ERICSSON INDIA PRIVATE LIMITED,DELHI V. DCIT, CIRCLE-7(1), NEW DELHI

ITA 1149/DEL/2022

AI Insights

The case involves Ericsson India Pvt. Ltd. appealing against the order of the Commissioner of Income Tax (Appeals), which confirmed the Assessing Officer's actions regarding various tax deductions and credits for the assessment year 2015-16. The primary issues included the disallowance of a deduction for a provision created for litigation costs, the application of a beneficial withholding tax rate on dividends paid to a foreign entity under the India-Sweden DTAA, and the non-allowance of deductions for Education Cess and Secondary Higher Education Cess. The tribunal's decision addressed these issues based on statutory provisions and precedents set by previous cases.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 26105 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Other Referred Cases: DCIT Vs. Total Oil India Pvt. Ltd. (2023) 149 taxmann.com 332 (Mum.)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY B. BASANTA
• Assessee Lawyers: VISHAL KALRA
• Keywords: Retrospective amendment; Double taxation relief
• Section: 143(3); 154; 43B; 144C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘D’ NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA No.1149/Del/2022 Assessment Year: 2015-16 Ericsson India Pvt. Ltd., 18/17, 4th Floor, WEA, Pusa Lane, Dhaka House, Karol Bagh, Delhi Vs. DCIT, Circle-7(1), New Delhi PAN:AAACE0138N (Appellant) (Respondent) ORDER PER SATBEER SINGH GODARA, JM This assessee’s appeal for assessment year 2015-16, arises against the Commissioner of Income Tax (Appeals) [in short, the “CIT(A)”], Delhi’s-44 DIN and order no. ITBA/APL/S/250/2021- 22/1041513865(1), dated 25.03.2022 involving proceedings under section 143(3) r.w.s. 144C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. Heard both the parties. Case file perused. Assessee by Sh. Vishal Kalra, Adv. Sh. Ankit Sahani, Adv. Department by Sh. Vijay B. Basanta, CIT(DR) Date of hearing 11.03.2025 Date of pronouncement 26.03.2025 ITA No.1149/Del/2022 2 | P a g e 3. The assessee pleads the following substantive grounds in the instant appeal: 1. That on the facts and in the circumstances of the case & in law, the order passed by the Ld Commissioner of Income Tax (Appeals) 44 [Ld. CIT(A)\"), to the extent confirming Assessing Officer's [\"AO\"] action, is bad in law and void ab-initio 2. That on the facts and in the circumstances of the case & in law, the Ld. CIT(A) grossly erred in not allowing deduction in respect of Provision created on account of litigation of INR 15,155,582. 3. That on the facts and circumstances of the case and in law, the AO/CIT(A), has erred in not considering a lower tax withholding rate of 5% (as provided in other country DTAAs with India e.g. Slovenia, Lithuania, Colombia), on dividend paid to Telefonaktiebolaget LM Ericsson, a Swedish company applying the 'most favoured nation clause, as per the protocol to the Double Taxation Avoidance Agreement (\"DTAA\") between India and Sweden. 3.1 That on the facts and circumstances of the case and in law, the AO/CIT (A) has failed to appreciate that the dividend income of the non-resident being governed by the provisions of India-Sweden DTAA and therefore, in terms of section 90(2) read with section 10(34) of the Act, could not be subjected to a rate in excess of the rate prescribed under the DTAA and hence, erred in subjecting the Appellant to additional income tax in terms of section 115-0 of the Act. 3.2 That on the facts and circumstances of the case and in law, the CIT(A) erred in not directing the AO to grant refund of the excess dividend distribution tax withheld, since as per the provisions of section 237 of the Act read with Article 265 of the Constitution of India, only legitimate tax could be recovered from the Appellant. 4. That on facts and in the circumstances of the case and in law, the CIT(A) erred in not allowing deduction in respect of Education Cess (\"EC\") and Secondary Higher Education Cess (\"SHEC\") paid on Income Tax of 65,235,132 for computing the total income as per the provisions of the Act. 5. Without prejudice to Ground Nos. 3-3.2 above, in case the rate of DDT is not restricted based on the beneficial provisions of the India- Sweden tax treaty, cess of INR 2,94,52,500 paid on DDT should be allowed as deduction for computing the total income as per the provisions of the Act. 6. That on facts and in the circumstances of the case and in law, the AO/CIT(A) has erred in not allowing complete credit of Tax Deducted at Source of INR 3,276,930,422 ITA No.1149/Del/2022 3 | P a g e 7. That on facts and in the circumstances of the case and in law, the AO/CIT(A) has erred in not allowing complete Foreign Tax Credit u/s 90/91 of INR 1,793,404 That the above grounds of appeal are without prejudice and notwithstanding each other, That the appellant reserves its right to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. Any consequential relief, to which the appellant may be entitled under the law in pursuance of the aforesaid grounds of appeal, or otherwise, may be thus granted. 2. Learned counsel submits very fairly at the outset that the assessee’s first and foremost substantive ground herein is general in nature. Rejected in very terms. 3. Next comes the assessee’s second substantive ground seeking to allow its deduction of Rs.1,51,55,582/- representing provision created on account of litigation, which has been disallowed by the learned lower authorities by quoting section 43B of the Act. The assessee’s case before us is that it has already filed section 154 rectification before the Assessing Officer on 6th of August, 2024, which is yet to be decided. 4. Faced with this situation, we deem it appropriate to accept the assessee’s instant second substantive ground for statistical purposes with a direction to the learned Assessing Officer to finally decide the foregoing section 154 rectification as per law within three effective opportunities. Ordered accordingly. ITA No.1149/Del/2022 4 | P a g e 5. We are next informed that the assessee’s third and fifth substantive ground seek beneficial withholding rate of 5% pertaining to the Dividend Distribution Tax “DDT” involving various overseas payees going by the Most Favoured Nation “MFN” clause(s) in the respective “DTAA”. Learned counsel submits very fairly that this tribunal’s special bench in DCIT Vs. Total Oil India Pvt. Ltd. (2023) 149 taxmann.com 332 (Mum.) has already decided the issue against the assessee and in the department’s favour that such an application of “MFN” clause is not automatic. We accordingly reject the assessee’s instant third and fifth substantive grounds in very terms. 6. So far as the assessee’s fourth substantive ground seeking deduction of Education Cess “EC” and secondly Higher Education Cess “HEC” is concerned, learned counsel submits very fairly that the same is no more allowable in light of Section 40(2) Explanation- III inserted by Finance Act, 2022 with retrospective effect from 01.04.2005. Rejected accordingly. 7. Learned counsel lastly submits that the assessee is no more whishes to press its sixth and seventh substantive grounds in light of the fact that the learned Assessing Officer has already allowed ITA No.1149/Del/2022 5 | P a g e its section 154 rectification to the very effect. Rejected in very terms, subject to all just exceptions. 8. This assessee’s appeal is partly allowed for statistical purposes. Order pronounced in the open court on 26th March, 2025 Sd/- Sd/- (S. RIFAUR RAHMAN) (SATBEER SINGH GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 26th March, 2025. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi "