| 2018-TII-INSTANT-ALL-552 | 03 April 2018 |
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TII BRIEF Two more bilateral & 14 unilateral APAs signed in March, 2018 ... CASE LAWS DCIT Vs WIPRO LTD: SUPREME COURT OF INDIA (Dated: March 28, 2018) Income Tax - Sections 2 (26), (45), (47), 4, 5, 10A(1), 14, 17, 37, 40(a)(ii), 45(2), 80IB, 80-O, 90, 91, 139(5), 142, 145A, 154, 234B - India-USA & India-Canada DTAAs - Articles 23 & 25. Keywords - attribution of profit - PE - permanent establishment - tax credit - global income - exempt income - software services - revised return - treaty benefits The assessee-company is engaged in the business of export of computer software including services for on-site development of software through its permanent establishment in many countries such as USA, UK, Canada, Japan, Germany. The assessee computes the profits attributable to the PEs, pays the applicable income taxes on such profits and files the returns of income as required by the domestic tax laws in the respective countries. The assessee being a a tax resident in India, was liable to tax in India on its worldwide income including the profits attributable to its Permanent Establishments in foreign countries and also the incomes which were subjected to withholding tax in foreign countries. The assessee claimed that it was entitled to relief of such income taxes paid in the foreign jurisdiction, as per the respective DTAAs. The said relief was granted by the CIT(A) which the Department has accepted. In 2004, the assessee made a request to allow tax credit of Rs.24,94,67,448/- towards the tax paid in foreign countries at the fag end of the assessment proceedings which was erroneously not claimed earlier. The assessing authority relying on Section 139(5) held that the claim for foreign tax was not admissible. The Tribunal also affirmed the stand taken by AO and held that credit for income tax paid in other country in relation to income under Section 10A would not be available u/s 90(1)(a). When the matter reached before High Court, it was held that the assessee was entitled to claim tax relief under the DTAA, even if the same was not claimed in the original return filed u/s 139(1). The High Court in its impugned judgment also opined that once the assessee files the necessary particulars and claims relief under the provisions of the DTAA, the limitation placed by domestic law would yield to the tax relief provided for under the DTAA. Having heard the parties, the Supreme Court condones the delay and granted Leave to the Revenue Department to defend their case on the issue of "eligibility of income earned u/s 10A to the benefit of Section 90 under DTAAs". Leave granted DCIT Vs CONVERGYS CUSTOMER MANAGEMENT GROUP INC: DELHI ITAT (Dated: February 23, 2018) Income tax - Sections 271AA & 271(1)(c) Keywords - attribution of profit - debatable issue - IPLC charges - fixed place PE - levy of penalty - substantial question The Assessee company had filed its return for the A.Y 2006-07 showing income of Rs.40,006,350/-, whereas the assessment u/s 143(3) was completed at an income of Rs.2,944,673,964/-, after making additions on account of profits attributable to PE at Rs.2,844,567,544/-, Software expenses taxable @ 15% at Rs.6,817,878/- and IPLC Charges taxable @ 10% at Rs.53,282,192/-. In addition, the AO also levied penalty of Rs.23,90,093/- which was deleted by the CIT(A) on appeal. On appeal, the ITAT held that, Whether penalty is leviable in case of a debatable issue which has been admitted and was pending consideration before the Writ Court - NO: ITAT + it is seen that the Tribunal had decided the assessee's appeal in ITA No.1443/Del/2012 and ITA No.1376/Del/2012 - 2013-TII-88-ITAT-DEL-INTL in which the Tribunal held that the assessee has a permanent Establishment in India in the form of fixed place PE. The Tribunal therefore attributed 15% profits generated by the assessee to the Indian PE. However, the software expenses as well as the IPLC charges as Equipment Royalty, was declared to be not taxable in the hands of assessee. Aggreived by the same, the assessee approached the High Court, which admitted the appeal by forming substantial question as to whether the ITAT had erred in reducing the quantum of profit attributable to the PE in the circumstances of the case; + it is found that the CIT(A) while deleting the penalty levied by AO u/s 271(1)(c) has observed that the High Court has admitted the substantial question of law. Therefore, it is clear that the issue is subject to different interpretation, and hence there is no infirmity in the order of CIT(A). Therefore, in view of the decision of High Court in the case of Liquid Investment and Trading Co., according to which, penalty cannot be levied when substantial question of law has been framed and admitted, therefore, in absence of any contrary material brought to our notice, no infirmity is found in the order of CIT(A). Revenue's appeal dismissed |
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