PARKE DAVIS AND COMPANY LLC, MUMBAI V. ASST CIT CPC, Bangalore

ITA 4400/MUM/2012

• Counselvise Citation: 440019914 RSA 2012
• Duration Of Justice: 1 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Next Hearing Date: 01-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEERAJA PRADHAN
• Assessee Lawyers: MILIN THAKARE
• Keywords: Business income; Double taxation relief

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L MUMBAI . . , / . . , ! ' BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI P.M.JAGTAP, ACCOUNTANT MEMBER . / ITA NO. 4400/MUM/2012 $ $ $ $ % % % % / ASSESSMENT YEAR 2009-10 PARKE DAVIS AND COMPANY LLC, C/O. PFIZER LIMITED, PFIZER CENTRE, PATEL ESTATE, S.V.ROAD, JOGESHWARI (WEST), MUMBAI 400 102. $ $ $ $ / VS. THE ASST. COMMISSIONER OF INCOME TAX, CPC,INCOME TAX DEPARTMENT-CPC, POST BAG NO.1, ELECTRONIC CITY POST OFFICE, BANGALORE 560100 & ./ ' ./ PAN/GIR NO. : AADCP 1134C ( &( / APPELLANT ) .. ( )*&( / RESPONDENT ) APPELLANT BY SHRI MILIN THAKARE RESPONDENT BY : SMT. NEERAJA PRADHAN $ + / DATE OF HEARING : 01/10//2013 ,-% + / DATE OF PRONOUNCEMENT : 01/10/2013 . / O R D E R PER I.P.BANSAL, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE. IT IS DI RECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-11, MUMBAI DATED 25/05/2012 FO R ASSESSMENT YEAR 2009-10. GROUNDS OF APPEAL READ AS UNDER: THE APPELLANT OBJECTS TO THE ORDER DATED 25 MAY 20 12 PASSED BY COMMISSIONER OF INCOME-TAX (APPEALS)-1 1, ON THE FOLLOWING AMONG OTHER GROUNDS: . / ITA NO. 4400/MUM/2012 $ $ $ $ % % % % / ASSESSMENT YEAR 2009-10 2 EDUCATION CESS 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) , ERRED IN HOLDING THAT THE EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION C ESS OF RS.50,104 IS LEVIABLE ON TAX PAYABLE DETERMINED AS PER THE INDIA- US TAX TREATY. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT NO EDUCATION CESS AND SECONDARY AND H IGHER EDUCATION CESS IS LEVIABLE IN THE APPELLANTS CASE AS TAX PAYABLE HAS BEEN DETERMINED BY APPLYING THE RATE OF 15% AS PER ARTICLE 12 OF THE INDIA- US TAX TREATY. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN NOT GIVING THE APPELLANT SUFFICIENT OPPORTUNITY TO SUBSTANTIATE IT S CLAIM THAT NO EDUCATION CESS AND SECONDARY AND HIGHER EDUCATION CESS IS LEVIABLE IN CASE TAX PAYABLE HAS DETERMINED AS PER ARTICLE 12 OF THE INDIA- US TAX T REATY. 2. AT THE OUTSET IT WAS SUBMITTED BY LD. AR THAT TH E ONLY ISSUE RAISED BY THE ASSESSEE IN THE PRESENT APPEAL IS THAT THE EDUCATI ON CESS AND SECONDARY AND HIGHER SECONDARY EDUCATION CESS OF RS. 50,104/- I S NOT LIABLE TO BE PAYABLE WHEN TAX IS DETERMINED AS PER INDIA US TAX TREATY. IT WAS SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE DECIS ION OF ITAT IN THE CASE OF SUNIL V. MOTIANI VS. ITO, 33 TAXMAN.COM 252 (MUMBAI -TRIB). HE HAS PLACED A COPY OF THE SAID ORDER ON OUR RECORD AND A COPY WAS ALSO GIVEN TO LD. DR. HE DREW OUR ATTENTION TOWARDS THE OBSERVATION OF THE TRIBUNAL IN PARA-5. 3. ON THE OTHER HAND, LD. DR SUBMITTED THAT EDUCAT ION CESS AND SECONDARY AND HIGHER SECONDARY EDUCATION CESS ARE CONSIDERE D TO BE TAX PAYABLE EVEN WHEN THE TAX IS DETERMINED ON THE BASIS OF DTAA. F OR THIS PURPOSE SHE RELIED UPON THE DECISION OF HONBLE UTTARAKHAND HIGH COURT IN THE CASE OF CIT VS. ARTHUSA OFFSHORE CO., 169 TAXMAN 484(UTTARAKHAND) AND DECISION OF ADVANCE RULLING AUTHORITY IN THE CASE OF AIRPORTS AUTHORITY OF INDIA, IN RE, 299 ITR 102(AAR). 4. IN THE REJOINDER IT WAS SUBMITTED BY LD. AR THAT AFTER CONSIDERING BOTH THE DECISIONS RELIED UPON BY LD. DR TRIBUNAL HAS H ELD THAT EDUCATION CESS AND . / ITA NO. 4400/MUM/2012 $ $ $ $ % % % % / ASSESSMENT YEAR 2009-10 3 SURCHARGE ETC. CANNOT BE LEVIED SEPARATELY AND WILL BE INCLUDED IN THE TAX RATE SPECIFIED IN THE DTAA. