SET SATELLITE ( SINGAPORE PTE LTD) NOW KNOW AS MSM SATELLITE ( SINGAPORE) PTE. LTD, V. ADDL CIT ( IT),

MA 520/MUM/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 5383 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: L
• Assessment Year: 2003-2004
• Appeal Filed On: 24-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Assessee Lawyers: S E DASTUR SHRI NIRAJ SHETH
• Keywords: Double taxation relief

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH L MUMBAI BEFORE SHRI P.M. JAGTAP (AM) AND SMT. ASHA VIJAYARAG HAVAN (JM) M.A. NO. 520/MUM/2010 (ARISING OUT OF ITA NO.7574 & 7349/MUM/2004) ASSESSMENT YEAR-2003-04 SET SATELLITE (SINGAPORE PTE LTD., NOW KNOWN AS MSM SATELLITE (SINGAPORE)PTE LTD. C/O S.R. BATLIBOI & CO., MUMBAI-400 021 PAN-AABCS 9229H VS. THE ADDL DIRECTOR OF INCOME TAX (INTERNATIONAL TAXATION), RANGE 2, SCINDIA HOUSE, MUMBAI (APP LICANT ) (RESPONDENT) A PPLICANT BY: SHRI S.E. D ASTUR SHRI NIRAJ SHETH DEPARTMENT BY: SHRI SUMIT KUMAR O R D E R PER ASHA VIJAYARAGHAVAN (JM) BY THIS M.A DATED 520/MUMBAI/2010, THE PETITIONER S UBMITS AS FOLLOWS: IN ALL THE DEPARTMENTAL APPEALS THE GROUNDS WERE A S UNDER: A) WHETHER THE APPLICATION OF ARTICLE 24 OF THE TRE ATY (LIMITATION OF RELIEF) ARTICLE, GCC WAS TO BE DENIED THE BENEFIT O F THE TREATY? B) WHETHER PAYMENT TO GCC WAS IN THE NATURE OF ROYA LTY? C) WHETHER THE CIT(A) ERRED IN HOLDING THAT THE ROY ALTY DID NOT ARISE IN INDIA HAVING REGARD TO THE PROVISIONS OF ARTICLE 12(7) OF THE TREATY AS REGARDS THE FIRST ISSUE, THE ONLY CONTENTION RAI SED BY THE DR WAS THAT SINCE THE PAYMENTS TO GCC WERE MADE TO A BANK ACCOUNT IN JERSEY AND NOT IN SINGAPORE ARTICLE 24 O F THE TREATY WAS APPLICABLE AND GCC WAS NOT ELIGIBLE TO TAX TREATY B ENEFIT. M.A. NO. 520/M/10 2 THE APPLICANT POINTED OUT THAT GCC HAD CONFIRMED IN A LETTER TO THE APPLICANT THAT IT HAD OFFERED THE PAYMENT TO TAX IN SINGAPORE (PG 69 OF PAPERBOOK) AND THEREFORE THE VERY BASIS O F THE DRS SUBMISSION THAT THE AMOUNTS WERE NOT SUBJECT TO TAX IN SINGAPORE WAS MISCONCEIVED AND INCORRECT. THE APPLICANT ALSO POINTED OUT THAT THE A.O HAD HIM SELF APPLIED THE TREATY IN THE ORDERS UNDER SECTION 195 PASSED BY HIM SUBSEQUENT TO THE FIRST ORDER UNDER SECTION 201 OF THE ACT ON THE BASIS OF THE CONFIRMATION REFERRED TO IN THE EARLIE R PARA THEREBY CLEARLY ACCEPTING THAT THE TREATY WAS APPLICABLE. NOW BY THIS M.A IT HAS BEEN POINTED OUT THAT THE HO NBLE TRIBUNAL WHILE DECIDING THE THIRD GROUND OF APPEAL IN FAVOUR OF THE APPLICANT BY HOLDING THAT IN VIEW OF ARTICLE 12(7) OF THE TREATY, THE PAYMENTS IN QUESTION WERE NOT ASSESSABLE IN INDIA AND THEREFORE THE APPLICANT CANNOT BE HELD TO BE AN ASSESSEE IN D EFAULT. IT IS PRAYED THAT THOUGH IMPLICITLY THE FIRST GROUND OF A PPEAL OF THE DEPARTMENT WHEREIN IT IS CONTENDED THAT THE TREATY IS NOT APPLICABLE HAS ALSO BEEN DISMISSED, NEVERTHELESS A SPECIFIC FI NDING FOR THE SAKE OF COMPLETENESS HAS BEEN REQUESTED BY THE PRESENT M ISCELLANEOUS APPLICATION BY THE ASSESSEE. THAT THE FIRST GROUND OF APPEAL OF THE DEPARTMENT I S TO BE HELD AS DISMISSED AND A CLEAR DECISION THAT TREATY BENEF IT IS AVAILABLE TO GCC PARTICULARLY AS THE AO HAS HIMSELF APPLIED THE TREATY IN SOME OF THE ORDERS SUBSEQUENT TO THE ORDER PASSED UNDER SECTION 201 OF THE ACT. 2. AFTER CONSIDERING THE ARGUMENT OF BOTH THE SIDES AND PERUSING THE MATERIAL ON RECORD, WE FIND THAT AN ERROR APPARENT ON RECORD HAS CREPT INTO THE ORDER OF THE TRIBUNAL DATED 25 TH JUNE, 2010. WE, THEREFORE, RECTIFY THE SAME BY DELETING PARA 21 OF THE SAID OR DER AND SUBSTITUTING THE SAME WITH THE FOLLOWING: 21. ARTICLE 24 OF THE INDIA-SINGAPORE TREATY READS AS FOLLOWS: LIMITATION OF RELIEF M.A. NO. 520/M/10 3 1. WHERE THIS AGREEMENT PROVIDES (WITH OR WITHOUT OTHE R CONDITIONS) THAT INCOME FROM SOURCES IN A CONTRACTI NG STATE SHALL BE EXEMPT FROM TAX, OR TAXED AT A REDUC ED RATE IN THAT CONTRACTING STATE AND UNDER THE LAWS I N FORCE IN THE OTHER CONTRACTING STATE THE SAID INCOME IS S UBJECT TO TAX BY REFERENCE TO THE AMOUNT THEREOF WHICH IS REMITTED TO OR RECEIVED IN THE OTHER CONTRACTING ST ATE AND NOT BY REFERENCE TO THE FULL AMOUNT THEREFORE, THEN THE EXEMPTION OR REDUCTION OF TAX TO BE ALLOWED UND ER THIS AGREEMENT IN THE FIRST-MENTIONED CONTRACTING S TATE SHALL APPLY TO SO MUCH OF THE INCOME AS IS REMITTED TO OR RECEIVED IN THAT OTHER CONTRACTING STATE 21.1 ARTICLE 24(1) CONTAINS A FORM OF LIMITATION OF BENEFIT PROVISION USED BY COUNTRIES SUCH AS SINGAPORE WHICH IMPOSE TAX ON CERTAIN TAXPAYERS ON A REMITTANCE BASIS. THESE LIMITATIONS OF BENEFIT PROVISIONS OPERATE IN CONJUNCTION WITH THE PROVISIONS OF THE TREATY WHICH PROVIDE FOR REDUCED RATE OF TAX OR EXEMPTION OF TAX IN THE COUNTRY OF SOURCE. 21.2. IT IS FUNDAMENTAL TO THESE PROVISIONS THAT TH EY APPLY ONLY TO INCOME PAID FROM SOURCES IN ONE CONTRACTING STATE, WHERE THEY ARE EXEMPT FROM TAX OR ENJOY TAX AT A RE DUCED RATE, TO A RECIPIENT RESIDENT IN THE OTHER CONTRACT ING STATE WHO IS TAXABLE ON A REMITTANCE BASIS. THIS IS AMPLY CLEAR M.A. NO. 520/M/10 4 FROM THE WORDING OF THE ARTICLE 24(1) WHICH STATES WHERE THIS AGREEMENT PROVIDES..THE INCOME FROM SOURCES I N A CONTRACTING STATE .. THUS, ARTICLE 24(1) CAN ONLY APPLY TO INCOME FROM A SOURCE IN ONE CONTRACTING STATE (INDI A IN THIS CASE) WHICH UNDER THE LAWS IN FORCE IN THE OTHER CONTRACTING STATE (SINGAPORE IN THIS CASE) IS SUBJE CT TO TAX BY REFERENCE TO THE AMOUNT THEREOF WHICH IS REMITTE D TO SINGAPORE 21.3 AS EXPLAINED EARLIER IN THIS ORDER THE INCOME IN THE INSTANT CASE, EVEN IF IT IS CONSTRUED AS ROYALTY, D O NOT ARISE IN INDIA UNDER ARTICLE 12(7) BECAUSE THE PAYER (SET SINGAPORE) IS A RESIDENT OF SINGAPORE. PARAGRAPH 26 OF THE OECD COMMENTARY TO ARTICLE 11 STATES: THIS PARAGRAPH LAYS DOWN THE PRINCIPLE THAT THE STATE OF SOURCE OF THE ROYALTIES IS THE STATE OF WHICH THE PAYER OF ROYALT IES IS RESIDENT . IN THIS CASE, THE STATE OF SOURCE OF ROYALTIES IS SINGAPORE AS THE PAYER IS A RESIDENT OF SINGAPORE. THE ROYALTIES ARE NOT THEREFORE INCOME FROM SOURCES IN INDIA WHICH UNDER THE LAWS IN FORCE IN SINGAPORE ARE SUBJ ECT TO TAX BY REFERENCE TO THE AMOUNT THEREFORE WHICH IS R EMITTED TO .. SINGAPORE. 21.4 FURTHERMORE, AS THE LEARNED COUNSEL POINTED OU T THE TREATY SPECIFICALLY MENTIONS CASES WHERE AN INCOME IS EXEMPT FROM TAX IN A CONTRACTING STATE. THERE IS A M.A. NO. 520/M/10 5 DISTINCTION BETWEEN INCOME EXEMPT FROM TAX AND INCOME WHICH IS NOT TAXABLE ; IN THE INSTANT CASE THERE IS NO QUESTION OF INCOME BEING EXEMPT FROM TAX IN INDIA A ND THEREFORE ARTICLE 24 SHOULD NOT APPLY ON THIS COUNT AS WELL. FINALLY, BASED ON THE DOCUMENTS FILED, IT IS CLEAR THAT THE AMOUNT PAID BY SET SATELLITE (SINGAPORE) PTE LTD TO GCC, IN JERSEY, WAS SUBJECT TO TAX IN SINGAPORE UNDER ITS D OMESTIC LAWS AND HENCE ARTICLE 24 CANNOT APPLY ON THIS COUN T TOO. WE THEREFORE BELIEVE THAT THE PROVISIONS OF ARTICLE 24 OF THE DTAA DO NOT APPLY TO THE FACTS OF THIS CASE AND THE ASSESSEE IS ENTITLED TO THE BENEFITS UNDER THE INDI A- SINGAPORE TREATY. WE DISMISS THE FIRST GROUND OF AP PEAL OF THE REVENUE. 3. IN THE RESULT, THE M.A. FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 11 TH DAY OF FEBRUARY, 2011. SD/- SD/- (P.M. JAGTAP) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 11 TH FEBRUARY, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR L BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI M.A. NO. 520/M/10 6 DATE INITIALS 1 DRAFT DICTATED ON: 4.02.2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 7.02.2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ S R. PS/PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: _________ ______ 9. DATE OF DISPATCH OF ORDER: _________ ______