Dy.C.I.T., Bangalore V. M/s IBM World Trade Corporation, Bangalore

ITA 728/BANG/2015

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1497 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 14-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Double taxation relief; Source of fund
• Section: 234B

Judgement Text

ITA.728/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'C', BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.728/BANG/2015 (ASSESSMENT YEAR : 2010-11) DEPUTY COMMISSIONER OF INCOME-TAX (INT.TAXATION), CIRCLE -1(1), BANGALORE ..APPELLANT V. M/S. IBM WORLD TRADE CORPORATION, C/O. BMR & ASSOCIATES, LEVEL 3, PRESTIGE NEBULLA -1, 8-12, CUBBON ROAD, BANGALORE 560 001 ..RESPONDENT PAN : AAACI1209G ASSESSEE BY : SHRI. ANKUR PAI, CA REVENUE BY : SHRI. SUNIL KUMAR AGARWALA, JCIT HEARD ON : 13.10.2015 PRONOUNCED ON : .10.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY REVENUE, IT HAS TAKEN THE FOLLOWING GROUNDS : 1. THE HON'BLE CIT(A) HAS ERRED IN HOLDING THAT THE AS SESSEE IS ENTITLED TO ADOPT PROVISIONS OF SECTION 115A(1)( B)(AA) OF THE INCOME TAX FOR COMPUTING THE TAX PAYABLE ON ROY ALTY INCOME RECEIVED IN PURSUANCE OF AGREEMENTS ENTERED INTO AFTER 1.6.2005 AND PROVISIONS OF ARTICLE 12 OF THE INDO-U S DTAA FOR COMPUTING THE TAX PAYABLE ON ROYALTY INCOME RECEIVE D IN PURSUANCE OF AGREEMENTS ENTERED INTO AFTER 1.6.2005 . ITA.728/BANG/2015 PAGE - 2 2. THE HON'BLE CIT(A) HAS ERRED IN HOLDING THAT THE AS SESSEE CAN AVAIL THE BENEFIT OF SEC. 90(2), WHEN IT IS NOT LEG ALLY PERMISSIBLE FOR THE ASSESSEE TO HAVE A MIX OF BOTH DTAA AND A PORTION OF THE INCOME TAX ACT IN ORDER TO MINIZE TH AT TAX. 3. THE HONBLE CIT(A) HAS ERRED IN HOLDING THAT THE ASS ESSEE BEING NON-RESIDENT IS NOT LIABLE FOR PAYMENT OF ADV ANCE TAX AS ITS TOTAL CHARGEABLE INCOME IS LIABLE FOR TDS U/ S 195, AND HENCE NOT LIABLE FOR LEVY OF INTEREST U/S 234B OF T HE IT ACT. 4. THE HON'BLE CIT(A) HAS FAILED TO APPRECIATE THAT TH E DEDUCTION OF TAX AT SOURCE U/S 195, AND PAYMENT OF ADVANCE TA X U/S 210 ARE NOT MUTUALLY EXCLUSIVE. 5. THE HON'BLE CIT(A) HAS FAILED TO APPRECIATE THAT SEC. 209 IS A COMPUTATION SECTION OF ADVANCE TAX ON ASSESSMENT OF FUTURE TAX LIABILITY AND THESE WORDS WOULD NOT HAVE BEEN CONSTRUED TO MEAN THAT NEITHER THE ADVANC E TAX PROVISIONS ARE APPLICABLE TO THE CASES COVERED U/S 195 NOR THE ASSESSEE ARE AT LIBERTY TO EVADE THEIR TAX LIABILIT Y EVEN THOUGH TDS IS EFFECTED. 6. THE HON'BLE CIT(A) HAS ERRED IN HOLDING THAT THE AS SESSEE IS NOT LIABLE FOR LEVY OF INTEREST U/S 234B EVEN THOUG H CHARGING OF INTEREST IS MANDATORY AND CONSEQUENTIAL AS PER T HE STATUS. 7. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE CIT(A) MAY BE ANNULLED AND THAT OF THE A.O. BE RESTORED. 02. ASSESSEE HAD ENTERED INTO AGREEMENT WITH IBM IN DIA PVT. LTD (IBM INDIA) AS WELL AS THREE OTHER PARTIES FOR SALE OF LICENCE AND USAGE OF INTELLECTUAL PROPERTY KNOWHOW AND SOFTWARE WHICH WE RE OWNED AND DEVELOPED BY THE ASSESSEE. ASSESSEE WAS RECEIVING ROYALTY INCOME FROM IBM INDIA. PART OF THE ROYALTY RECEIPTS WERE, AS PER T HE MARKETING ROYALTY AGREEMENT DT.01.04.2005 AND PART OF THE ROYALTY REC EIVED WAS ON ACCOUNT OF AGREEMENT ENTERED PRIOR TO 01.04.2005. ASSESSEE WH ILE OFFERING INCOME FROM ROYALTY / FEE FOR TECHNICAL SERVICES, TOOK UMBRAGE U/S.115A OF THE INCOME-TAX ITA.728/BANG/2015 PAGE - 3 ACT, 1961 (THE ACT IN SHORT), FOR A PART OF ITS I NCOME, WHEREAS OTHER INCOME AS PER RATES PROVIDED IN INDO US DTAA ON CERTAIN OT HER INCOME. IN OTHER WORDS, INCOME ARISING OUT OF AGREEMENTS ENTERED PRI OR TO 01.06.2005 WERE OFFERED UNDER THE PROVISIONS OF DTAA AT THE RATE OF 15% AND INCOME ARISING ON ACCOUNT OF AGREEMENTS ENTERED AFTER 01.06.2005, WERE OFFERED FOR TAXAS PER THE PROVISIONS OF SECTION 115A OF THE ACT, AT 10%. AO HELD THAT ASSESSEE COULD NOT APPLY DIFFERENT RATES FOR DIFFERENT PAYME NTS. 03. ASSESSEES APPEAL IN THIS REGARD WAS SUCCESSFUL . CIT (A) RELIED ON A DECISION OF COORDINATE BENCH IN ASSESSEES OWN CASE FOR A. Y. 2007-08 AND HELD THAT AN ASSESSEE WAS ENTITLED TO THE BENEFIT O F DTAA FOR CERTAIN SOURCES OF INCOME AND APPLICATION OF THE IT ACT FOR CERTAIN OTHER SOURCES OF INCOME. NOW REVENUE IS IN APPEAL BEFORE US. 04. WE FIND THAT THE ISSUE RAISED BY THE REVENUE IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH IN IBM WORLD TRADE CORPORATION V. DDI [(2012) 20 TAXMANN.COM 728]. CI T (A) HAS REPRODUCED THIS DECISION IN ITS ENTIRELY IN HIS ORDER. NOTHIN G HAS BEEN BROUGHT BEFORE US BY THE REVENUE TO TAKE A DIFFERENT VIEW. ESPECIALL Y SO SINCE THE DECISION RELIED ON BY THE CIT (A) WAS THAT OF THE ASSESSEE I TSELF FOR AN EARLIER YEAR ON THE SAME SET OF FACTS. ITA.728/BANG/2015 PAGE - 4 05. IN THE RESULT APPEAL FILED BY THE REVENUE STAND S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20TH DAY OF O CTOBER, 2015. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (ABRAHAM P GEORGE) JUDICIAL MEMBER ACCOUNTA NT MEMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR