PRAMERICA ASPF II CYPRUS HOLDING LTD, GURGAON V. DCIT (IT) 3(3)(2), MUMBAI

ITA 1113/MUM/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3543 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 03-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 24-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VANDANA SAGAR
• Assessee Lawyers: KANCHAN KAUSHAL DHANESH BAFNA
• Keywords: Double taxation relief; Competent authority; Revised return; Bonafide mistake
• Section: 143(3); 234B; 80IB; 10B; 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) PRAMERICA ASPF II CYPRUS HOLDING LIMITED, C/O. PRICEWATERHOUSE COOPERS PVT. LTD. 18 TH FLOOR, BUILDING NO.10, TOWER C, DLF CYBERCITY, GURGAON - 122002 ... APPELLANT PAN: AAECP 5087H VS. THE DCIT ( INTL.TAXATION) 3(3)(2), ROOM NO.11,SCINDIA HOUSE, GROUND FLOOR, BALLARD ESTATE MUMBAI .... RESPONDENT APPELLANT BY : S/ SHRI KANCHAN KAUSHAL/DHANES H BAFNA RESPONDENT BY : SMT. VANDANA SAGAR DATE OF HEARING : 25/02/2016 DATE OF PRONOUNCEMENT : 29/2/2016 ORDER PER G.S. PANNU,AM: THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTE D AGAINST THE DIRECTIONS OF THE DRP-III, MUMBAI DATED 22/12/201 4 PERTAINING TO THE ASSESSMENT YEAR 2010-11, WHICH IN TURN HAS ARISEN F ROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 28/03/2014 U NDER SECTION 143(3)R.W.S. 144C(1) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) . 2 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL:- 1. ON THE FACTS OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER/ DISPUTE RESOLUTION PANEL ('LD. ASSESSING OFFICER/DR P') ERRED IN ASSESSING THE INCOME OF THE APPELLANT AT RS 23,93,98,904 AS AGAIN ST THE RETURNED INCOME OF RS 15,56,49,334. 2. ON THE FACTS OF THE CASE AND IN LAW, THE LD. AS SESSING OFFICER/DRP HAS ERRED IN HOLDING THAT THE INTEREST INCOME EARNED BY THE APPELLANT IS TAXABLE AT THE RATE PRESCRIBED UNDER THE ACT, INSTEAD OF A LOWER/ BENEFICIAL RATE PRESCRIBED IN INDIA-CYPRUS DOUBLE TAXATION AVOIDANC E AGREEMENT ('DTAA'). 2.1 THE LD. ASSESSING OFFICER/DRP HAS ERRED IN HOL DING THAT THE APPELLANT HAS ITSELF NOT CLAIMED THE BENEFIT OF THE DTAA, MERELY ON THE GROUND OF APPELLANT'S INADVERTENCE OF NOT FILLING SCHEDULE 'S I' (SPECIAL INCOME) OF THE INCOME-TAX RETURN FORM. 2.2 THE LD. ASSESSING OFFICER/ DRP HAS ERRED IN DE NYING THE APPELLANT FROM CLAIMING THE BENEFITS OF DTAA, MERELY DUE TO NON-FI LING OF A REVISED RETURN AND DISREGARDING JUDICIAL PRECEDENTS AND CBDT CIRCU LAR, CASTING AN OBLIGATION UPON THE REVENUE TO NOT TO TAKE AN ADVANTAGE OF APP ELLANT'S BONAFIDE MISTAKE OR IGNORANCE. 2.3 THE LD. ASSESSING OFFICER/DRP ALSO ERRED IN IG NORING THE FACT THAT THE APPELLANT HAS BEEN CONSISTENTLY CLAIMING THE BENEFI TS OF THE BENEFICIAL PROVISIONS OF DTAA, WHICH HAVE BEEN ACCEPTED BY THE REVENUE EITHER IN SCRUTINY ASSESSMENTS OR UNDER SECTION 143(1) OF THE ACT. 2.4 THE LD. AO, WHILE FRAMING THE DRAFT ASSESSMENT ORDER, HAS ERRED IN DISREGARDING THE ORDER OF THE LD. CIT(A) - 11, WHER EIN, THE LATTER HAD ALREADY ADJUDICATED THE IMPUGNED ISSUE IN FAVOUR OF THE APP ELLANT. 2.5 WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT PRAYS BEFORE THIS HON'BLE TRIBUNAL TO EXERCISE ITS INHERENT POWERS AND GRANT THE APPELLANT ITS BONAFIDE CLAIM OF CHARGING ITS INCOME TO TAX AT THE BENEFICI AL RATES PRESCRIBED IN THE DTAA. PRAYER THE APPELLANT PRAYS THAT IT IS ENTITLED TO CLAIM TH E BENEFICIAL PROVISIONS OF INDIA-CYPRUS DTAA AND ACCORDINGLY, ITS INCOME OUGHT TO BE TAXED AT THE LOWER/ BENEFICIAL RATE PRESCRIBED THEREIN. 3 ON THE FACTS OF THE CASE AND IN LAW, THE LD. AS SESSING OFFICER/DRP ERRED IN MAKING ADDITION TO THE RETURNED INCOME ON ACCOUNT O F INTEREST OF RS.8,37,49,570/-, ON ACCRUAL BASIS AS AGAINST RECE IPT BASIS , ADOPTED BY THE APPELLANT. 3 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) 3.1 THE LD. AO/DRP HAS ERRED IN LAW BY DISREGARDIN G THE PROVISIONS OF DTAA, WHICH PROVIDE FOR TAXATION OF ONLY THOSE INTEREST I NCOME, WHICH WERE PAID TO THE NON-RESIDENT. 3.2 THE LD. AO/DRP HAS ERRED IN LAW BY IGNORING TH AT AS PER SECTION 145 OF THE ACT, THE APPELLANT HAS AN OPTION TO OPT, EITHER CASH OR MERCANTILE SYSTEM OF ACCOUNTING AND TO FOLLOW THE SAME ON A CONSISTEN T AND REGULAR BASIS. 3.3 THE LD. AO/DRP ERRED IN DISREGARDING THE FACT THAT THE METHOD OF ACCOUNTING ADOPTED BY THE APPELLANT HAS BEEN FOLLOW ED BY IT REGULARLY AND CONSISTENTLY OVER THE YEARS AND CANNOT BE DISCARDED ON ACCOUNT OF AN INADVERTENT SOLITARY ERROR. 3.4 WITHOUT PREJUDICE TO THE FOREGOING, THE LD. AO BE DIRECTED NOT TO TAX THE SAID INTEREST INCOME OFFERED TO TAX ON RECEIPT BASI S IN SUBSEQUENT YEAR(S). PRAYER THE APPELLANT PRAYS THAT IT SHOULD BE ENTITL ED TO OFFER ITS INCOME TO TAX IN THE YEAR IN WHICH IT IS RECEIVED BY IT. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. AO HAS ERRED IN NOT GRANTING CREDIT OF TAX DEDUCTED AT SOURCE, TO T HE EXTENT OF RS 1,41,76,878, CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. AO/DRP ERRED IN LEVYING INTEREST OF RS 6,31,86,832 UNDER SECTION 234B AND RS 32,49,671 UNDER SECTION 234C OF THE ACT. 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. AO ERRED IN INITIATING THE PENALTY PROCEEDINGS UNDER S ECTION 271(1)(C) OF THE ACT. 2.1 ALTHOUGH IN THE MEMO OF APPEAL, THE ASSESSEE HA S RAISED MULTIPLE GROUNDS OF APPEAL, BUT THE DISPUTE IS ESSENTIALLY O N TWO ISSUES, WHICH WE SHALL WITH HEREINAFTER IN SERIATIM. 