DCIT 3(1), MUMBAI V. J.P. MORGAN SECURITIES ASIA P.LTD., MUMBAI

ITA 5320/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71786 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 04-11-2013
• Assessment Year: 2010-2011
• Appeal Filed On: 24-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SHRIVASTAVA
• Keywords: Business income; Double taxation relief

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL J JJ J BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.5320/MUM/2012 5320/MUM/2012 5320/MUM/2012 5320/MUM/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2010-11) THE DEPUTY DIRECTOR OF INCOME TAX-3(1), ROOM NO. 136, 1 ST FLOOR, SCINDIA HOUSE, N. M. ROAD, BALLARD ESTATE, MUMBAI-400038 % % % % / VS. M/S J. P. MORGAN SECURITIES ASIA PVT. LTD., C/O PWC, PWC HOUSE, PLOT NO. 18/A, GURU NANAK ROAD (STATION ROAD), BANDRA (W) MUMBAI-400050 #' ! ./ ( ./ PAN/GIR NO. :AAACJ6908R ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SHRI FARROKH V. IRANI # # # # . / . / . / . / / REVENUE BY : SHRI S. D. SHRIVASTAVA % % % % . .. . -! -! -! -! / DATE OF HEARING : 27 TH NOVEMBER 2013 01& 01& 01& 01& . .. .-! -! -! -! /DATE OF PRONOUNCEMENT: 27 TH NOVEMBER 2013 '2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 18.5.2012 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2010-11. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE LEVY OF SURCHA RGE AND CESS WITHOUT APPRECIATING THE FACT THAT LEVY OF SURCHARG E AND CESS IS A MANDATORY SIMPLE MECHANICAL AND COMPULSORILY LEVY I N ALL THE TAX PAYING CASES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE LEVY OF SURCHA RGE AND CESS ITA NO.5320/M/2012 J. P. MORGAN SECURITIES ASIA PVT. LTD. 2 WITHOUT APPRECIATING THE FACT THAT BEING A MANDATOR Y AND STATUTORY LEVY, IT WOULD BE INCORRECT TO HOLD THAT THE SAME CAN NOT BE ADJUSTED U/S 143(1) OF THE I. T. ACT, 1961. 3. WE HAVE HEARD THE LD. D.R AS WELL AS LD. A.R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES O WN CASE FOR THE ASSESSMENT YEAR 2009-10 VIDE ORDER DATED 23.10.2013 IN ITA NO. 4622/2012 IN PARA 4 AND 5 AS UNDER: 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AR OF THE ASSESSEE HAS POINTED OUT THAT AN IDENTICAL ISSUE HA S BEEN CONSIDERED AND DECIDED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF SUNIL V. MOTIANI VS ITO (INTERNATIONAL) VIDE ORDER DATED 27.2.2013 IN ITA NO.276/M/2012. WE NOTE THAT THE QU ESTION OF CHARGEABILITY OF TAX ON INTEREST INCOME AS PER THE PROVISIONS OF DTAA HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUN AL IN THE CASE OF SUNIL V. MOTIANI VS ITO (SUPRA) IN PARA 5 A ND 5.1 AS UNDER: 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THERE IS NO DISPUTE THAT THE ASSE SSEE 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. TH E 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 A ND UAE AND, THEREFORE, TAX HAS TO HE COMPUTED UNDER TH E PROVISIONS OF DTAA WHICH IS BENEFICIAL TO THE ASSES SEE. THERE ARE SPECIFIC ARTICLES IN DTAA DEALING WITH TA XATION OF INCOME UNDER DIFFERENT HEADS. THE BUSINESS PROFIT I S GOVERNED BY ARTICIE-7 WHEREAS INTEREST INCOME BY AR TICLE-IL. UNDER PARA-7 OF ARTICLE-7 WHERE BUSINESS PROFIT INC LUDES ITEMS OF INCOME WHICH ARE DEALT WITH SEPARATELY IN ANY OTHER ARTICLE OF THE AGREEMENT, PROVISIONS OF THOSE ARTICLES SHOULD NOT BE AFFECTED BY THE PROVISIONS OF THIS AR TICLE. 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. THEREFORE, THOUGH I NTEREST 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 B Y THE SAID ITA NO.5320/M/2012 J. P. MORGAN SECURITIES ASIA PVT. LTD. 3 ARTICLE-11. SECONDLY INTEREST INCOME MAY BE TAXED I N CONTRACTING STATE IN WHICH IT ARISES, ACCORDING TO LAW OF THAT STATE BUT IF THE RECIPIENT IS BENEFICIAL OWNER OF I NTEREST, TAX SO CHARGED SHALL NOT EXCEED 5% OF GROSS INTEREST IF THE INTEREST IS RECEIVED FROM BANK AND IN OTHER CASES 1 2.5% OF GROSS AMOUNT OF INTEREST. IN THIS CASE, THE ASSESSE E IS THE BENEFICIAL OWNER OF INTEREST AND TAX CHARGED CANNOT EXCEED 12.5% OF GROSS INTEREST. TAX HAS BEEN DEFINED IN AR TICLE- 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 CE SS AND SURCHARGE BEING SAME AS HELD BY THE TRIBUNAL IN THE CASE OF DIC ASIA PACIFIC PTE LTD. (SUPRA), IN OUR VIEW E DUCATION 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 OF FSHORE CO. (SUPRA), IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS THE HONBLE HIGH COURT WAS CONCERNED WITH TAXABILITY OF INCOME UNDER ARTICLE 14(2) OF THE DTA BETWEEN INDIA AND USA. THE HONBLE HIGH COURT WAS NOT CONCE RNED WITH INTERPRETATION OF TAX PAYABLE ON INTEREST INCO ME UNDER DTAA. THE JUDGMENT OF AAR IN THE CASE OF AIRPORTS AUTHORITY OF INDIA, IN RE (SUPRA), IS ALSO DISTINGU ISHABLE 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 AND AUXILIARY TYPE OF WORK WAS EXC LUDED FROM THE PURVIEW OF PE AND THEREFORE, THERE BEING N O PE IT WAS HELD THAT INCOME FROM SOFTWARE 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 T HAT TAX PAYABLE @ 12.5% UNDER ARTICLE 11(2) OF FTAA IS INCL USIVE OF SURCHARGE AND EDUCATION CESS. WE, THEREFORE, SET AS IDE THE ORDER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE . 5. WE FURTHER NOTE THAT AN IDENTICAL ISSUE HAS ALSO BEEN CONSIDERED AND DECIDED BY THE KOLKATA BENCHES OF TH IS TRIBUNAL IN CASE OF DIC ASIA PACIFIC PTE. LTD. VS ADIT (INTE RNATIONAL TAXATION) 52 SOT 447. THE TRIBUNAL IN CASE OF SUNIL V. MOTIANI VS ITO HAS CONSIDERED THE DECISION OF KOLKATA BENCHES OF THE TRIBUNAL IN CASE OF DIC ASIA PACIFIC PTE. LTD. VS A DIT (SUPRA). ACCORDINGLY, FOLLOWING THE ORDERS OF THIS TRIBUNAL WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) QU A THIS ISSUE. ITA NO.5320/M/2012 J. P. MORGAN SECURITIES ASIA PVT. LTD. 4 4. FOLLOWING THE EARLIER ORDER OF THIS TRIBUNAL IS ASSESSEES OWN CASE WE DO NOT FIND ANY MERITS IN THE APPEAL OF THE REVE NUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON THIS 27 TH DAY OF NOVEMBER 2013 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 27 TH NOVEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI