DDIT 3(1), MUMBAI v. J.P. MORGAN SECURITIES ASIA P.LTD, MUMBAI

ITA 4622/MUM/2012 | 2009-2010
Pronouncement Date: 23-10-2013 | Result: Dismissed

Appeal Details

RSA Number 462219914 RSA 2012
Assessee PAN AAACJ6908R
Bench Mumbai
Appeal Number ITA 4622/MUM/2012
Duration Of Justice 1 year(s) 3 month(s) 14 day(s)
Appellant DDIT 3(1), MUMBAI
Respondent J.P. MORGAN SECURITIES ASIA P.LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 23-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted J
Tribunal Order Date 23-10-2013
Date Of Final Hearing 18-09-2013
Next Hearing Date 18-09-2013
Assessment Year 2009-2010
Appeal Filed On 09-07-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL J JJ J BENCH BENCH BENCH BENCH MUMBAI MUMBAI MUMBAI MUMBAI . . . ! ! ! ! ' ' ' ' #$ #$ #$ #$ BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM VIJAY PAL RAO JM & & & & SHRI SHRI SHRI SHRI N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA AM AM AM AM ./ I.T.A I.T.A I.T.A I.T.A. NO.4622/MUM/2012 . NO.4622/MUM/2012 . NO.4622/MUM/2012 . NO.4622/MUM/2012 ( % % % % & & & & / ASSESSMENT YEAR :2009-10) THE DEPUTY DIRECTOR OF INCOME TAX-3(1) ROOM NO. 136 1 ST FLOOR SCINDIA HOUSE N. M. ROAD BALLARD ESTATE MUMBAI-400038 / VS. M/S J. P. MORGAN SECURITIES ASIA PVT. LTD. C/O PWC PWC HOUSE PLOT NO- 18/A |GURU NANAK ROAD (STATION ROAD) BANDRA (W) MUMBAI-400050 $' ' ./ ( ./ PAN/GIR NO. :AAACJ6908R ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $ $ $ $ - . - . - . - . / REVENUE BY : SHRI S. D. SRIVASTAVA % %% % /0 /0 /0 /0 - . - . - . - . /ASSESSEE BY : SHRI FARROKH IRANI - -- - 0' 0' 0' 0' / DATE OF HEARING : 17 TH OCTOBER 2013 12& 12& 12& 12& - -- -0' 0' 0' 0' /DATE OF PRONOUNCEMENT: 23 RD OCTOBER 2013 #3 / O R D E R PER : . . / VIJAY PAL RAO JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 26.4.2012 OF COMMISSIONER OF INCOME TAX(APPEALS) FO R THE ASSESSMENT YEAR 2009-2010. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE LEVY OF SURCHA RGE AND CESS WITHOUT APPRECIATING THE FACT THAT LEVY OF SURCHARG E AND CESS IS A MANDATORY SIMPLE MECHANICAL AND COMPULSORILY LEVY I N ALL THE TAX PAYING CASES. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. ITA NO.4622/M/2012 J. P. MORGAN SECURITIES ASIA PVT. LTD. 2 3. THE ASSESSEE IS A TAX RESIDENT OF SINGAPORE AND CLAIM BENEFIT UNDER DTAA BETWEEN INDIA AND SINGAPORE IN THE RETURN OF I NCOME. THE ASSESSEE OFFERED INTEREST INCOME TO THE TAX AS 15% AS PER TH E PROVISIONS OF ARTICLE 11(2)(B) OF DTAA BETWEEN INDIA AND SINGAPORE. THE A O WHILE PROCESSING THE ASSESSMENT U/S 143(1) LEVIED SURCHARGE AND EDUC ATION CESS ON THE INTEREST INCOME. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A). THE CIT(A) DELETED THE SURCHARGE AND EDUCAT ION CESS ON THE GROUND THAT THE SCOPE OF ADJUSTMENT U/S 143(1) IS L IMITED AND THE QUESTION OF UPPER CEILING FOR THE RATE OF TAX OF INTEREST OF ARTICLE 11 OF DTAA AS WELL AS SURCHARGE AND EDUCATION CESS CANNOT BE DECIDED W HILE ACCEPTING THE RETURN U/S 143(1). 4. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD. AR OF THE ASSE SSEE HAS POINTED OUT THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED AND DEC IDED BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN CASE OF SUNIL V. MOTIANI VS ITO (INTERNATIONAL) VIDE ORDER DATED 27.2.2013 IN ITA N O.276/M/2012. WE NOTE THAT THE QUESTION OF CHARGEABILITY OF TAX ON INTERE ST INCOME AS PER THE PROVISIONS OF DTAA HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL IN THE CASE OF SUNIL V. MOTIANI VS ITO (SUPRA) IN PARA 5 AND 5.1 AS UNDER: 5. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THERE IS NO DISPUTE THAT THE ASSESSEE IS A NON RESIDENT BASED IN UAE. THERE IS ALSO NO DISPUTE THAT THE ASS ESSEE HAD RECEIVED GROSS INTEREST OF RS.7 55 187/- FROM THE I NDIAN FIRMS IN WHICH HE WAS A PARTNER. THE INTEREST INCOME IS NO D OUBT TAXABLE AS THE SAME HAD ARISEN FROM THE SOURCES IN INDIA. H OWEVER THERE IS DOUBLE-TAXATION AVOIDANCE AGREEMENT (DTAA) BETWE EN INDIA AND UAE AND THEREFORE TAX HAS TO HE COMPUTED UNDE R THE PROVISIONS OF DTAA WHICH IS BENEFICIAL TO THE ASSES SEE. THERE ARE ITA NO.4622/M/2012 J. P. MORGAN SECURITIES ASIA PVT. LTD. 3 SPECIFIC ARTICLES IN DTAA DEALING WITH TAXATION OF INCOME UNDER DIFFERENT HEADS. THE BUSINESS PROFIT IS GOVERNED BY ARTICIE-7 WHEREAS INTEREST INCOME BY ARTICLE-IL. UNDER PARA-7 OF ARTICLE-7 WHERE BUSINESS PROFIT INCLUDES ITEMS OF INCOME WHIC H ARE DEALT WITH SEPARATELY IN ANY OTHER ARTICLE OF THE AGREEME NT PROVISIONS OF THOSE ARTICLES SHOULD NOT BE AFFECTED BY THE PRO VISIONS OF THIS ARTICLE. IN OTHER WORDS IN CASE THERE IS PROVISION FOR DEALING WITH A PARTICULAR TYPE OF INCOME SUCH TYPE OF INCOME HA S TO BE DEALT WITH BY THOSE PROVISIONS. THEREFORE THOUGH INTERES T INCOME MAY HAVE BEEN ASSESSED AS BUSINESS INCOME THERE BEING SPECIFIC ARTICLE TO DEAL WITH INTEREST INCOME I.E. ARTICLE-1 1 TAXATION OF INTEREST WILL BE GOVERNED BY THE SAID ARTICLE-11. S ECONDLY INTEREST INCOME MAY BE TAXED IN CONTRACTING STATE IN WHICH I T ARISES ACCORDING TO LAW OF THAT STATE BUT IF THE RECIPIENT IS BENEFICIAL OWNER OF INTEREST TAX SO CHARGED SHALL NOT EXCEED 5% OF GROSS INTEREST IF THE INTEREST IS RECEIVED FROM BANK AND IN OTHER CASES 12.5% OF GROSS AMOUNT OF INTEREST. IN THIS CASE TH E ASSESSEE IS THE BENEFICIAL OWNER OF INTEREST AND TAX CHARGED CA NNOT EXCEED 12.5% OF GROSS INTEREST. TAX HAS BEEN DEFINED IN AR TICLE-2(2)(B) AS PER WHICH INCOME TAX INCLUDED SURCHARGE. THEREFO RE TAX REFERRED TO IN ARTICLE 11(2) @ 12.5% ALSO INCLUDES SURCHARGE. FURTHER NATURE OF EDUCATION CESS AND SURCHARGE BEI NG SAME AS HELD BY THE TRIBUNAL IN THE CASE OF DIC ASIA PACIFI C PTE LTD. (SUPRA) IN OUR VIEW EDUCATION CESS AND SURCHARGE C ANNOT BE LEVIED SEPARATELY AND WILL BE INCLUDED IN TAX RATE OF 12.5%. THE JUDGMENT OF HONBLE HIGH COURT OF UTTARAKHAND IN TH E CASE OF ARTHUSA OFFSHORE CO. (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AS THE HONBLE HIGH COURT WAS CONCERNE D WITH TAXABILITY OF INCOME UNDER ARTICLE 14(2) OF THE DTA BETWEEN INDIA AND USA. THE HONBLE HIGH COURT WAS NOT CONCERNED W ITH INTERPRETATION OF TAX PAYABLE ON INTEREST INCOME UN DER DTAA. THE JUDGMENT OF AAR IN THE CASE OF AIRPORTS AUTHORITY O F INDIA IN RE (SUPRA) IS ALSO DISTINGUISHABLE AS IN THAT THE COU RT WAS CONCERNED WITH TAXABILITY OF BUSINESS INCOME AND IT WAS HELD THAT UNDER ARTICLE 5(3) OF DTAA WITH USA PREPARATORY AN D AUXILIARY TYPE OF WORK WAS EXCLUDED FROM THE PURVIEW OF PE AN D THEREFORE THERE BEING NO PE IT WAS HELD THAT INCOME FROM SOFT WARE MAINTENANCE WAS LIABLE TO BE TAXED IN INDIA. THE HI GH COURT WAS NOT CONCERNED WITH TAXABILITY OF INTEREST INCOME AS PER THE TREATY. 5.1 IN VIEW OF THE FORE-GOING DISCUSSION WE HOLD T HAT TAX PAYABLE @ 12.5% UNDER ARTICLE 11(2) OF FTAA IS INCLUSIVE OF SURCHARGE AND EDUCATION CESS. WE THEREFORE SET ASIDE THE OR DER OF CIT(A) AND ALLOW THE CLAIM OF THE ASSESSEE. ITA NO.4622/M/2012 J. P. MORGAN SECURITIES ASIA PVT. LTD. 4 5. WE FURTHER NOTE THAT AN IDENTICAL ISSUE HAS ALSO BEEN CONSIDERED AND DECIDED BY THE KOLKATA BENCHES OF THIS TRIBUNAL IN CASE OF DIC ASIA PACIFIC PTE. LTD. VS ADIT (INTERNATIONAL TAXATION) 52 SOT 4 47. THE TRIBUNAL IN CASE OF SUNIL V. MOTIANI VS ITO HAS CONSIDERED THE DECIS ION OF KOLKATA BENCHES OF THE TRIBUNAL IN CASE OF DIC ASIA PACIFIC PTE. LT D. VS ADIT (SUPRA). ACCORDINGLY FOLLOWING THE ORDERS OF THIS TRIBUNAL WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) QUA TH IS ISSUE. 6. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 23 RD DAY OF OCTOBER 2013 SD/- SD/- ( . . ! ) ' #$ (N. K. BILLAIYA) ACCOUNTANT MEMBER ( ) % #$ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 23 RD OCTOBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI