M/s. Texas Instruments Incorporated, Bangalore v. DCIT, Bangalore

ITA 1418/BANG/2010 | 2006-2007
Pronouncement Date: 29-09-2011 | Result: Allowed

Appeal Details

RSA Number 141821114 RSA 2010
Assessee PAN AACCT4427F
Bench Bangalore
Appeal Number ITA 1418/BANG/2010
Duration Of Justice 9 month(s) 19 day(s)
Appellant M/s. Texas Instruments Incorporated, Bangalore
Respondent DCIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 29-09-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted A
Tribunal Order Date 29-09-2011
Assessment Year 2006-2007
Appeal Filed On 10-12-2010
Judgment Text
PAGE 1 OF 9 ITA NO.1418/BANG/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N K SAINI ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K J.M ITA NO.1418/BANG/2010 (ASSESSMENT YEAR 2006-07) M/S TEXAS INSTRUMENTS INCORPORATED C/O BMR & ASSOCIATES EMBASSY ICON ANNEXE 2/1 INFANTRY ROAD BANGALORE-1. - APPELLANT PA NO. AACCT4427F VS THE DEPUTY DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION) CIRCLE-1(1) BANGALORE. - RESPONDENT DATE OF HEARING : 27/09/2011 DATE OF PRONOUNCEMENT : 29/09/2011 APPELLANT BY : SHRI PADAM CHAND KHINCHA C.A. RESPONDENT BY : SHRI ETWA MUNDA CIT-III ORD ER PER GEORGE GEORGE K : THIS APPEAL INSTITUTED BY THE ASSESSEE IS DIRECTE D AGAINST ORDER OF LEARNED CIT(A)-IV BANGALORE DATED 15/09/2010. THE ASST. YEAR CONCERNED IS 2006-07. 2. THE ASSESSEE HAS RAISED NINE GROUNDS OF APPEAL. ALL THE GROUNDS RELATE TO THE SOLITARY ISSUE NAMELY WHETHER THE CIT(A) IS PAGE 2 OF 9 ITA NO.1418/BANG/2010 2 JUSTIFIED IN UPHOLDING THE LEVY OF INTEREST U/S 234B OF THE ACT IN RESPECT OF THE ASSESSEE WHICH IS A FOREIGN COMPANY. 3. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A FOREIGN COMPANY INCORPORATED IN THE UNITED STATES OF AMERICA. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DESIGNING AND MANUFACTURING SEMICONDUCTORS. FOR T HE ASST. YEAR 2006-07 THE ASSESSEE FILED ITS RETURN OF INCOME ON NOVEMBER 30 2006 RETURNING INCOME FROM OTHER SOURCES OF RS.10 6 2 31 360/-/-. THE INCOME OF THE ASSESSEE COMPRISED OF AMOUNTS REC EIVED FROM TEXAS INSTRUMENTS (INDIA) PRIVATE LIMITED (TI INDI A) ON ACCOUNT OF CROSS CHARGES PURSUANT TO A COST ALLOCATION AGREEME NT ENTERED INTO BETWEEN THE ASSESSEE AND TI INDIA. THE SAID CROS S CHARGES COMPRISES OF PAYMENTS PERTAINING TO ELECTRONIC DATA AUTOMATION (EDA) CHARGES AMOUNTING TO RS.87 91 83 971/- INFOR MATION TECHNOLOGY (IT) SUPPORT SERVICE CHARGES AMOUNTING TO RS.18 17 36 828/- SOFTWARE CROSS CHARGES AMOUNTING TO RS.90 51 737/- AND LEASE RENTALS AMOUNTING TO RS.3 62 58 826/-. FOR THE ASST. YEAR 2006-07 BASED ON A LOWER WITHH OLDING ORDER OBTAINED BY ASSESSEE U/S 195(2) OF THE ACT TH E TI INDIA HAD WITHHELD