ROHM AND HAAS ( CHINA) HOLDING CO, MUMBAI V. ACIT CENTRALIZED PROCESSING CENTER, MUMBAI

ITA 1545/MUM/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9390 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2015
• Appeal Filed By: Assessee
• Bench Allotted: L
• Next Hearing Date: 02-07-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 25-02-2013
• Court: TRIBUNAL
• Keywords: Business income; Double taxation relief; Tax effect
• Section: 234B; 54; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL L , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA, AM & SHRI VIVEK VARMA , JM ITA NO. 1545 / MUM/20 1 3 ( ASSESSMENT YEAR : 20 10 - 11 ) ROHM AND HAAS (CHINA) HOLDING CO., C/O SRBC & ASSOCIATES, 14 TH FLOOR, THE RUBY, 29 SENAPATI BAPAT MARG, DADAR (WEST), MUMBAI - 400028 VS. ACIT(CENTRALIZED PROCESSING CENTRE), MUMBAI PAN/GIR NO. : A ADCR 2679 E ( APPELLANT ) .. ( RESPONDENT ) AND ITA NO. 1 889 / MUM/20 13 ( ASSESSMENT YEAR :2010 - 11 ) ACIT(CENTRALIZED PROCESSING CENTRE), MUMBAI VS. ROHM AND HAAS (CHINA) HOLDING CO., C/O SRBC & ASSOCIATES, 14 TH FLOOR, THE RUBY, 29 SENAPATI BAPAT MARG, DADAR (WEST), MUMBAI - 400028 PAN/GIR NO. : AADCR 2679 E ( APPELLANT ) .. ( RESPONDENT ) /ASSESSE E BY : SHRI M.P.LOHIA /REVENUE BY : SHRI VIVEK A. PERAMPURNA DATE OF HEARING : 23 / 0 2 /201 5 DATE OF PRONOUNCEMENT : 25 /0 2 /2015 O R D E R PER BENCH : THESE CROSS APPE ALS HAVE BEEN FILED BY THE ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) , DATED 19 - 12 - 2012, FOR THE ASSESSMENT YEAR 2010 - 2011 , IN THE MATTER OF ORDER PASSED U/S. 1 54 OF THE I.T.ACT . ITA NO. 1545&1889 /20 1 3 2 2. IN THE APPEAL OF THE ASSESSEE, THE ASSESSEE IS AGGRIEVED BY THE ACTIO N OF CIT(A) IN CONFIRMING THE CHARG ING OF SURCHARGE ON THE TAX CALCULATED AS PER THE RATE PRESCRIBED IN THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIAN AND CHINA. 3. AT THE OUTSET, LD. AR PLACED ON RECORD THE ORDER OF COORDINATE BENCH IN THE CASE OF M/S J.P.MORGAN SECURITIES ASIA PVT. LTD., ITA NO.4622/M/2012. DATED 23 - 10 - 2013, WHEREIN EXACTLY SIMILAR ISSUE IS DECIDED IN FAVOUR OF ASSESSEE. LD. AR ALSO PLACED ON RECORD ORDER OF MUMBAI BENCH IN THE CASE OF SUNIL V. MOTIANI, 59 SOT 37(MUM) , WHER EIN THE ISSUE WITH REGARD TO CHARGING OF SURCHARGE ON THE TAX CALCULATED AS PER THE RATE PRESCRIBED IN THE DTAA WAS DECIDED BY HOLDING THAT INTEREST INCOME RECEIVED FROM INDIAN PARTNERSHIP FIRM BY THE ASSESSEE, A NON - RESIDENT BASED IN UAE IS TAXABLE UNDER ARTICLE 11(2) OF INDIA - UAE DTAA AT 12.5% AND INTEREST UNDER ARTICLE 11(2) INCLUDES SURCHARGE AND EDUCATION CESS. THE PRECISE OBSERVATION OF THE TRIBUNAL ARE AS UNDER : - '5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THERE IS NO DISPUT E THAT THE ASSESSEE IS A NON RESIDENT BASED IN UAE. THERE IS ALSO NO DISPUTE THAT THE ASSESSEE HAD RECEIVED GROSS INTEREST OF RS.7,55,187/ - FROM THE INDIAN FIRMS IN WHICH HE WAS A PARTNER. THE INTEREST INCOME IS NO DOUBT TAXABLE AS THE SAME HAD ARISEN FROM THE SOURCES IN INDIA. HOWEVER THERE IS DOUBLE - TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND UAE AND, THEREFORE, TAX HAS TO HE COMPUTED UNDER THE PROVISIONS OF DTAA WHICH IS BENEFICIAL TO THE ASSESSEE. THERE ARE SPECIFIC ARTICLES IN DTAA DEALING WI TH TAXATION OF INCOME UNDER DIFFERENT HEADS. THE BUSINESS PROFIT IS GOVERNED BY ARTICIE - 7 WHEREAS INTEREST INCOME BY ARTICLE - IL. UNDER PARA - 7 OF ARTICLE - 7 WHERE BUSINESS PROFIT INCLUDES ITEMS OF INCOME WHICH ARE DEALT WITH SEPARATELY IN ANY OTHER ARTICLE O F THE AGREEMENT, PROVISIONS OF THOSE ARTICLES SHOULD NOT BE AFFECTED BY THE PROVISIONS OF THIS ARTICLE. IN OTHER WORDS, IN CASE THERE IS PROVISION FOR DEALING WITH A PARTICULAR TYPE OF INCOME, SUCH TYPE OF INCOME HAS TO BE DEALT WITH BY THOSE PROVISIONS. T HEREFORE, THOUGH INTEREST INCOME MAY HAVE BEEN ASSESSED AS BUSINESS INCOME, THERE BEING SPECIFIC ARTICLE TO DEAL WITH INTEREST INCOME I.E. ARTICLE - 11, TAXATION OF INTEREST WILL BE GOVERNED BY THE SAID ARTICLE - 11. SECONDLY INTEREST INCOME MAY BE ITA NO. 1545&1889 /20 1 3 3 TAXED IN CO NTRACTING STATE IN WHICH IT ARISES, ACCORDING TO LAW OF THAT STATE BUT IF THE RECIPIENT IS BENEFICIAL OWNER OF INTEREST, TAX SO CHARGED SHALL NOT EXCEED 5% OF GROSS INTEREST IF THE INTEREST IS RECEIVED FROM BANK AND IN OTHER CASES 12.5% OF GROSS AMOUNT OF INTEREST. IN THIS CASE, THE ASSESSEE IS THE BENEFICIAL OWNER OF INTEREST AND TAX CHARGED CANNOT EXCEED 12.5% OF GROSS INTEREST. TAX HAS BEEN DEFINED IN ARTICLE - 2(2)(B) AS PER WHICH INCOME TAX INCLUDED SURCHARGE. THEREFORE, TAX REFERRED TO IN ARTICLE 11(2) @ 12.5% ALSO INCLUDES SURCHARGE. FURTHER, NATURE OF EDUCATION CESS AND SURCHARGE BEING SAME AS HELD BY THE TRIBUNAL IN THE CASE OF DIC ASIA PACIFIC PTE LTD. (SUPRA), IN OUR VIEW EDUCATION CESS AND SURCHARGE CANNOT BE LEVIED SEPARATELY AND WILL BE INCLUDED IN TAX RATE OF 12.5%. THE JUDGMENT OF HON'BLE HIGH COURT OF UTTARAKHAND IN THE CASE OF ARTHUSA OFFSHORE CO. (SUPRA), IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS THE HON'BLE HIGH COURT WAS CONCERNED WITH TAXABILITY OF INCOME UNDER ARTICLE 14(2) OF THE DTA BETWEEN INDIA AND USA. THE HON'BLE HIGH COURT WAS NOT CONCERNED WITH INTERPRETATION OF TAX PAYABLE ON INTEREST INCOME UNDER DTAA. THE JUDGMENT OF AAR IN THE CASE OF AIRPORTS AUTHORITY OF INDIA, IN RE (SUPRA), IS ALSO DISTINGUISHABLE AS IN THAT THE COURT WAS CONCERNED WITH TAXABILITY OF BUSINESS INCOME AND IT WAS HELD THAT UNDER ARTICLE 5(3) OF DTAA WITH USA, PREPARATORY AND AUXILIARY TYPE OF WORK WAS EXCLUDED FROM THE PURVIEW OF PE AND THEREFORE, THERE BEING NO PE IT WAS HELD THAT INCOME FROM SOFTW ARE MAINTENANCE WAS LIABLE TO BE TAXED IN INDIA. THE HIGH COURT WAS NOT CONCERNED WITH TAXABILITY OF INTEREST INCOME AS PER THE TREATY. 5.1 IN VIEW OF THE FORE - GOING DISCUSSION, WE HOLD THAT TAX PAYABLE @ 12.5% UNDER ARTICLE 11(2) OF D TAA IS INCLUSIVE OF S URCHARGE AND EDUCATION CESS. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE.' 4. THE ABOVE DECISION WAS FOLLOWED BY THE COORDINATE BENCH VIDE ORDER DATED 23 - 10 - 2013, WHICH READS AS UNDER : - 5. WE FURTHER NOTE THAT AN IDENT ICAL ISSUE HAS ALSO BEEN CONSIDERED AND DECIDED BY THE KOLKATA BENCHES OF THIS TRIBUNAL IN CASE OF DIC ASIA PACIFIC PTE. LTD. VS ADIT (INTERNATIONAL TAXATION) 52 SOT 447. THE TRIBUNAL IN CASE OF SUNIL V. MOTIANI VS ITO HAS CONSIDERED THE DECISION OF KOLKAT A BENCHES OF THE TRIBUNAL IN CASE OF DIC ASIA PACIFIC PTE. LTD. VS ADIT (SUPRA). ACCORDINGLY, FOLLOWING THE ORDERS OF THIS TRIBUNAL WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) QUA THIS ISSUE. 5. RIVAL CONTENTIONS HAVE BEEN CONSIDERED A ND RECORD PERUSED. THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED BY VARIOUS DECISIONS OF THE TRIBUNAL CITED ABOVE. THE FACTS AND CIRCUMSTANCES ARE PARI MATERIA , ITA NO. 1545&1889 /20 1 3 4 RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE HOLD THAT CHARGING OF SURCHARGE ON THE TAX CALCULATED AS PER THE RATE PRESCRIBED IN THE DOUBLE TAXATION AVOIDANCE AGREEMENT WAS NOT JUSTIFIED INSOFAR AS INTEREST INCLUDES SURCHARGE AND EDUCATION CESS. ACCORDINGLY, THE GROUND TAKEN BY THE ASSESSEE IS ALLOWED. 6 . THE GRIEVANCE IN THE APPEAL OF THE REVENUE RELATES TO CIT(A)S ACTION FOR DELETING INTEREST CHARGED U/S.234B. THE CIT(A) HAS DECIDED THE ISSUE AS UNDER : - 5.1 I HAVE CONSIDERED THE SUBMISSION OF THE LD. AR CAREFULLY. BASED ON THE ABOVE PROVISIONS LAID DOWN IN THE IT ACT AND, FOR TH E REASONS SET OUT BY THE APPELLANT VIDE ITS SUBMISSIONS AND FACT THAT T DS HAS BEEN DONE IN THIS CASE BY ROHM & HASS (I) PVT. LTD. (PAN - AAACR2855F), I AM OF THE VIEW THAT AS REGARDS CHARGE ABILITY OF INTEREST IN RESPECT OF INCOME ON WHICH T DS IS DONE, THE APPELLANT'S CASE IS SQUARELY COVERED BY THE BOMBAY HIGH COURT RULING IN CASE OF NGC ASIA NETWORKS LLC (SUPRA). ACCORDINGLY, IT IS HELD THAT THERE SHOULD NOT BE ANY LEVY OF INTEREST UNDER SECTION 234B AND SECTION 234C OF THE IT ACT. THE AO IS DIRECTED TO D ELETE THE INTEREST LEVIED U/S.234B & 234C OF THE ACT. THESE GROUNDS OF APPEAL ARE ALLOWED. HOWEVER, AO MAY CONSIDER APPROPRIATE ACTION AGAINST THE PAYER FOR FAILURE REGARDING T DS, IF ANY. 7 . THE ISSUE IS ALSO COVERED BY THE DECISION OF HONBLE BOMBAY H IGH COURT IN THE CASE OF NGC NETWORK ASIA LLC, 313 ITR 187 , WHEREIN IT WAS HELD THAT SINCE THE ALLEGED INCOME WAS LIABLE TO TAX DEDUCTION AT SOURCE U/S.195, THERE WAS NO LIABILITY TO PAY ADVANCE TAX U/S.208 OF THE ACT AND IN THE ABSENCE OF ANY LIABILITY TO ADVANCE TAX, THE PROVISION OF SECTION 234B &C IS NOT APPLICABLE. RESPECTFULLY, FOLLOWING THE ORDER OF HONBLE HIGH COURT, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 8 . WE ALSO FOUND THAT TAX EFFECT IN THE APPEAL OF THE REVENUE IS BELOW THE LIM IT OF RS. 3 LAKHS AS PRESCRIBED IN THE CBDT INSTRUCTION NO. 3/2011 [F. NO. 279/MISC. 142/2007 - ITJ], DATED 9 - 2 - 2011 . ITA NO. 1545&1889 /20 1 3 5 9 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED , WHEREAS APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 25 TH FEB. 201 5 . SD/ - SD/ - ( ) ( VIVEK VARMA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 25 / 0 2 /201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITA T, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//