3. BRIEFLY PUT, THE RELEVANT FACTS ARE THAT THE APP ELLANT ASSESSEE WAS INCORPORATED IN CYPRUS AND IS A TAX RESIDENT OF CYP RUS. IT IS ENGAGED IN THE BUSINESS OF MAKING INVESTMENT IN REAL ESTATE DE VELOPMENT COMPANIES IN INDIA AND IS ELIGIBLE TO CLAIM THE BEN EFIT OF INDIA-CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT ('DTAA'). FOR ASSESSMENT YEAR 2010-11, IT FILED A RETURN OF INCOME DECLARING INT EREST INCOME EARNED FROM COMPULSORY CONVERTIBLE DEBENTURES (CCDS) OF TH E INVESTEE 4 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) COMPANIES IN INDIA ENGAGED IN THE BUSINESS OF DEVEL OPMENT OF REAL ESTATE. THE SAID INCOME WAS OFFERED TO TAX @10% PU RPORTEDLY IN LINE WITH THE PROVISIONS OF ARTICLE-11(2) OF THE INDIA-C YPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). THE ASSESSING OFFICER , HOWEVER, TAXED THE INCOME ON THE NORMAL RATE OF 43.23% ON THE GROU ND THAT THE ASSESSEE COMPANY DID NOT FILL UP THE SPECIAL INCOM E(SI) SCHEDULE IN THE RETURN OF INCOME FILED. IN OTHER WORDS, THE ASSESS ING OFFICER DID NOT ALLOW THE BENEFIT OF THE LOWER RATE OF TAX PRESCRIB ED IN THE INDIA-CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). THIS I S THE FIRST AREA OF DIFFERENCE BETWEEN THE ASSESSEE AND THE REVENUE. 3.1 SECONDLY, THE INTEREST INCOME EARNED FROM CCDS WAS DECLARED BY THE ASSESSEE FOR TAXATION ON RECEIPT BASIS, WHEREAS THE ASSESSING OFFICER TAXED IT ON ACCRUAL BASIS. THIS IS THE SECOND AREA OF DIFFERENCE BETWEEN THE ASSESSEE AND THE REVENUE BEFORE US. 3.2 IN SO FAR AS, THE FIRST ISSUE RELATING TO THE A PPLICABLE RATE OF TAX IS CONCERNED, THERE IS NO DISPUTE TO THE FACT THAT THE RATE OF TAX PRESCRIBED IN THE INDIA-CYPRUS DOUBLE TAXATION AVOIDANCE AGREE MENT (DTAA) WITH RESPECT TO THE STATED INCOME IS 10%, AND THE ASSE SSING OFFICER DENIED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THE S .I SCHEDULE IN THE FORM OF RETURN OF INCOME WAS NOT FILLED UP BY THE A SSESSEE AND, THEREFORE, THE INCOME WAS TAXED AT THE NORMAL RATE OF 43.23%. THE ASSESSEE HAS BEEN CONSISTENTLY POINTING OUT THAT NO N FILLING-UP OF THE SCHEDULE FOR S.I IN THE FORM OF RETURN OF INCOME WAS AN INADVERTENT MISTAKE. IN THIS CONTEXT, ASSESSEE HAD EXPLAINED T HAT THE COMPUTATION OF INCOME FILED CONTAINED A NOTE TO THE EFFECT THAT ASSESSEE WAS A TAX 5 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) RESIDENT OF CYPRUS AND WAS THUS, ENTITLED TO THE BE NEFICIAL PROVISIONS OF INDIA-CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (D TAA). FURTHERMORE, SUCH NOTE ALSO MADE A REFERENCE TO ART ICLE 11(2) OF THE INDIA-CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (D TAA), WHEREBY THE INTEREST INCOME WAS TAXABLE @10%. 4. BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE H AS ANNEXED COPIES OF THE RELEVANT PORTION OF THE FORM OF RETUR N OF INCOME, AS ALSO THE COMPUTATION OF INCOME FILED WITH THE ASSESSING OFFICER. IT WAS ALSO POINTED OUT BEFORE US THAT IN THE PRECEDING ASSESSM ENT YEAR OF 2009- 10, WHEREIN ASSESSMENT WAS FINALIZED UNDER SECTION 143(3) OF THE ACT, THE ASSESSEE HAS BEEN ALLOWED THE BENEFIT OF THE LO WER RATE OF TAX PRESCRIBED IN THE INDIA-CYPRUS DOUBLE TAXATION AVOI DANCE AGREEMENT (DTAA). THE LD. REPRESENTATIVE FOR THE ASSESSEE AS SERTED THAT SIMILAR SITUATION HAS PREVAILED EVEN IN THE SUBSEQUENT ASSE SSMENT YEARS OF 2011-12 AND 2012-13, WHEREIN THE RETURN OF INCOME WAS ACCEPTED IN THE PROCESSING DONE UNDER SECTION 143(1) OF THE ACT . 