OSRAM India Pvt. Ltd., Gurgaon V. DCIT, Ghaziabad

ITA 4052/DEL/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98333 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-10-2015
• Assessment Year: misc
• Appeal Filed On: 18-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK JASWAL
• Assessee Lawyers: S K AGARWAL
• Keywords: Double taxation relief; Advance ruling

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. KULDI P SINGH, JM ITA NO. 4052/DEL./2015 : ASSTT. YEAR : 2014-15 OSRAM INDIA PVT. LTD. SIGNATURE TOWERS, 11 TH FLOOR TOWER-B, SOUTH CITY-1 GURGAON VS DCIT CPC-TDS, AAYAKAR BHAWAN, VAISHALI GHAZIABAD (APPELLANT) (RESPONDENT) PAN NO. AAACO0160A APPELLANT BY : SH. S.K.AGAR WAL, CA RESPONDENT BY : SH. K.K.JASWA L, DR DATE OF HEARING : 06.10.2015 DATE OF PRONOUNCEMENT : 29.12.2015 ORDER PER N.K. SAINI, A.M. 1. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 01/04/2015 OF THE LD. CIT(A)- 1, GURGAON. 2. THE 1 ST ISSUE IN THIS APPEAL REQUIRING THE ADJUDICATION IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDIN G THE LEVY OF EDUCATION CESS @ 3% IN ADDITION TO THE TAX RATES PRESCRIBED IN DOUBLE TAXATION AVOIDANCE AGREEMENT ( DTAA) ITA NO.4052/DEL/2015 OSRAM INDIA PVT. LTD. 2 ENTERED BY INDIA WITH GERMANY, CHINA AND THE UNITED STATES OF AMERICA (USA). 3. FACTS OF THE CASE IN BRIEF ARE THAT THE AO RAISED T HE TDS LIABILITY ON ACCOUNT OF THE PAYMENTS MADE BY THE AS SESSEE TO NON-RESIDENT @ 10.30% (10% TAX + 0.30% ON ACCOUNT O F SECONDARY AND HIGHER EDUCATION CESS) AS AGAINST 10% DEDUCTED BY THE ASSESSEE. 4. THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) A ND SUBMITTED THAT THE TAX WAS DEDUCTED @ 10% AS PER TH E DTAA BETWEEN GOVERNMENT OF INDIA WITH GERMANY, CHIN A AND THE UNITED STATES OF AMERICA (USA) AND THAT AS PER ARTICLE 3 OF DTAA RATE OF TAX MEANS INCOME TAX INCL UDING SURCHARGE THEREON. THE RELIANCE WAS PLACED ON THE F OLLOWING DECISION OF THE ITAT -: A) DIC ASIA PACIFIC PTE. LTD. ITA NO. 1458/KOL/2011 ( KOL). B) SUNIL V. MOTIANI VS. ITO ITA NO. 276/M/12 (MUM) C) CSC TECHNOLOGY SINGAPORT PVT. LTD. VS. ADIT ITA NO. 5604/DEL/2010(DEL). 5. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE CONFIRMED THE ACTION OF THE AO BY OBSERVIN G THAT SURCHARGE IS ALSO PAYABLE BY THE FOREIGN COMPANIES UNDER THE ACT. THE RELIANCE WAS PLACED ON THE DECISION OF THE ITA NO.4052/DEL/2015 OSRAM INDIA PVT. LTD. 3 AUTHORITY FOR ADVANCE RULING IN THE CASE OF AIRPORT AUTHORITY OF INDIA REPORTED AT 299 ITR 102 (AAR). N OW THE ASSESSEE IS IN APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SU BMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMI TTED THAT AS PER THE DTAA, THE TDS WAS TO BE DEDUCTED @ 10% WHICH THE ASSESSEE RIGHTLY DEDUCTED THEREFORE, THE AO WAS NOT JUSTIFIED IN RAISING THE DEMAND ON THE GROUND T HAT TDS WAS TO BE DEDUCTED @ 10.30% AND THE LD. CIT WAS NOT JUSTIFIED IN UPHOLDING THE SAME. THE RELIANCE WAS P LACED ON THE FOLLOWING CASE LAWS -: A) SUNIL V. MOTIANI VS. ITO, ITA NO. 276/MUM/ 2012, O RDER DATED 27.02.2013 B) DIC ASIA PACIFIC PTE. LTD. VS. ADIT, ITA NO. 1458/K O/.2011, ORDER DATED 20.06.2012 C) CSC TECHNOLOGY SINGAPORE PTE. LTD. VS. ADIT, ITA NO . 5604/DEL/2010 ORDER DATED 17.02.2012. 7. IN HIS RIVAL SUBMISSIONS THE LD. DR REITERATED THE OBSERVATIONS MADE BY THE LD. CIT(A) AND STRONGLY SU PPORTED THE IMPUGNED ORDER. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PART IES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON TH E RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILA R FACTS WAS A SUBJECT MATTER OF ADJUDICATION BEFORE THE ITAT KO LKATA BENCH B IN ITA NO. 1458/ KOL./2011 FOR THE ASSESSME NT ITA NO.4052/DEL/2015 OSRAM INDIA PVT. LTD. 4 YEAR 2009-10 IN THE CASE OF DIC ASIA PACIFIC PTE L TD. VS. ASSISTANT DIRECTOR OF INCOME TAX INTERNATIONAL TAXA TION (1), KOLKATA WHEREIN RELEVANT FINDINGS HAVE BEEN GIVEN I N PARA 9 AND 10 OF THE ORDER DATED 20 TH JUNE, 2012 WHICH READ AS UNDER -: 9. WE HAVE ALSO NOTED THAT ARTICLE 2(1) OF THE APPLICABLE TAX TREATY PROVIDES THAT THE TAXES COVER ED SHALL INCLUDE TAX AND SURCHARGE THEREON. ONCE WE CO ME TO THE CONCLUSION THAT EDUCATION CESS IS NOTHING BU T AN ADDITIONAL SURCHARGE, IT IS ONLY COROLLARY THERETO THAT THE EDUCATION CESS WILL ALSO BE COVERED BY THE SCOP E OF ARTICLE 2. ACCORDINGLY, THE PROVISIONS OF ARTICLE 1 1 AND 12 MUST FIND PRECEDENCE OVER THE PROVISIONS OF THE INCOME TAX ACT AND RESTRICT THE TAXABILITY, WHETHER IN RESPECT OF INCOME TAX OR SURCHARGE OR ADDITIONAL SURCHARGE- WHATEVER NAME CALLED, AT THE RATES SPECI FIED IN THE RESPECTIVE ARTICLE. IN ANY CASE, EDUCATION C ESS WAS INTRODUCED BY THE FINANCE ACT 2004, WITH EFFECT FROM ASSESSMENT YEAR 2005-06 WHICH WAS MUCH AFTER THE SIGNING OF INDIA SINGAPORE TAX TREATY ON 24 TH JANUARY 1994. IN VIEW OF THE SPECIFIC PROVISIONS TO THE EFFECT THAT THE SCOPE OF ARTICLE 2 SHALL ALSO COVER ANY IDENTICAL OR SUBSTANTIALLY SIMILAR TAXES WHICH ARE IMPOSED BY EITHER CONTRACTING STATE AFTER THE DATE OF SIGNATURE OF THE PRESENT AGREEMENT IN ADDITION TO, OR IN PLACE OF, THE TAXES REFERRED TO IN PARAGRAPH 1 , AND IN VIEW OF THE FACT THAT EDUCATION CESS IS ESSENTIALLY OF THE SAME NATURE AS SURCHARGE, BEING AN ADDITIONAL SURCHARGE, THE SCOPE OF ARTICLE 2 ALSO EXTENDS TO T HE EDUCATION CESS. 10. FOR THE REASONS SET OUT ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE EDUCATION CESS CANNOT INDE ED ITA NO.4052/DEL/2015 OSRAM INDIA PVT. LTD. 5 BE LEVIED IN RESPECT OF TAX LIABILITY OF THE APPELL ANT COMPANY. THE ASSESSEE, THEREFORE, DESERVES TO SUCCE ED ON THIS ISSUE. 9. SINCE THE FACTS OF THE CASE UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS INVOLVED IN THE AFORESAID RE FERRED TO CASE OF DIC ASIA PACIFIC PTE LTD. SO, RESPECTFULLY FOLLOWING THE ORDER DATED 10 TH JUNE, 2012 IN THE SAID CASE WE SET ASIDE THE IMPUGNED ORDER AND DIRECT THE AO N OT TO LEVY THE EDUCATION CESS IN RESPECT OF TAX LIABILITY OF THE ASSESSEE COMPANY. 10. AS REGARDS TO GROUND NO. 2 RELATING TO CHARGING OF INTEREST U/S 201(1A) OF THE IT ACT, 1961 IT WAS THE COMMON CONTENTION OF BOTH THE PARTIES THAT IT IS CONSEQUEN TIAL IN NATURE. WE, ORDER ACCORDINGLY. 11. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED . (ORDER PRONOUNCED IN THE OPEN COURT ON 29/12/2015 ). SD/- SD/- (KULDIP SINGH) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 29 / 12/2015 *B.RUKHAIYAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITA NO.4052/DEL/2015 OSRAM INDIA PVT. LTD. 6 DATE INITIAL 1. DRAFT DICTATED ON 21.12.2015 2. DRAFT PLACED BEFORE AUTHOR 22.12.2015 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. 5. APPROVED DRAFT COMES TO THE SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON 29/12/2015 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.