CAPGEMINI S.A, MUMBAI V. ADIT (IT) 1(2), MUMBAI

ITA 7198/MUM/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3250 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: L
• Next Hearing Date: 22-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 04-12-2012
• Court: TRIBUNAL
• Department Lawyers: JASBIR CHA UHAN
• Assessee Lawyers: KHURSHED BULSARA
• Keywords: Double taxation relief; Permanent establishment

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL L , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI PAWAN SINGH , J M ./ ITA NO . 7198 /MUM /20 1 2 ( / ASSESSMENT YEAR : 20 0 9 - 20 10 ) CAPGE MINI S.A., C/O KALYANIWALLA & MISTRY, ARMY & NAVY BUILDING, 3 RD FLOOR, 148, MAHATMA GANDHI ROAD, FORT, MUMBAI - 400001 VS. ADIT(INTERNATIONAL TAXATION) - 1(2), MUMBAI ./ ./ PAN/GIR NO. : A A DCC5353 J ( / APPELLANT ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI M.M.GOLVALA & KHURSHED BULSARA /REVENUE BY : SHRI JASBIR CHAUHAN / DATE OF HEARING : 22 / 1 2 / 201 5 / DATE OF PRONOUNCEMENT 28/03 /201 6 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE DIRECTION OF DRP - I , MUMBAI , DATED 5 - 9 - 2012 , FOR THE ASSESSMENT YEAR 200 9 - 2010 , IN THE MATTER OF ORDER PASSED U/S.144C(5) OF THE ACT. 2 . IN THIS APPEAL THE ASSESSEE IS AGGRIEVED FOR TAXING CORPORATE GUARANTEE COMMISSION AMOUNTING TO RS.42,31,646/ - UNDER ARTICLE 23 OF DTAA BETWEEN INDIA AND FRANCE. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A RESIDENT OF FRANCE AND DOES NOT HAVE A PERMANENT ESTABLISHMENT IN INDIA. DURING THE YEAR ASSESSEE HAS GIVEN A CORPORATE GUARANTEE BNP PARIBAS, A FRENCH BANK IN FRANCE, ON BEHALF OF ITS VARIOUS SUBSIDIARIES WORLDWIDE. DURING THE YEAR UNDER CONSIDERATION, IN ITA NO. 7198 /1 2 2 INDIA, TWO SUBSIDIARIE S OF THE ASSESSEE M/S.CAPGEMINI INDIA PVT. LTD. AND CAPGEMINI BUSINESS SERVICES (INDIA) LTD. WERE SANCTIONED CREDIT FACILITIES BY THE INDIAN BRANCHES OF BNP PARIBAS, WHICH CREDIT FACILITIES TO THE EXTENT OF USD 15 MILLION4AND 2 MILLION RESPECTIVELY, WERE S ECURED BY THE SAID CORPORATE GUARANTEE GIVEN BY THE ASSESSEE. THE ASSESSEE HAS CHARGED GUARANTEE COMMISSION @ 0.5% PER ANNUM FOR THE CORPORATE GUARANTEES GIVEN ON BEHALF OF ITS SUBSIDIARIES IN INDIA. THE AO HAS TAXED THE SAME BY HOLDING IT TO BE 'OTHER INC OME' UNDER ARTICLE 23 OF THE DTAA BETWEEN INDIA AND FRANCE. 4. THE ASSESSEE IS BEFORE US AGAINST THE SAID ADDITION. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE AO TAXED THE GUARANTEE COMMISSION ON THE PLEA THAT GUARANTEE HAS BEEN PROVIDED FO R THE PURPOSE OF RAISING FINANCE BY AN INDIA COMPANY. AS PER THE AO FINANCE WAS RAISED IN INDIA. THE AO FURTHER OBSERVED THAT FINANCE REQUIREMENT IS MET BY A INDIAN BRANCH OF THE BANK, THE BENEFITS OF GUARANTEE ARE SHARED BY THE INDIAN ENTITY WITH THE ASS ESSEE BY MAKING A COMPENSATORY PAYMENT. ACCORDINGLY THE AO HELD THAT FEES FOR GUARANTEE ARISE IN INDIA. FROM THE RECORD WE FOUND THAT GUARANTEE COMMISSION RECEIVED BY FRANCE COMPANY DID NOT ACCRUE IN INDIA NOR IT CAN BE DEEMED TO BE ACCRUED IN INDIA, THERE FORE, NOT TAXABLE IN INDIA UNDER INCOME TAX ACT. FURTHERMORE, A S PER ARTICLE 23.3, INCOME CAN BE TAXED IN INDIA, ONLY IF IT ARISES IN INDIA. IN THE INSTANT CASE, THE INCOME CLEARLY ARISES IN FRANCE BECAUSE THE GUARANTEE HAS BEEN GIVEN BY THE ASSESSEE , A FR ENCH ITA NO. 7198 /1 2 3 COMPANY TO BNP PARIBAS, A FRENCH BANK, IN FRANCE AND, THEREFORE, ARTICLE 23.3 HAS NO APPLICABILITY AS INCOME DOES NOT ARISE IN INDIA. 6. THE ASSESSEE IS ALSO AGGRIEVED FOR NOT GRANTING CREDIT FOR TAX DEDUCTED AT SOURCE. WE DIRECT THE AO TO VERIFY THE RECORDS FOR GRANTING TAX CREDIT AS PER LAW. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN TERMS INDICATED HEREINABOVE. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 28/03 / 201 6 . SD/ - SD/ - ( PAWAN SINGH ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 28/03 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//