TAXES ON 20% OF THE IT SUPPORT CHARGE PAYME NTS MADE TO ASSESSEE IN RESPECT OF THE PERIOD FROM APRIL 1 200 5 TO DECEMBER 31 2005 AND ACCORDINGLY ASSESSEE HAD OFFERED 20% OF SU CH IT SUPPORT CHARGE TO TAX IN ITS RETURN OF INCOME. THE TAX LIA BILITY IN RESPECT OF THE INCOME OFFERED TO TAX BY THE ASSESSEE IN ITS RET URN OF INCOME PAGE 3 OF 9 ITA NO.1418/BANG/2010 3 AMOUNTED TO RS.14 15 88 642/- AND THE SAID TAX LIAB ILITY WAS DISCHARGED ON ACCOUNT OF THE TAXES DEDUCTED AT SOUR CE (TDS) AMOUNTING TO RS.14 15 88 642/-. ACCORDINGLY THERE WAS NO FURTHER TAX PAYABLE/REFUND DUE TO THE ASSESSEE AS DISCLOSED IN THE RETURN OF INCOME FOR THE AY 2006-07. 3.1 LATER ASSESSMENT WAS TAKEN UP FOR SCRUTINY U/S 143(2) OF THE ACT. DURING THE COURSE OF SCRUTINY ASSESSMEN T PROCEEDINGS THE AO REFERRED THE CASE OF THE ASSESSEE TO THE JOI NT DIRECTOR OF INCOME-TAX (TRANSFER PRICING)-II (TPO) FOR DETERMIN ING THE ARMS LENGTH PRICE (ALP) IN RESPECT OF ITS INTERNATIONAL TRANSACTIONS WITH ASSOCIATED ENTERPRISES. THE TPO VIDE ORDER U/S 92C A OF THE ACT DATED OCTOBER 30 2009 CONCLUDED THAT THERE WAS NO REQUIREMENT FOR MAKING ANY ADJUSTMENT TO THE ALP. 3.2 THE AO ISSUED A DRAFT ASSESSMENT ORDER U/S 143 (3) RWS 144C OF THE ACT DATED DECEMBER 29 2009 COMPUTING T HE TOTAL INCOME OF THE ASSESSEE FOR THE AY 2006-07 AT RS.1 23 87 70 364/- (AN EXCHANGE RATE OF 1US $ = INR 44.81 WAS TAKEN FOR CO NVERSION). ACCORDINGLY THE AO HAS COMPUTED A TOTAL TAX LIABILI TY OF RS.16 14 69 492/- INTER ALIA INCLUDING INTEREST U/S 234B OF THE ACT AMOUNTING TO RS.1 28 98 565/- IN THE SUBJECT DRAFT ASSESSMENT ORDER. 3.3 THE ASSESSEE DID NOT FILE OBJECTIONS BEFORE TH E DISPUTE RESOLUTION PANEL AND OPTED TO FILE AN APPEAL BEFORE THE CIT(A). ACCORDINGLY FINAL ASSESSMENT ORDER U/S 143(3) OF TH E ACT WAS PASSED ON 25.2.2010. THEREAFTER THE AO HAS SUO MOTO ISSU ED AN ORDER U/S PAGE 4 OF 9 ITA NO.1418/BANG/2010 4 154 OF THE ACT DATED MARCH 18 2010 PROPOSING TO RE CTIFY THE ASSESSMENT ORDER DATED FEBRUARY 25 2010 PASSED U/S 143(3) OF THE ACT. AS PER THE ORDER U/S 154 OF THE ACT THE AO M ADE AN ADDITION OF RS.23 98 24 011/- REPRESENTING INCOME DECLARED IN T HE RETURN OF INCOME AND COMPUTED THE TOTAL INCOME OF THE ASSESSE E FOR AY 2006- 07 AT RS.1 34 60 55 371/-. CONSEQUENTLY THE AO HAS RAISED A DEMAND OF RS.5 21 61 722/- (INCLUDING INTEREST U/S 234B OF THE ACT AMOUNTING TO RS.1 61 88 121/-) AFTER PROVIDING CREDIT FOR TAX ES PAID ON REGULAR ASSESSMENT AMOUNTING TO RS.14 15 88 642/-. 4. THE ASSESSEE BEING AGGRIEVED BY THE LEVY OF INTER EST U/S 234B OF THE ACT FILED AN APPEAL BEFORE THE CIT(A). 5. THE CIT(A) HELD THAT THE ASSESSEE CANNOT ESCAPE LIABILITY FOR INTEREST U/S 234B OF THE ACT IN RESPECT OF THE TAX PAYABLE ON INCOME OVER AND ABOVE WHAT IS COVERED BY THE LOWER W ITHHOLDING ORDER U/S 195(2) OF THE ACT. THE CIT(A) FOLLOWED THE DECI SION OF THE TRIBUNAL IN THE CASE OF ANSALDO ENERGIA SPA. 6. THE ASSESSEE BEING GRIEVED IS IN APPEAL BEFORE US. 7. THE LEARNED AR SUBMITTED THAT THE TRIBUNAL IN A SSESSEES OWN CASE IN ITA NO.785/BANG/2010 DATED 28.12.2010 F OR THE IMMEDIATELY PRECEDING ASST. YEAR (2005-06) HAD HELD T HAT THE ASSESSEE IS NOT LIABLE TO PAY ANY INTEREST U/S 234B O F THE ACT. HE FURTHER SUBMITTED THAT THE FACTS OF THIS CASE ARE I DENTICAL TO THE FACTS CONSIDERED BY THE TRIBUNAL FOR ASST. YEAR 2005- 06. PAGE 5 OF 9 ITA NO.1418/BANG/2010 5 8. THE LEARNED DR FAIRLY CONCEDED THAT THE ISSUE I N QUESTION IS SQUARELY COVERED BY THE AFORESAID ORDER OF THE TRI BUNAL. 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE TRIBUNAL IN ASSESSEES OWN CASE CITED SUPRA HAD CONSIDERED THE PRECEDENT ON THE SUBJECT AND HEL D AS FOLLOWS:- 11. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDERED THE RIVAL CONTENTIONS WE FIND THAT THE BASIC QUESTION BEFORE US IS AS FOLLOWS; 12. ONCE THE PAYER HAS OBTAINED A CERTIFICATE U/S 192(2) OF THE IT ACT REGARDING TAXABILITY OF THE PAYMENTS AND WHERE THE ENTIRE AMOUNT OF PAYMENTS MADE TO NON-RESIDENT ARE COVERED BY THE PROVISIONS OF TDS THE INTEREST U/S 234B CAN BE LEVIED ON A NON-RESIDENT COMPANY. 13. THE CIT(A) AND THE LEARNED DR HAVE RELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S ANSALDO ENERGIA SPA VS ADIT(INT.TAX.) WHILE THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON A CATENA OF DECISIONS INCLUDING THAT OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF M/S MOTOROLA VS DCIT AND ALSO DECISIONS OF THE HONBLE HIGH COURTS OF UTTARANCHAL AND UTTARAKHAND AND BOMBAY. 14. IN THE CASE OF M/S ANSALDO ENERGIA SPS VS ADIT(INT.TAX.) THE CO-ORDINATE BENCH OF THIS TRIBUNAL AFTER CONSIDERING THE DECISIONS OF THE SPECIAL BENCH IN THE CASE OF M/S MOTOROLA AND ALSO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS ANJUM M.H.GHASWALA (2001) 171 CTR (SC) WHERE IN THE APEX COURT HELD THAT SEC. 234B IS MANDATORY CAME TO THE CONCLUSION THAT PAGE 6 OF 9 ITA NO.1418/BANG/2010 6 INTEREST U/S 234B WHICH IS OF MANDATORY IN NATURE CAN BE CHARGED ONLY ON THE AMOUNT WHICH IS PAYABLE BY THE ASSESSEE AFTER REDUCING THE AMOUNT OF TAX WHICH IS DEDUCTIBLE. 