5. IN THIS BACKGROUND, THE LD. DEPARTMENTAL REPRESE NTATIVE FOR THE REVENUE HAS MERELY REITERATED THE STAND OF THE LOWE R AUTHORITIES WHICH IS TO THE EFFECT THAT THE BENEFIT OF THE LOWER RATE OF TAX PRESCRIBED IN INDIA-CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (D TAA) COULD NOT BE ALLOWED SINCE ASSESSEE HAS FAILED TO FILE ANY RE VISED RETURN TO SHOW THAT THE NON-FILLING OF THE SCHEDULE OF S.I IN THE RETURN OF INCOME WAS AN INADVERTENT MISTAKE. 6 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE MATERIAL ON RECORD CLEARLY ESTABLISHES THAT THE APPELLANT I S A TAX RESIDENT OF CYPRUS, WHICH IS FURTHER SUPPORTED BY THE TAX RESI DENCY CERTIFICATE, ISSUED BY THE COMPETENT AUTHORITY OF CYPRUS, COPY O F WHICH HAS BEEN PLACED ON RECORD. CONSEQUENTLY, IT IS ELIGIBLE TO CLAIM THE BENEFIT OF INDIA-CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (D TAA) AND SUCH CLAIM OF THE ASSESSEE HAS BEEN ACCEPTED BY THE ASSE SSING OFFICER IN SCRUTINY ASSESSMENT IN THE PRECEDING ASSESSMENT YEA R OF 2009-10 AND ALSO IN THE SUBSEQUENT ASSESSMENT YEARS OF 2011-12 AND 201213 IN THE INTIMATION MADE UNDER SECTION 143(1) OF THE ACT. E VEN OTHERWISE, WE FIND THAT IN THE ORDERS OF THE AUTHORITIES BELOW TH ERE IS NO CONTRAVENTION OF ASSESSEES CLAIM FOR TAXATION @ 10 % ON MERITS. THE FACT THAT ASSESSEE DID NOT FILL-UP SCHEDULE-SI IN T HE FORM OF RETURN OF INCOME HAS SINGULARLY PREVAILED WITH THE LOWER AUT HORITIES IN DENYING THE BENEFIT OF THE CONCESSIONAL RATE OF TAX PRESCRI BED IN THE INDIA- CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). THE ASSERTIONS OF THE ASSESSEE THAT SUCH NON FILING-UP OF THE SCHE DULE-S.I IN THE FORM OF RETURN OF INCOME IS AN INADVERTENT OMISSION HAS BEEN REJECTED. IN OUR CONSIDERED OPINION, THE LOWER AUTHORITIES HAVE COMPLETELY MISDIRECTED THEMSELVES IN REFUSING ASSESSEES CLAIM FOR BEING TAXED AT THE CONCESSIONAL RATE OF 10% PRESCRIBED IN THE INDI A-CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA). NOTABLY, THE ACCEPTED HISTORY OF THE CASE DEPICTED BY THE ASSESSMENT UNDER SECTIO N 143(3) FOR ASSESSMENT YEAR 2009-10, AS WELL AS THE MANNER OF D RAWING UP COMPUTATION OF TAX ON INCOME FURNISHED BY THE ASSES SEE BEFORE THE ASSESSING OFFICER REFLECTS THAT SUCH AN OMISSION W AS INDEED AN INADVERTENT MISTAKE. NOTABLY, THE STATEMENT OF TOT AL INCOME INCLUDING 7 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) THE COMPUTATION OF TAX ON INCOME AS FURNISHED BY TH E ASSESSEE