JCDecaux S.A. Vs ACIT (ITAT Delhi)
Conclusion: Surcharge and Education Cess was not leviable on receipts in the nature of Royalties and reimbursements of other expenses, which was offered to tax by assesse on gross basis under the India – France DTAA.
Held: Assessee- company was incorporated under the laws of France. It was a holding company of “JCDecaux” group. During the relevant period, assessee company was engaged in the field of ‘outdoor advertising’. Assessee was owner of all intellectual property rights developed and used by the JCDecaux group across the globe. Assessee entered into an agreement with the VCD India’, for providing various functional and management support. The management fee had been received by assessee during assessment year 2011-12 and 2012-13. Assessee filed return of income for assessment year 2011-12 showing income, which was taxed at the rate of 10% on a gross basis. AO had levied Surcharge and Education Cess on receipts in the nature of Royalties and reimbursements of other expenses, which was offered to tax by assesse on gross basis under the India – France DTAA. It was held that as per provisions of the India France treaty on the issue being similarly worded with the provisions of the India UK DTAA, following the finding of the Tribunal in the case of BOC group Ltd. wherein it was held that surcharge and education cess was not leviable when the tax rate was prescribed under DTAA, AO was directed to delete the education cess and secondary and higher education cess levied on the Income-tax on the gross basis under the India France DTAA.
FULL TEXT OF THE ITAT JUDGEMENT
These two appeals by the assessee have been preferred against two separate final assessment orders dated 29/01/2015 and 25/01/2016 passed by the Deputy/Assistant Commissioner of Income Tax, Circle-2(1)(2), International taxation, New Delhi (in short ‘the Assessing Officer’) for assessment year 2011-12 and 2012-13 respectively, framed under section 144C(13) read with section 143 (3) of the Income-tax Act, 1961 (in short ‘the Act’) pursuant to the directions of the Learned Dispute Resolution Panel in respective years. The issues raised in both the appeals being identical in nature in same set of facts and circumstances and, therefore, these both appeals have been heard together and disposed off by way of this consolidated order for convenience.
2. The grounds raised in ITA No. 1630/Del/2015 for assessment year 2011-12 are reproduced as under:
1. On the facts and in the circumstances of the case and in law, the Assessing Officer (`A0′) erred in assessing the income of the appellant at Rs. 1,14,66,317 as against returned income of Rs. 34,36,830.
2. On the facts and in the circumstances of the case and in law, the Ld. AO and Ld. Dispute Resolution Panel (`DRP), have grossly erred in holding that the ‘Management Fee’ is taxable as ‘Fees for Technical Services’ (`FTS) under Article 13 of Double Taxation Avoidance Agreement between India-France (DTAA’) read with Protocol to the DTAA.
3. On the facts and in the circumstances of the case and in law, the Ld. AO and DRP erred in holding that Corporate Guarantee Fee is taxable as ‘Fee for Technical Services’ under Article 13 of India France DTAA on extraneous and vague reasons.
4. On the facts and in the circumstances of the case and in law, the Ld. AO, pursuant to directions of the DRP, grossly erred in confirming the addition of Rs.24,26, 660 by characterizing pure reimbursements of disbursements made by the Appellant towards social security contributions as Fee for technical services under Article 13 of India France DTAA on extraneous and vague
5. On the facts and in the circumstances of the case and in law, the Ld. AO erred in levying Surcharge and Education Cess on receipts in the nature of Royalties and reimbursements of other expenses, which was offered to tax by the Appellant on gross basis under the India – France DTAA.
6. On the facts and in the circumstances of the case and in law, the Ld. AO grossly erred in not allowing the credit of tax deducted at source by JCD India while calculating the tax liability of Appellant.
7. On the facts and in the circumstances of the case and in law, the Ld. AO erred in levying interest of Rs.720,023 under Section 234A, 234B and 234C of the Act while calculating the tax.
The above grounds of appeals are independent of, and without prejudice to each other.
The appellant craves leave to add, alter, amend or vary from the above grounds of appeal on or before the time of hearing.”
2.1 Identical grounds have been raised in ITA No. 1552/Del/2016 for assessment year 2012-13.
3. Briefly stated facts of the case are that the assessee is a company incorporated under the laws of France. The assessee is a holding company of “JCDecaux” group. During the relevant period, the assessee company was engaged in the field of ‘outdoor advertising’. The assessee is owner of all intellectual property rights including copyrights in ‘drawings and models’, `trademarks’, ‘patents’, ‘domain names’ and know-how’ developed and used by the JCDecaux group across the globe. Before the lower authorities, the assessee has submitted of engaged in providing following services:
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