Case Law Details
FCC Co. Ltd. Vs ACIT (ITAT Delhi)
ITAT Delhi held that levy of surcharge and cess cannot exceed the tax rate of 10% as per India – Japan DTAA. Accordingly, as per article 12 of India – Japan tax treaty the tax to be charged on royalty and FTS shall not exceed 10% of the gross amount of royalty or FTS.
Facts- The assessee is a non-resident corporate entity incorporated in Japan and a tax resident of Japan. In the year under consideration, the assessee had entered into various international transactions with its AE in India.
In the return of income the assessee declared income of Rs.79,65,46,784/- and offered to tax at the rate of 10% as per the treaty provisions. In course of assessment proceeding, AO noticed that the incomes offered by the assessee are in the nature of royalty, Fee for Technical Services (FTS) and interest income. Whereas, amounts of Rs. 94,95,87,223/- and Rs.54,03,953/- received by the assessee towards sale of raw materials and components and capital goods, respectively, were not offered to tax on the plea that the said supplies have been made on a principal to principal basis outside India and the property/title in goods were transferred outside India.
After examining the Master Sales Agreement and other materials on record, AO was of the view that the wholly owned subsidiary of the assessee in India is effectively assessee’s PE in India and the raw materials and capital goods sold by the assessee were effectively connected with the activities of the PE. While coming to such conclusion, AO referred to the assessment order passed for assessment year 2015-16. Thus, following the decision taken in the preceding assessment year, AO ultimately held that 50% of the amount received towards sale of raw materials and capital goods is attributable to the PE in India as business income. Accordingly, he added back an amount of Rs.2,77,42,494/-.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
ITR 2 Form, in computing tax liability , has no provision for exclusion of surcharge and cess over special rates of DTAA at maxm limit for NRI.
How can NRI after considering maxm tax rate of 15% on interest income from India
eliminate charging of surcharge and cess while filing ITR 2