IS CONTAINED IN A NOTE, WHICH IS REPRODUCED HEREUNDER: - 5. THE COMPANY IS A TAX RESIDENT OF CYPRUS AND IS ENTITLED TO BENEFICIAL PROVISIONS OF INDIA- CYPRUS TAX TREATY. THE COMPAN Y HAS MADE INVESTMENTS IN COMPULSORILY CONVERTIBLE DEBENTURES IN INDIAN COMPA NIES ENGAGED IN REAL ESTATE DEVELOPMENT. DURING THE PREVIOUS YEAR RELEV ANT TO THE A.Y 2010-11, THE COMPANY HAS EARNED INTEREST OF RS.155,649,334/- FROM SUCH INVESTMENTS. AS PER ARTICLE 11(2) OF THE INDIA-CYPRUS TAX TREATY , INTEREST IS TAXABLE IN INDIA @ 10%. THE COMPANY HAS ACCORDINGLY PAID TAXES ON I NTEREST INCOME @ 10%. 6.1 NOTABLY, THE TAX LIABILITY ON THE TOTAL INCOME HAS ALSO BEEN COMPUTED AT 10%. IN VIEW OF THE AFORESAID MATERIAL WHICH WAS VERY MUCH BEFORE THE LOWER AUTHORITIES, IN OUR VIEW, THE INSISTENCE OF THE REVENUE ON FILING OF THE REVISED RETURN OF INCOME T O CLAIM LOWER RATE OF TAX REFLECTS AN OVER-TECHNICAL APPROACH, WHICH IS U NTENABLE. ONCE ON FACTS AND IN LAW IT IS DISCERNIBLE THAT ASSESSEE IS ENTITLED TO THE BENEFITS OF THE INDIA-CYPRUS DOUBLE TAXATION AVOIDANCE AGREE MENT ('DTAA') AND ITS INCOME IS LIABLE TO BE TAXED AT THE LOWER RATE OF 10% AS PER INDIA- CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA), MERE TECHNICAL ERROR WOULD NOT DEFEAT THE CLAIM OF THE ASSESSEE, W HICH IS OTHERWISE IN ACCORDANCE WITH LAW. ON THIS PROPOSITION, THE LD. REPRESENTATIVE FOR THE ASSESSEE HAD RELIED UPON THE JUDGMENT OF THE HO NBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. RAJASTHAN FASTENE RS (P) LTD., [2014] TAXMANN.COM 175 (RAJASTHAN). IN THE CASE BEFORE HO NBLE RAJASTHAN HIGH COURT, THE ASSESSEES CLAIM FOR EXEMPTION UND ER SECTION 10B OF THE ACT WAS SOUGHT TO BE DENIED BY THE REVENUE ON T HE GROUND THAT WHILE E-FILING THE RETURN OF INCOME, THE CLAIM WAS WRONGLY MENTIONED AS BEING UNDER SECTION 80IB OF THE ACT, WHICH WAS SOUG HT TO BE EXPLAINED BY THE ASSESSEE AS A MERE TYPOGRAPHICAL ERROR. THE HONBLE HIGH COURT 8 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) AFFIRMED THE STAND OF THE TRIBUNAL, WHEREBY THE CLA IM OF THE ASSESSEE FOR EXEMPTION UNDER SECTION 10B OF THE ACT WAS ALLO WED CONSIDERING THAT A MERE TYPOGRAPHICAL ERROR IN MENTIONING SECTI ON 80IB OF THE ACT IN THE RETURN OF INCOME WOULD NOT DISENTITLE THE ASSES SEES CLAIM FOR EXEMPTION UNDER SECTION 10B OF THE ACT. 6.2 IN OUR CONSIDERED OPINION, IN THE PRESENT CASE, HAVING REGARD TO THE FACTS AND EVIDENCE ON RECORD AND IN LAW, THE CL AIM OF THE ASSESSEE FOR TAXATION @ 10% FOLLOWING INDIA-CYPRUS DOUBLE TA XATION AVOIDANCE AGREEMENT (DTAA) DESERVES TO BE ALLOWED. WE HOLD S O. 6.3 IN THE RESULT, SO FAR AS THE FIRST ISSUE IS CO NCERNED, ASSESSEE SUCCEEDS. 7. IN SO FAR AS SECOND ISSUE IS CONCERNED, RELEVAN T FACTS ARE THAT ASSESSEE HAD INVESTED RS.606.50 CRORES IN THE CCDS OF SEVEN REAL ESTATE COMPANIES IN INDIA AND INTEREST EARNED THEREON TO T HE EXTENT OF RS.15,56,49,334/- WAS OFFERED TO TAX IN THE RETURN OF INCOME. INSTEAD, THE ASSESSING OFFICER ASSESSED THE INCOME AT RS.23, 93,98,904/-, THEREBY MAKING AN ADDITION OF RS.8,37,49,570/-. THIS ADDIT ION WAS MADE ON THE GROUND THAT INTEREST INCOME WAS LIABLE TO BE ASSESS ED ON ACCRUAL BASIS. THE RELEVANT DETAILS IN THIS REGARD ARE ENUMERATED IN PARA- 4.1 OF THE ASSESSMENT ORDER. THE ASSESSEE COMPANY RESISTED SU CH ACTION OF THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT PROCE EDINGS AS ALSO IN THE COURSE OF THE HEARING BEFORE US. THE MAIN POINT RA ISED BY THE APPELLANT IS THAT HAVING REGARD TO ARTICLE 11 OF THE INDIA-C YPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) INTEREST INCOME IN QUES TION IS LIABLE TO BE TAXED IN INDIA ON THE BASIS OF PAYMENT. IN SUPPORT OF SUCH PROPOSITION, 9 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) THE LD. REPRESENTATIVE FOR THE ASSESSEE HAS PLACED RELIANCE ON THE FOLLOWING DECISIONS:- 1. DIT V. SIEMENS AKTIENGESELLSCHAFT (BOM HC) (ITA NO.124 OF 2010) 5. DCIT V. UHDE GMBH (1996) 54 TTJ 355 (MUM ITAT) 6. NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD. VS. D CIT [2006] 5 SOT 317(MUM ITAT). 7. JOHNSON & JOHNSON V. ADIT [2013] 32 TAXMANN.CO M 123(DELHI ITAT) 7. CSC TECHNOLOGY SINGAPORE PTE. LTD. VS. ADIT[201 2] 19 TAXMANN.COM 123 (DELHI ITAT) 8. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE FOR THE REVENUE SUBMITTED THAT THE INTEREST IN QUESTION BEC AME DUE TO THE ASSESSEE ON EVERY 15 TH MARCH AND 15 TH SEPTEMBER AND THUS, INCOME WAS LIABLE TO BE ASSESSED ON ACCRUAL BASIS. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE ASSESSEE COMPANY MADE INVESTMENTS IN CCDS IN INDIAN COMPANIE S ENGAGED IN REAL ESTATE DEVELOPMENT AND THE INTEREST EARNED ON SUCH INVESTMENT IS SOUGHT TO BE OFFERED TO BE TAXED ON RECEIPT BASIS. THE CRUCIAL PLEA OF THE ASSESSEE IS BASED ON ARTICLE -11(1) OF THE INDI A-CYPRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA), WHICH READ AS UNDER:- 1. INTEREST ARISING IN A CONTRACTING STATE AND PAI D TO A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER STATE. 9.1 ON THE SAID BASIS, THE CLAIM OF THE ASSESSEE IS THAT THE INTEREST INCOME CAN BE ASSESSED ON FULFILMENT OF TWIN CONDIT IONS I.E. ACCRUAL AS WELL AS PAYMENT. IT WAS THEREFORE, CONTENDED THAT THE INTEREST INCOME IN QUESTION BE ASSESSED ON RECEIPT BASIS. IN THIS CONTEXT, THE LD. 10 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) REPRESENTATIVE FOR THE ASSESSEE HAD RELIED ON THE J UDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF SIEMENS AK TIENGESELLSCHAFT (SUPRA), WHEREIN HAVING REGARD TO THE DTAA BETWEEN INDIA & FEDERAL GERMANY REPUBLIC, THE ASSESSMENT OF ROYALTY OR FEE FOR TECHNICAL SERVICES WAS HELD TO BE TAXABLE ON RECEIPT BASIS. IN THE