DDIT (IT) 4(2), MUMBAI V. NOVARTIS VACCINES AND DIAGNOSTICS GMBH ( EARLIER KNOWN AS NOVARTIS VACCINES AND DIAGNOSTICS GMBH & CO. KG), MUMBAI

ITA 5388/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84469 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 05-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HITESH PERAMPURN A
• Assessee Lawyers: HI TESH GAJARIA
• Keywords: Double taxation relief

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES L MUMBAI . . , , BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER /AND SHRI SANJAY ARORA, ACCOUNTANT MEMBER ITA NO.5388/MUM/2013 (A.Y.2008-09) THE DY. DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION)-4(2), MUMBAI. (APPELLANT ) VS. M/S. NOVARTIS VACCINES AND DIAGNOSTICS GMBH, (EARLIER KNOWN AS NOVARTIS VACCINES AND DIAGNOSTICS GMBH & CO.KG) C/SO. CHIRON BEHRING VACCINES PVT. LTD, 501, SHREE AMBA SHANTI CHAMBERS, OPP. THE LEELA, ANDHERI KURLA ROAD, ANDHERI(E), MUMBAI -59 PANAABCC7831M (RESPONDENT) APPELLANT BY : SHRI HITESH PERAMPURN A RESPONDENT BY : SHRI HI TESH GAJARIA DATE OF HEARING : 11/12/2014 DATE OF PRONOUNCEMENT : 11 /12/2014 ORDER PER I.P.BANSAL, J.M: THIS IS AN APPEAL FILED BY THE REVENUE AND IT I S DIRECTED AGAINST THE ORDER PASSED BY LD. CIT(A)-11, MUMBAI DATED 15/5/2013 FOR ASSESSMENT YEAR 2008-09. THE GROUNDS OF APPEAL READ AS UNDER: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN GRANTING DTAA RELIEF TO THE A SSESSEE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE BEING LIMITED LIABILITI ES PARTNERSHIP (LLP), IS NOT RECOGNIZED BY GERMAN GOVT. AS A TAXABLE ENTITY. ITA NO.5388/MUM/2013 (A.Y.2008-09) 2 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) WAS CORRECT IN HOLDING THAT THE ASSESSEE CAN BE CONSIDERED AS RESIDENT OF GERMANY. 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. CIT(A) WAS CORRECT IN NOT APPRECIATING THAT ASSESSE E IS PAYING TURNOVER TAX ON HIS BUSINESS WHICH IS NOT IN THE NATURE OF INCOME TAX. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) WAS CORRECT IN DIRECTING THE ASSESSING OFFICER TO TAX R OYALTY INCOME AT THE RATE PRESCRIBED IN THE TREATY, INSTEAD OF 21.115% RELYIN G UPON THE ORDER OF HONBLE HIGH COURT FOR AY 2002-03 IN THE ASSESSEES OWN CAS E WITHOUT APPRECIATING THE FACT THAT DEPARTMENT HAS FILED SLP ON THE ISSUE. 5. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND(S) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 2. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL IS A GAINST TAXATION OF ROYALTY INCOME OF RS.3,66,87,380/- @ 21.115% AS AGAINST 10% AS PER INDIA- GERMANY TREATY ON THE GROUND THAT APPELLANT IS NOT ENTITLED TO TR EATY BENEFIT. LD. CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE ON THE BASIS OF DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CHIRON BEARING GMBH & CO. (29 TAXAMNN.COM 199) WHICH IS THE ERSTWHILE NAME OF THE ASSESSEE. SO IN ASSESSEES OWN CASE IN A.Y 2002-03 HONBBLE BOMBAY HIGH COURT HAS RULED THAT ASSESSEE IS ENTITLED TO BENEFIT OF INDIA-GERMANY TREATY. RELEVANT PORTION OF THE ORDER OF HONBLE BOMBAY HIG H COURT HAS BEEN REPRODUCED IN PARA 2.3 OF THE ORDER PASSED BY LD. CIT(A). THE DEP ARTMENT IS AGGRIEVED AND HAS FILED AFOREMENTIONED GROUNDS OF APPEAL. 3. AT THE OUTSET LD. AR OF THE ASSESSEE HAS PRODUCE D BEFORE US AFOREMENTIONED ORDER OF HONBLE BOMBAY HIGH COURT AND IT WAS PLEA DED THAT LD. CIT(A) DID NOT COMMIT ANY ERROR IN FOLLOWING THE DECISION OF JUR ISDICTIONAL HIGH COURT IN THE CASE OF ASSESSEE ITSELF. HE SUBMITTED THAT DEPARTMENT I S AGITATING THE RELIEF SIMPLY ON THE GROUND THAT DEPARTMENT HAS FILED SLP AGAINST TH AT ORDER WHICH CANNOT BE A VALID GROUND. ITA NO.5388/MUM/2013 (A.Y.2008-09) 3 4. ON THE OTHER HAND, LD. DR SUBMITTED THAT THE MAT TER IS COVERED BY THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COU RT. 5. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENT IONS HAVE CAREFULLY BEEN CONSIDERED. THE ISSUE RAISED BY THE REVENUE IS NO MORE RES-INTEGRA AND IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFOREMENTIONED ORD ER OF HONBLE BOMBAY HIGH COURT. FOR THE SAKE OF COMPLETENESS RELEVANT PORTION OF TH E ORDER OF HONBLE BOMBAY HIGH COURT IS REPRODUCED BELOW: 6. WE HAVE CONSIDERED THE SUBMISSIONS. WE FIND THA T RESPONDENT ASSESSEE IS RECEIVING ROYALTY AND FEES FOR TECHNICAL SERVICES RENDERED IN INDIA. IN TERMS OF ARTICLE 12 OF DTAA, ROYALTY AND FEES FOR TECHNICAL SERVICES RECEIVED IN INDIA BY A PERSON RESIDENT OUTSIDE INDIA ARE NOT LIABLE TO TAX IN INDIA IN EXCESS OF 1 0% OF THE GROSS AMOUNT RECEIVED. ON EXAMINATION OF THE DTAA, WE FIND THAT IN TERMS OF A RTICLE 2(3) THEREOF THE TRADE TAX PAID IN GERMANY IS ONE OF THE TAXES TO WHICH DTAA APPLIE S. FURTHER, IN THE ARTICLE 3(D) OF DTAA PERSON INCLUDES ANY ENTITY TREATED AS TAXABLE UNIT IN GERMANY. THE TERM RESIDENT IN TERMS OF ARTICLE 4 OF THE DTAA MEANS ANY PERSON WHO, UNDER THE LAWS OF GERMANY IS LIABLE TO TAX THEREIN BY REASON OF HIS DOMICILE, RE SIDENCE, PLACE OF MANAGEMENT OF ANY CRITERION OF A SIMILAR NATURE. WE FIND THAT BOTH T HE CIT(A) AND THE TRIBUNAL HAS ON EXAMINATION OF RECORDS FOUND THAT RESPONDENT ASSESS EE IS FILING TRADE TAX RETURN IN GERMANY AND THEREFORE IS PAYING TAX TO WHICH THE DT AA APPLIES. FURTHER, THE TAX RESIDENCY CERTIFICATE DATED 28.03.2005 ISSUED BY GE RMAN AUTHORITIES EVIDENCES THE FACT THAT THE RESPONDENT ASSESSEE IS CONSIDERED AS A TAX ABLE UNIT UNDER THE TAXATION LAWS OF GERMANY. THEREFORE, THE DTAA IS APPLICABLE TO THE R ESPONDENT ASSESSEE AND IN PARTICULAR THE BENEFIT OF ARTICLE 12(2) THEREOF CAN NOT BE DENIED. WE DO NOT FIND MERIT IN THE SUBMISSION OF THE REVENUE THAT THE RESPONDENT A SSESSEE CANNOT BE CONSIDERED AS A TAXABLE ENTITY IN VIEW OF THE OECD COMMENTARY. THIS IS FOR THE REASON THAT ENTIRE ISSUE IS GOVERNED BY THE DTAA AND ON THE BASIS OF EVIDENC E LED BEFORE THE AUTHORITIES. IN THESE CIRCUMSTANCES, IT IS NOT OPEN TO DENY THE BENEFIT O F THE DTAA ON THE BASIS OF THE OECD COMMENTARY. IN THIS VIEW OF THE SITUATION, THE APPEAL FILED BY THE REVENUE IS DISMISSED. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/12/20 14 ! ' #$ % &'( 11/12/2014 ' ) SD/- SD/- ( /SANJAY ARORA ) ( . . / I.P. BANSAL ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER ITA NO.5388/MUM/2013 (A.Y.2008-09) 4 MUMBAI; &' DATED 11/12/2014 ! ! ! ! ' '' ' *+, *+, *+, *+, -,$+ -,$+ -,$+ -,$+ / COPY OF THE ORDER FORWARDED TO : 1. ./ / THE APPELLANT 2. *0./ / THE RESPONDENT. 3. 1 ( ) / THE CIT(A)- 4. 1 / CIT 5. ,2) *+' , , / DR, ITAT, MUMBAI 6. )3 4 / GUARD FILE. !' !' !' !' / BY ORDER, 0,+ *+ //TRUE COPY// 5 55 5 / 6 6 6 6 (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI . ' . ./ VM , SR. PS