15. COMING TO THE FACTS OF THE CASE BEFORE US WE FIND THAT THE IN CASE OF M/S ANSALDO ENERGIA SPA THE ASSESSEE HAD APPROACHED THE DEDUCTOR TO DEDUCT THE TAX AT A LOWER RATE AND IN TURN THE DEDUCTOR APPROACHED THE DEPARTMENT TO PERMIT IT DEDUCT THE TAX AT LOWER RATE U/S 197 WHICH MEANS THAT TAX TO BE DEDUCTED ITSELF WAS REDUCED AND THEREFORE THE HONBLE TRIBUNAL WAS OF THE OPINION THAT INTEREST U/S 234B IS TO BE CHARGED ON THE AMOUNT OF ADVANCE TAX PAYABLE BY THE ASSESSEE AFTER REDUCING ONLY THAT AMOUNT OF TAX WHICH THE ASSESSEE CLAIMS TO BE DEDUCTIBLE AT SOURCE. WHEREAS IN THE CASE BEFORE US IT IS NOT THE ASSESSEE WHICH HAD APPROACHED THE DEDUCTOR TO DEDUCT THE TAX AT LOWER RATE IT IS THE DEDUCTOR WHO APPROACHED THE DEPARTMENT CLAIMING THAT THE PAYMENTS TO BE MADE TO THE ASSESSEE ARE NOT CHARGEABLE TO TAX IN INDIA AND TO DETERMINE THE CHARGEABILITY AND IT IS AFTER DETERMINATION OF TAX LIABILITY BY THE DEPARTMENT THAT THE DEDUCTOR HAS DEDUCTED THE TAX AT SOURCE AND REMITTED THE BALANCE TO THE ASSESSEE. THEREFORE IN OUR OPINION THE DECISION RELIED UPON BY THE DR AND THE CIT(A) IS NOT APPLICABLE TO THE FACTS BEFORE US. 16. ON THE OTHER HAND LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL AND ALSO THE DECISION OF THE HIGH COURT OF DELHI IN THE CASE OF DIT VS M/S JACOBS CIVIL INCORPORATED & OTHERS WHEREIN THE HONBLE HIGH COURT AFTER TAKING INTO CONSIDERATION THE DECISION OF UTTRANCHAL HIGH COURT AND ALSO THE DECISION OF THE BOMBAY HIGH COURT AS WELL AS THE DECISIONS OF THE SUPREME PAGE 7 OF 9 ITA NO.1418/BANG/2010 7 COURT IN THE CASE OF CIT VS ANJUM M.H.GHASWALA AND OTHERS HAS HELD AS UNDER; 7.SEC.2(1) OF THE ACT DEFINES ADVANCE TAX TO MEAN THE ADVANCE TAX PAYABLE IN ACCORDANCE WITH THE PROVISIONS OF CHAPTER XVII-C OF THE ACT. THESE PROVISIONS ARE CONTAINED FROM SEC.207 ONWARDS. SEC.209 FALLS UNDER THIS CHAPTER. SUB-SECTION(1) THEREOF DEALS WITH FOUR SITUATIONS UNDER WHICH THE ADVANCE TAX PAYABLE BY THE ASSESSEE IS TO BE COMPUTED. ADMITTEDLY THESE CASES DO NOT CONCERN WITH CLAUSE (A) TO (C). CLAUSE (D) OF SUB-SEC.(1) OF SEC.209 WHICH IS RELEVANT READS AS UNDER; (D) THE INCOME-TAX CALCULATED UNDER CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C) SHALL IN EACH CASE BE REDUCED BY THE AMOUNT OF INCOME-TAX WHICH WOULD BE DEDUCTIBLE OR COLLECTIBLE AT SOURCE DURING THE SAID FINANCIAL YEAR UNDER ANY PROVISION OF THIS ACT FROM ANY INCOME (AS COMPUTED BEFORE ALLOWING ANY DEDUCTIONS ADMISSIBLE UNDER THIS ACT) WHICH HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE CURRENT INCOME OR AS THE CASE MAY BE THE TOTAL INCOME AFORESAID; AND THE AMOUNT OF INCOME-TAX AS SO REDUCED SHALL BE THE ADVANCE TAX PAYABLE. 8. THIS CLAUSE CATEGORICALLY USES THE EXPRESSION DEDUCTIBLE OR COLLECTABLE AT SOURCE AND IT IS THI S CLAUSE WHICH IS INCORPORATED BY THE UTTARANCHAL HIGH COURT IN THE SAID JUDGMENT(SUPRA) IN THE MANNER ALREADY POINTED ABOVE. THE SCHEME OF THE PAGE 8 OF 9 ITA NO.1418/BANG/2010 8 ACT IN RESPECT OF NON- RESIDENTS IS CLEAR. SEC. 1 95 OF THE ACT PUTS AN OBLIGATION ON THE PAYER I.E ANY PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDENT TO DEDUCT INCOME TAX AT SOURCE AT THE RATES IN FORCE FROM SUCH PAYMENTS EXCLUDING THOSE ITEMS WHICH ARE CHARGEABLE UNDER THE HEAD SALARIES. THEREFORE THE ENTIRE TAX IS TO BE DEDUCTED AT SOURCE WHICH IS PAYABLE ON SUCH PAYMENTS MADE BY THE PAYEE TO THE NON-RESIDENT. SEC. 201 OF THE ACT LAYS DOWN THE CONSEQUENCES OF FAILURE TO DEDUCT OR PAY. THESE CONSEQUENCES INCLUDE NOT ONLY THE LIABILITY TO PAY THE AMOUNT WHICH SUCH A PERSON WAS REQUIRED TO DEDUCT AT SOURCE FROM THE PAYMENTS MADE TO A NON-RESIDENT BUT ALSO PENALTIES ETC. ONCE IT IS FOUND THAT THE LIABILITY WAS THAT OF THE PAYER AND THE SAID PAYER HAS DEFAULTED IN DEDUCTING THE TAX AT SOURCE THE DEPARTMENT IS NOT REMEDY-LESS AND THEREFORE CAN TAKE ACTION AGAINST THE PAYER UNDER THE PROVISIONS OF SEC.201 OF THE INCOME-TAX ACT AND COMPUTE THE AMOUNT ACCORDINGLY. NO DOUBT IF THE PERSON (PAYER) WHO HAD TO MAKE PAYMENTS TO THE ON-RESIDENT HAD DEFAULTED IN DEDUCTING THE TAX AT SOURCE FROM SUCH PAYMENTS THE NON-RESIDENT IS NOT ABSOLVED FROM PAYMENT OF TAXES THEREUPON. HOWEVER IN SUCH A CASE THE NON-RESIDENT IS LIABLE TO PAY TAX AND THE QUESTION OF SUCH A CASE THE NON-RESIDENT IS LIABLE TO PAY TAX AND THE QUESTION OF PAYMENT OF ADVANCE TAX WOULD NOT ARISE. THIS WOULD BE CLEAR FROM THE READING OF SEC.191 OF THE ACT ALONG WITH SEC.209(1)(D) OF THE ACT. FOR THIS REASON IT WOULD NOT BE PERMISSIBLE FOR THE REVENUE TO CHARGE ANY INTEREST U/S 234 B OF THE ACT. 9. WE THUS ANSWER THE AFORESAID QUESTION IN FAVOUR OF THE ASSESSEE AS WE ARE OF THE OPINION THAT THE TRIBUNAL HAS RIGHTLY HELD THAT THE ASSESSEE WAS NOT LIABLE TO PAY ANY INTEREST U/S PAGE 9 OF 9 ITA NO.1418/BANG/2010 9 234B OF THE ACT FOLLOWING THE JUDGMENTS OF THE UTTARANCHAL AND BOMBAY HIGH COURTS. THE OTHER DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE ALSO TO THE EFFECT THAT WHERE ALL PAYMENTS MADE TO NON-RESIDENT ARE SUBJECT TO DEDUCTION OF TAX AT SOURCE U/S 195 OF THE IT ACT THE INTEREST U/S 234B IS NOT LEVIABLE ON THE NON-RESIDENT. RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO- ORDINATE BENCHES AND ALSO VARIOUS HIGH COURTS WE HOLD THAT THE ASSESSEE IS NOT LIABLE FOR PAYMENT OF ADVANCE TAX AND THE INTEREST U/S 234B CANNOT BE LEVIED. 9.1 THE FACTS BEING IDENTICAL WE FOLLOW THE COORD INATE BENCH DECISION OF THE TRIBUNAL CITED SUPRA AND HOLD THAT THE ASSESSEE IS NOT LIABLE TO PAY INTEREST U/S 234B OF THE ACT. IT IS O RDERED ACCORDINGLY. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED ON THE 29 TH DAY OF SEPTEMBER 2011 AT BANGALORE. SD/- SD/- (N K SAINI) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE C IT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER ASST. REGISTRAR ITAT BANGALORE.