CASE OF NATIONAL ORGANIC CHEMICAL INDUSTRIES LTD. (SUPRA), THE TRIBUNAL WAS CONCERNED WITH PAYMENT MADE TO NON-RESIDENTS I.E. A SWISS COMPANY, FOR ACQUIRING SOME MATERIAL SAFETY DATA SHEETS. IT WAS HELD THAT SINCE THE PAYMENT WAS COVERED BY THE SCOPE OF ARTICLE 12( 4) OF THE DOUBLE TAXATION AVOIDANCE TREATY WITH SWITZERLAND, IT WAS LIABLE TO BE TAXED ON THE BASIS OF PAYMENT. SIMILARLY, IN THE CASE OF JO HNSON& JOHNSON (SUPRA) IN THE CONTEXT OF THE DTAA BETWEEN INDIA AN D USA, WHEREIN ALSO EXPRESSION PAID USED IN ARTICLE 12(1) WAS INTER PRETED TO MEAN THAT THE ROYALTY WAS TO BE TAXED ON PAID BASIS AND NOT ON ACCRUAL BASIS. THE AFORESAID PRECEDENTS SUPPORT THE UNDERSTANDING OF THE EXPRESSION PAID USED IN ARTICLE 11(1) OF THE INDIA-CYPRUS DOUB LE TAXATION AVOIDANCE AGREEMENT (DTAA) TO MEAN THAT THE INTERES T INCOME IN QUESTION IS LIABLE TO BE TAXED ON PAYMENT/RECEIPT B ASIS AND NOT ON ACCRUAL BASIS, AS SOUGHT TO BE MADE OUT BY THE ASS ESSING OFFICER. THUS, IN PRINCIPLE, WE UPHOLD THE PLEA OF THE ASSESSEE. 9.2 BEFORE PARTING, WE MAY ALSO REFER TO THE POINT MADE OUT BY THE REVENUE THAT ASSESSEE ITSELF IS INCONSISTENT IN OF FERING TO TAX SUCH INTEREST INCOME IN AS MUCH AS RS.4,38,356/- RECEIVA BLE FROM PARK DEVELOPMENT PVT. LTD. HAS BEEN OFFERED TO TAX ON AC CRUAL BASIS IN THE RETURN OF INCOME FILED. THEREFORE, ACCORDING TO TH E REVENUE, THE PLEA OF THE ASSESSEE THAT INTEREST INCOME HAS BEEN OFFERED BY THE ASSESSEE ON RECEIPT BASIS CONSISTENTLY, IS NOT SO. IN THIS CON TEXT, THE PLEA OF THE 11 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) ASSESSEE WAS THAT BY AN INADVERTENT ERROR SUCH AMO UNT HAS BEEN INCLUDED AS INCOME ON ACCRUAL BASIS. IT HAS BEEN F URTHER CANVASSED THAT SUCH SOLITARY ERROR CANNOT BE CONSTRUED TO MEAN THA T ASSESSEE HAS NOT BEEN FOLLOWING THE CASH BASIS OF ACCOUNTING REGULAR LY. IN OUR CONSIDERED OPINION, THE PLEA OF THE ASSESSEE IS QUITE JUSTIFIE D, AND IN ANY CASE, THE APPLICABLE LEGAL POSITION ON ANY POINT HAS TO BE ARRIVED AT BY KEEPING IN MIND THE RELEVANT PROVISIONS OF LAW AND NOT MERELY BY THE CONDUCT OF THE PARTIES. OSTENSIBLY, ARTICLE 11(1) OF INDIA-CY PRUS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA), WHICH COVERS THE INSTA NT SITUATION PROVIDES FOR TAXATION OF INTEREST INCOME ON PAYMENT /RECEIPT BASIS AND NOT ON ACCRUAL BASIS. 9.3 FOR ALL THE AFORESAID REASONS, WE, THEREFORE, D EEM IT FIT AND PROPER TO DIRECT THE ASSESSING OFFICER TO ACCEPT TH E INTEREST INCOME RETURNED BY THE ASSESSEE ON CASH BASIS. THUS, ON T HIS ASPECT ALSO ASSESSEE SUCCEEDS. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 29/02/201 6 SD/- SD/- (PAWAN SINGH) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED 29/02/2016 VM , SR. PS 12 ITA NO. 1113/MUM/2015 (ASSESSMENT YEAR : 2010-11) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI