IN THE INCOME TAX APPELLATE TRIBUNAL
`C' : NEW DELHI
DELHI BENCH `C
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
SIDHU, JUDICIAL MEMBER
SHRI H.S. SIDHU,
No.6414/Del/2012
ITA No.
2009-10
Assessment Year : 2009-
M/s ION Geophysical Vs. Assistant Director of
Corporation, Income Tax,
(formerly known as `Input International Taxation,
Output Inc.'), Dehradun.
C/o Deloitte Haskins & Sells,
7th Floor, Building 10,
Tower B, DLF Cyber City
Phase-II,
Complex, DLF City, Phase-
Gurgaon 122 002,
Haryana.
PAN : AABCI6763Q.
(Appellant) (Respondent)
Appellant by : Shri Piyush Kaushik, Advocate and
Shri Gaurav Saxena, CA.
Respondent by : Smt. Poonam Sidhu, CIT-DR.
ORDER
PER G.D. AGRAWAL, VP :
This appeal by the assessee is directed against the directions of
learned Dispute Resolution Panel-II, Delhi dated 17th September, 2012
for the AY 2009-10.
2. Ground No.1 of the assessee's appeal reads as under:-
"That on the facts and in the circumstances of the case
and in law, the order passed by the ld. Assessing Officer
("AO") is bad in law and void ab-initio."
3. At the time of hearing before us, it is stated by the learned
counsel for the assessee that this ground is of general nature and
2 ITA-6414/Del/2012
should be treated as not pressed. Accordingly, the same is rejected
being not pressed.
4. Ground No.2 of the assessee's appeal reads as under:-
"That on the facts and in the circumstances of the case
and in law, the ld. AO/Ld. DRP has erred in applying tax
rate of 15 per cent on `Fee for technical services'
("FTS") under Article 12 of the India-USA DTAA on
training services rendered by the appellant, ignoring
the fact that section 115A of the Act provides for
beneficial tax rate of 10% (exclusive of surcharge/cess)
on FTS."
5. At the time of hearing before us, it is stated by the learned
counsel that the assessee is a non-resident corporation based in USA.
That during the year under consideration, the assessee had received
fee for technical services which is taxed by the Assessing Officer at the
rate of 15% as per DTAA between India and USA. He stated that as per
Section 115A(BB) of the Income-tax Act, 1961, fee for technical
services is chargeable to tax at the rate of 10%. That as per sub-
section (2) of Section 90, the provision of the Income-tax Act or DTAA,
whichever is beneficial to the assessee, should be applied. He,
therefore, submitted that since the rate of tax chargeable in respect of
fee for technical services is lower under the Income-tax Act, the same
should be applied and instead of 15%, the tax should be charged at the
rate of 10% of the fee for technical services.
6. Learned DR, on the other hand, stated that the assessee itself
has offered the income under Article 12 of the DTAA and therefore, the
Assessing Officer assessed the fee for technical services as per Article
12 of the DTAA between India and USA. The assessee has not
maintained any books of account and no claim was made before the
Assessing Officer that the tax should be charged as per Section 115A
3 ITA-6414/Del/2012
and not as per DTAA. She submitted that in view of the decision of
Hon'ble Apex Court in the case of Goetze (India) Ltd. Vs. CIT (2006)
284 ITR 323, the assessee is precluded from making the fresh claim
before the authorities. She further submitted that the assessee has a
PE in India and, therefore, Section 115A is not applicable in the case of
the assessee.
7. In the rejoinder, it is stated by the learned counsel that the
decision of Goetze (India) Ltd. (supra) relied upon by the learned DR
would not be applicable because the above decision was with regard to
the claim of some expenses which was made by the assessee before
the Assessing Officer without filing the revised return. In that context,
Hon'ble Apex Court held that the assessee ought to have filed the
revised return for making any additional claim of expenses. That in
this case, the assessee is not claiming any additional expenses but
assessee is only disputing the rate of tax. The rate of tax applied by
the Assessing Officer became known to the assessee only after the
receipt of the final order and therefore, assessee had no occasion to
raise this issue either before the Assessing Officer or before the DRP.
He also submitted that it is the duty of the Assessing Officer to levy tax
at the correct rate. He further pointed out that the Assessing Officer
has applied Article 12 of the DTAA which would not be applicable if
there is a PE in India. Moreover, if there is a PE in India, then the
Assessing Officer ought to have estimated the income from fee for
technical services and the gross receipt for fee for technical services
cannot be charged to tax. He, therefore, submitted that the Assessing
Officer has charged the gross receipt of the fee for technical services
for the purpose of the income tax and the only dispute in this appeal is
the rate at which the gross fee for technical services can be charged to
tax. As per Article 12 of the DTAA, the rate is 15% while as per Section
4 ITA-6414/Del/2012
115A(BB), it is 10%. The only request of the assessee is that
whichever is beneficial to the assessee should be applied.
8. We have carefully considered the submissions of both the sides
and perused relevant material placed before us. After considering the
facts of the case and the arguments of both the sides, we are of the
opinion that the decision of Hon'ble Apex Court in the case of Goetze
(India) Ltd. (supra) relied upon by the learned CIT-DR would not be
applicable. In this appeal before us, the only dispute is with regard to
the rate of tax and the assessee rightly pointed out that the issue of
rate of tax arose only after the receipt of the assessment order.
Moreover, it is the duty of the Assessing Officer to charge the tax at
the correct rate. Therefore, in our opinion, the assessee can agitate for
the first time before the ITAT the issue regarding the rate of tax in
respect of fee for technical services.
9. Section 90, sub-section (2) reads as under:-
"(2) Where the Central Government has entered into an
agreement with the Government of any country outside
India or specified territory outside India, as the case
may be, under sub-section (1) for granting relief of tax,
or as the case may be, avoidance of double taxation,
then, in relation to the assessee to whom such
agreement applies, the provisions of this Act shall apply
to the extent they are more beneficial to that
assessee."
10. From the above, it is evident that the assessee can claim the
applicability of the Income-tax Act if the provision of the Income-tax
Act is more beneficial to the DTAA. As per Section 115A(BB) as it stood
at the relevant time reads as under:-
5 ITA-6414/Del/2012
"the amount of income-tax calculated on the income by
way of fees for technical services, if any, included in the
total income, at the rate of ten per cent if such fees for
technical services are received in pursuance of an
agreement made on or after the 1st day of June, 2005;
and."
11. It is not in dispute that the fees for technical services was in
pursuance to an agreement made after the first day of June, 2005.
Thus, the provision of sub-section (BB) of Section 115A was applicable.
Learned DR contended that since the assessee has a PE in India,
therefore, Section 115A was not applicable. However, she fairly
admitted that when PE is there in India, then, the income has to be
apportioned and the gross receipt cannot be charged to tax.
Admittedly, in this case, the Assessing Officer has charged to tax the
gross amount of fees for technical services. Moreover, as pointed out
by the learned counsel, Article 12 of the DTAA would not be applicable
if there is a PE in India. In view of the above, we are of the opinion that
clause (BB) of Section 115A was applicable which provides for tax rate
of 10% in respect of fees for technical services. This being a more
beneficial provision than the Article 12 of DTAA, therefore, assessee
had a right to claim the applicability of this provision of the Income-tax
Act in view of the provision of Section 90(2) of the Income-tax Act. We,
therefore, direct the Assessing Officer to apply Section 115A(BB) and
tax the fees for technical services at the rate of 10%.
12. Ground No.3 reads as under:-
"That on the facts and in the circumstances of the case
and in law, the ld. AO has erred in not granting credit
for tax deducted at source (`TDS') amounting to
Rs.36,98,688 while issuing notice under section 156 of
the Act read with the assessment order under section
143(3)/144C(13) of the Act."
6 ITA-6414/Del/2012
13. At the time of hearing before us, both the parties fairly admitted
that let this matter be set aside to the file of the Assessing Officer and
assessee be directed to produce evidence/certificates of the tax
deducted at source and thereafter Assessing Officer would be directed
to allow credit of the same after verification. We, therefore, set aside
the issue raised by the assessee vide ground No.3 of its appeal and
direct the assessee to produce necessary evidence/certificates in
respect of tax deducted at source before the Assessing Officer. The
Assessing Officer is directed to verify the same and allow credit as per
law.
14. Ground No.4 reads as under:-
"That the ld.AO has erred in facts and law in
determining and levying income tax on income arising
from installation and inspection activities, which has
been assessed in the impugned assessment order on
protective basis."
15. At the time of hearing before us, a limited prayer has been made
by the learned counsel that the recovery of the tax in respect of
protective addition should not be made. He pointed out that certain
income has been offered by the assessee in the year under
consideration. Learned DRP was of the opinion that the income is
liable to be taxed in the preceding year and therefore, DRP directed
the Assessing Officer to reopen the assessment of the preceding year
and tax the income on substantive basis in that year. However, the
income offered by the assessee has been directed by the DRP to be
assessed on protective basis. The learned counsel for the assessee
stated that at present, the assessee is not disputing the protective
assessment of the income of this year. His only prayer is the direction
to the Assessing Officer for non-recovery of the tax on protective
addition.
7 ITA-6414/Del/2012
16. After considering the arguments of both the sides, we agree with
the contention of the learned counsel. It is a settled position of law
that the Revenue cannot insist on recovering the tax on protective
assessment of income. We, therefore, set aside this matter to the file
of the Assessing Officer and direct him not to recover the tax on
protective addition.
17. In the result, the appeal of the assessee is partly allowed.
Decision pronounced in the open Court on 26th December, 2014.
Sd/- Sd/-
SIDHU)
(H.S. SIDHU) AGRAWAL)
(G.D. AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 26.12.2014
VK.
Copy forwarded to: -
1. Appellant : M/s ION Geophysical Corporation,
(formerly known as `Input Output Inc.'),
C/o Deloitte Haskins & Sells,
7th Floor, Building 10, Tower B, DLF Cyber City
Phase-II, Gurgaon 122 002,
Complex, DLF City, Phase-
Haryana.
2. Respondent : Assistant Director of Income Tax,
International
International Taxation, Dehradun.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
|
