Commissioner Of Income Tax (It) - 3 v. M/S Pramerica Aspf Ii Cyprusholding Limited

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.1824 OF 2016 Commissioner of Income Tax (IT) - 3 .... Appellant versus M/s Pramerica ASPF II CyprusHolding Limited... Respondent….... Mr.Suresh Kumar, Advocate for Appellant.Mr.Suresh Kumar, Advocate for Appellant. Mr.F.V. Irani a/w Mr.Madhur Agrawal i/b. Mr.Atul Jasani, Advocate for Respondent.Mr.F.V. Irani a/w Mr.Madhur Agrawal i/b. Mr.Atul Jasani, Advocate for Respondent. CORAM : AKIL KURESHI &SARANG V. KOTWAL, JJ.DATE: 12[th] MARCH, 2019. P.C. : 1. Revenue has filed this Appeal raising followingquestion for our consideration; “Whether on the facts and circumstances of the caseand in law, the ITAT is correct in directing theAssessing Officer to accept the interest incomereturned by the assessee on cash basis whereas theA.O. has made additions on the ground that interestincome was liable to be assessed on accrual basis?” 2. Learned Counsel Mr.A. Jasani waives service forRespondent. 3. The issue is whether the interest income of theRespondent assessee can be taxed on the basis of accrualwithout receipt thereon or can it be taxed only upon receipt.This has to be decided on the basis of Double TaxationAvoidance Agreement (for short 'DTAA') between India andCyprus, particularly, having regard to Article 11 of the saidtreaty. The tribunal relied upon earlier decision of this Courtand held that such receipt can be taxed only upon receipt andnot on accrual basis. 4. Article 11 of the DTAA between India and Cypruspertains to interest. Clause (1) of Article 11 reads as under; “1. Interest arising in a Contracting State and paid to aresident of the other Contracting State may be taxed inthat other State.” 5. It was pointed out by the learned Counsel for assessee that DTAA between India and Germany also contains anidentical clause in Article VIII. Clause (1) thereto provides asunder; (1)Interest arising in a Contracting State andpaid to a resident of the other Contracting State may betaxed in that other State.” 6. This Court in case of Director of Income-tax (International Taxation) Vs. M/s Siemens Aktiengesellschaft,in Income Tax Appeal No.124 of 2010 dated 22/10/2012considered following question; “Whether on the facts and in the circumstances of thecase the Tribunal was right in law in holding that theRoyalty and fees for technical services should be taxed onreceipt basis without appreciating the fact that theHon'ble Supreme Court has held in the case of StandardDrum Motors Private Limited V/s. CIT 201 ITR 391 that 7. 4 / 5 06-ITXA-1824-16.odtthe credit entry to the account of the assessee non-resident in the books of the Indian company amounted toreceipt by the non-resident?” This question was considered in following manner; “2. As regards first question is concerned, the IncomeTax Appellate Tribunal referring to para-1 to 3under Article IIX-A of the Double TaxationAvoidance Treaty with the Federal GermanyRepublic as per Notification dated 26[th] August 1985held that the assessment of royalty or any fees fortechnical services should be made in the year inwhich the amounts are received and not otherwise.Counsel for the Revenue relied upon the SpecialBench decision of the Tribunal in the assessee's owncase, which in our opinion, has no relevance to thefacts of the present case, as it relates to the periodprior to the issuance of Notification dated 26[th]August 1985. In this view of the matter the decisionof the Income Tax Appellate Tribunal in holdingthat the royalty and fees for technical servicesshould be taxed on receipt basis cannot bedefaulted.” 8. Thus, while interpreting similar clause of Indo-German DTAA in relation to taxing royalty or fees for technical services,this Court had confirmed the decision of tribunal holding thatsuch service can be taxed only on receipt. This decision was later 8. Thus, while interpreting similar clause of Indo-German DTAA in relation to taxing royalty or fees for technical services,this Court had confirmed the decision of tribunal holding thatsuch service can be taxed only on receipt. This decision was later on followed in Income Tax Appeal No.1033/11 dated20/11/2012 and thereafter in Income Tax Appeal No.2356/11 and connected Appeals vide the order dated 07/03/2013. 9. On the same principle, the Appeal is dismissed. (SARANG V. KOTWAL, J.) (AKIL KURESHI, J.)