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. WE FOUND THAT THE ISSUE RAISED BY THE ASSESSEE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFOREMENTIONED DECISIONS OF TRIBUNAL IN THE CASE OF SUNIL V. MOTIANI VS. ITO (SUPRA). REFERENCE CAN BE MADE TO THE FOLLOWING OBSERVATIONS OF THE TRIBUNAL: 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THERE IS NO DISPUTE THAT THE ASSESSEE IS A NON RESIDENT BASED I N UAE. THERE IS ALSO NO DISPUTE THAT THE ASSESSEE HAD RECEIVED GROSS INTERE ST OF RS.7,55,187/-FROM THE INDIAN FIRMS IN WHICH HE WAS A PARTNER. THE INTERES T INCOME IS NO DOUBT TAXABLE AS THE SAME HAD ARISEN FROM THE SOURCES IN INDIA. H OWEVER THERE IS DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA A ND UAE AND, THEREFORE, TAX HAS TO BE COMPUTED UNDER THE PROVISIONS OF DTAA WHICH IS BENEFICIAL TO THE ASSESSEE. THERE ARE SPECIFIC ARTICLES IN DTAA DEALI NG WITH TAXATION OF INCOME UNDER DIFFERENT HEADS. THE BUSINESS PROFIT IS GOVER NED BY ARTICLE-7 WHEREAS INTEREST INCOME BY ARTICLE-11. UNDER PARA-7 OF ARTI CLE-7 WHERE BUSINESS PROFIT INCLUDES ITEMS OF INCOME WHICH ARE DEALT WITH SEPAR ATELY IN ANY OTHER ARTICLE OF 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 INCO ME HAS TO BE DEALT WITH BY THOSE PROVISIONS. THEREFORE, THOUGH INTEREST INCOME MAY HAVE BEEN ASSESSED AS BUSINESS INCOME, THERE BEING SPECIFIC ARTICLE TO DE AL WITH INTEREST INCOME I.E. ARTICLE-IL, TAXATION OF INTEREST WILL BE GOVERNED B Y THE SAID ARTICLE-11. SECONDLY INTEREST INCOME MAY BE TAXED IN CONTRACTING STATE I N WHICH IT ARISES, ACCORDING TO LAW OF THAT STATE BUT IF THE RECIPIENT IS BENEFICIA L OWNER OF INTEREST, TAX SO CHARGED SHALL NOT EXCEED 5% OF GROSS INTEREST IF THE INTERE ST IS RECEIVED FROM BANK AND IN OTHER CASES 12.5% BF GROSS AMOUNT OF INTEREST. IN T HIS CASE, THE ASSESSEE IS THE BENEFICIAL OWNER OF INTEREST AND TAX CHARGED CANNOT EXCEED 12.5% OF GROSS INTEREST. TAX HAS BEEN DEFINED IN ARTICLE2(2)(B) AS PER WHICH INCOME TAX INCLUDED SURCHARGE. THEREFORE, TAX REFERRED TO IN ARTICLE 11 (2) @ 12.5,6 ALSO INCLUDES SURCHARGE. FURTHER, NATURE OF EDUCATION CESS AND SU RCHARGE 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 SEPAR ATELY AND WILL BE INCLUDED IN TAX RATE OF 12.5%. THE JUDGMENT OF HONBLE HIGH COU RT OF UTTARAKHAND IN THE CASE OF ARTHUSA OFFSHORE CO. (SUPRA), IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS THE HONBLE HIGH COURT WAS CONCERNED WITH TAXABIL ITY OF INCOME UNDER ARTICLE 14(2) OF THE DTA BETWEEN INDIA AND USA. THE HONBLE HIGH COURT WAS NOT CONCERNED WITH INTERPRETATION OF TAX PAYABLE ON INT EREST INCOME UNDER DTAA. THE JUDGMENT OF AAR IN THE CASE OF AIRPORTS AUTHORITY O F 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 D TAA WITH USA, PREPARATORY . / ITA NO. 4400/MUM/2012 $ $ $ $ % % % % / ASSESSMENT YEAR 2009-10 4 AND AUXILIARY TYPE OF WORK WAS EXCLUDED FROM THE PU RVIEW OF PE AND THEREFORE, THERE BEING NO PE IT WAS HELD THAT INCOME FROM SOFT WARE MAINTENANCE WAS LIABLE TO BE TAXED IN INDIA. THE HIGH COURT WAS NOT CONCER NED WITH TAXABILITY OF INTEREST INCOME AS PER THE TREATY. IN VIEW OF THE FOREGOING DISCUSSION, WE HOLD THAT T AX PAYABLE @ 12.5% UNDER ARTICLE 12(2) OF FTAA IS INCLUSIVE OF SURCHARGE AND EDUCATION CESS. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM O F THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 5.1 ACCORDINGLY, RESPECTFULLY FOLLOWING THE AFOREME NTIONED DECISION, WE DECIDE THIS ISSUE IN FAVOUR OF ASSESSEE AND ALLOW A PPEAL FILED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01/10//201 3 . + ,-% / 0$1 01/10/2013 - + ' SD/- SD/- ( . . / P.M.JAGTAP ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; 0$ DATED 01/10/2013 . . . . + ++ + )23 )23 )23 )23 43% 43% 43% 43% / COPY OF THE ORDER FORWARDED TO : 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT. 3. 5 ( ) / THE CIT(A)- 4. 5 / CIT 5. 36 )$ , , / DR, ITAT, MUMBAI 6. 7 8 / GUARD FILE. .$ .$ .$ .$ / BY ORDER, *3 ) //TRUE COPY// 9 99 9 / : : : : (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . $ . ./ VM , SR. PS