACTING STATE. 22. APPLYING THE ABOVE UNDERLYING PRINCIPLE, WE F IND THE CONTENTION OF THE LD. DR TO BE SANS MERIT. THE REAS ON FOR OUR THIS DECISION IS THAT THE BENEFIT OF LOWER RATE AS PROVI DED UNDER ARTICLE 13(2) OF THE DTAA CAN BE WITHDRAWN IF THE BENEFICI AL OWNER OF THE ROYALTY IN OUR CASE HAPPENS TO BE NOT A RESIDEN T OF UK. A CASE HAS BEEN MADE OUT THAT SINCE THE ASSESSEE, A RESIDE NT OF UK, IS NOT THE BENEFICIAL OWNER OF THE ROYALTY ETC., THE B ENEFIT OF LOWER ITA NO.80/DEL/2013 CO NO.160/DEL/2014 25 RATE OF TAXATION WOULD BE AUTOMATICALLY FORFEITED. IN OUR CONSIDERED OPINION, THIS CONTENTION IS DEVOID OF ME RITS BECAUSE THE REQUIREMENT FOR THE APPLICABILITY OF ARTICLE 13 (2) OF THE DTAA IS THAT THE BENEFICIAL OWNER SHOULD BE THE RESIDENT OF THE UK. IT IS NOT THAT IF THE FORMAL RECIPIENT, A RESIDENT OF UK, IS NOT THE BENEFICIAL OWNER, THEN THE BENEFIT IS LOST, NOTWITH STANDING THE FACT THAT THE BENEFICIAL OWNER IS ALSO THE RESIDENT OF U K. SUCH RELIEF OF LOWER RATE OF TAXATION CAN BE DENIED IF THE BENEFIC IAL OWNER OF THE ROYALTY IS A RESIDENT OF SOME THIRD STATE, NEITHER BEING INDIA NOR UK. DESPITE THE FACT THAT THE ASSESSEE, A RESIDENT OF UK, IS NOT A BENEFICIAL OWNER AS PER THE STAND POINT OF THE REVE NUE, STILL THE BENEFIT OF LOWER RATE OF TAX CANNOT BE DENIED BECAU SE THE BENEFICIAL OWNER OF THE ROYALTY, BEING JCBE, IS ADM ITTEDLY RESIDENT OF UK. AS THE ROYALTY IN THE PRESENT CASE HAS ARISE N IN INDIA, AND THE BENEFICIAL OWNER OF THIS ROYALTY IS RESIDENT OF UK, WE HOLD THAT THE TAX SHALL BE CHARGED @ 15% AS PROVIDED IN ARTIC LE 13(2) OF THE DTAA. ITA NO.80/DEL/2013 CO NO.160/DEL/2014 26 23. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE CO OF THE REVENUE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 04.07.201 4. SD/- SD/- [ C.M. GARG ] [ R.S. SYAL ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 04 TH JULY, 2014. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.