Income Tax Appellate Tribunal - Delhi
Siemens International Trading Ltd., ... vs Ito, Ward- 3(1)(2), Intl. Taxation, New ... on 11 March, 2024
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'D', NEW DELHI
Before Dr. B. R. R. Kumar, Accountant Member
Ms. Astha Chandra, Judicial Member
ITA No. 7275/Del/2017 : Asstt. Year : 2014-15
Siemens International Trading Ltd., Vs Income Tax Officer,
Shanghai, 5th Floor, Room No. 515, Ward-3(1)(2),
Mansion South, No. 2, Hua Jing Road, International Taxation,
People Republic of China-200131 New Delhi-110002
(APPELLANT) (RESPONDENT)
PAN No. AATCS6765Q
ITA No. 8429/Del/2019 : Asstt. Year : 2016-17
ACIT, Vs Siemens International Trading Ltd.,
Circle-3(1)(2), Shanghai, 5th Floor, Room No. 515,
International Taxation, Mansion South, No. 2, Hua Jing Road,
New Delhi-110002 People Republic of China-200131
(APPELLANT) (RESPONDENT)
PAN No. AATCS6765Q
Assessee by : None
Revenue by : Sh. Sanjay Kumar, Sr. DR
Date of Hearing: 19.12.2023 Date of Pronouncement: 11.03.2024
ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the as sessee against the order of ld. CIT(A)-23, New Delhi dated 22.09.2017 and the appeal of the revenue against the order of ld. C IT(A)-43, New Delhi dated 28.08.2019.
2 ITA No. 7275/Del/2017 ITA No. 8429/Del/2019Siemens International Trading Ltd.
2. In ITA No. 8429/Del/2019 , following grounds have been raised by the Revenue:
" 1. On the facts and c ircumstances of the case and in law, the ld. CIT(A) has erred in allo wing the credit of TDS of Rs .2,41,05,620/- on conside ra tion received for o ffs hore supply of rolling stock, w hen no corr esponding income has been o ffe red fo r taxation by the asse ssee."
3. In ITA No. 7275/Del/2017 , following grounds have been raised by the assessee:
"1. That on the facts a nd circumstances of the case and in law, the order passed by the Commissioner of Income Tax (Appeals) - 23, New Delhi ('Ld. CIT(A)'] is bad in law and contr ar y to facts and provisio ns of the Income Tax Act, 1961 ('the Act').
2. That the Ld. CIT(A) has erred in law and on the facts of the case in confirming the order of the Income Tax Office r, Ward -3(1)(2), International Taxation, Delhi (' Ld. AO') and not a llo wing credit of Tax Deductible at So urce ("TDS') o f INR 68,82,340 to the Appellant.
3. The Ld. CIT(A) has erred in law and on facts and circums tances of the case in rejecting the cre dit of TDS of INR 6,882,340 for the subjec t year without appreciating the legal positio n that income from offshore supply receive d by the Appellant is no t taxable in India under the provisio ns of the Act rea d w ith Double Taxation A voidance Agreement ente red betwee n India and China (" Tax Treaty") .
4. Tha t the Ld. CIT(A) has e rred in holding that the credit of TDS would be allowed in the year in whic h the correspo nding income shall be offered to tax and the Appellant is re quired to make specific claim for credit o f TDS in specific assessment years w hich shall be entertained as per la w.
5. That the Ld. CIT(A) has e rre d in making vario us factua l infe rences/co njectures/surmises that have no bearing on the return o f inco me file d by the A ppellant and / or not borne out from any material on reco rd and are contrary to the provisions o f the Act read w ith Tax Treaty. Interalia, 3 ITA No. 7275/Del/2017 ITA No. 8429/Del/2019 Siemens International Trading Ltd.
the incorrect assumptio ns/infere nce made by the .d. CIT(A) are as under:
(a) The appellant has itself contested that Ld. AO has erred in facts and in law in not giving direc tions for allo wing the cre dit of TDS of INR 6,882,340 deducte d on mobiliza tion adva nces in the year in whic h ac tual offshore supplies we re undertaken by the Appellant.
(b) The Appellant is acce pting that the ques tio n of these receipts (mobilization advance) ha ving element o f income could be decided in the year in which actual o ffs hore supplies we re undertaken by the Appellant.
(c) The co ntract is, indeed, composite/indivisible one .
(d) The contact being performed by Siemens Consortium is composite/indivisible contract o f whic h the appellant is leade r and partner.
(e) There will certa inly be a Pe rmanent Establis hment ('PE') o f the Appellant in India.
(f) The part o f income arising out of activities pe rfor med by the appe lla nt, certainly accrues and arises in India."
4. The gro unds raised by the assessee and the Revenue in this appeal are interrelated, they were heard toge ther and being adjudicated by a common order.
5. The assessee is a company registered and existing under the laws of People's Republic of China. T he assessee involved in procurement and sale of Rolling Stocks. Its portfolio covers the full range of vehicles - from railroad cars to metros and locomotives to trams a nd light-r ail vehicles.
6. During Financial Year (F.Y. 2013-14), the assessee entered into a contract with IL & FS Rail Limite d ('IRL'). The scope of work of the assessee under the contract was limited to offshore supply of Rolling Stock. The assessee during the assessment 4 ITA No. 7275/Del/2017 ITA No. 8429/Del/2019 Siemens International Trading Ltd.
year, received an amount Rs.111,44,52,342/- in c onnectio n with the aforesaid contract on which tax of Rs.24,105,620/- was deducted. The said tax was de ducted by IRL o n the basis of withholding tax certificate issued by ITO, Ward-3(1)(2), (Int. Tax), Delhi u/s 197 of the Income Tax Act, 1961.
7. The assessee had filed re turn of Income on 07.02.2017 declaring NIL income and claiming a refund of Rs.24,105,620/- on account of Tax Deducted at Source. Copy of RoI along with the acknowledgment and computation of income along with notes to computation, copy of Form 26AS and Form 16A issued by IRL for the year under consideratio n was filed before the ITO. The AO completed the assessment proceedings u/s 143(3) of the Act vide order dated December 10, 2018 after disallowing the c laim for refund of TDS amo unting to Rs.24,105,620/-.
8. Aggrieve d, the assessee filed appeal before the ld. CIT(A).
9. The fact that the underlying receipts from the contr act is not taxable was submitted before the AO during the course of assessment proceedings and while obtaining the lower withholding ta x certificate from ITO, Ward-3(1)(2), (Int. Tax), Delhi under section 197 of the Act pursuant to whic h the Assessee was granted the lower withho lding tax certificate, it was submitted that the amount received during the subject year was not in the nature of income chargeable to tax in India.
10. The Assessing Officer he ld that credit of TDS is not allow able since the Assessee did not offer corresponding income to tax in its RoI. In this regard, the Assessee submitted that the 5 ITA No. 7275/Del/2017 ITA No. 8429/Del/2019 Siemens International Trading Ltd.
credit for tax withheld is not linked to actual discharge of tax liability on such receipt by the recipient. In terms of provisions of the Act, the disclosure of such receipt by the recipient in its retur n of income alo ng with claim for credit of suc h tax withheld, duly supported by For m 16A issued by tax deduc tor is the only pre-requisite to grant credit for such taxes.
12. As per Section 199(1) of the Act, any deductions ma de in accor dance with the foregoing provisio ns of this chapter and paid to the Central Go vernment shall be treated as payment of tax o n behalf of the person from whose income the deduction is made. Therefore, as per the pro visions, o nce TDS was deducted, a cre dit of the same is to be given to the assesse e. Considering the same, the claim of credit of withholding tax should be allowed to Assessee as per provisions of the Act.
13. The Co-ordinate Bench of ITAT, in the case of Escorts Ltd. vs. Deputy Commissio ner of Income tax [2007] 15 SOT 368 (Delhi) held that once deduction of tax at source is made and the same is deposited with the Government then the assessee beco mes entitled for credit of such TDS while computing the tax liability for the period irrespective of the fact tha t the assessee considered that he is not liable to tax in respect of the income and, therefore, does not disclose the amount of income in his retur n. The Income-tax Department cannot refuse to give credit merely by contending that the income has not been disclosed in the return file d by the assessee for the assessment year . The relevant extract of the judgme nt in this regard is repro duced below:
6 ITA No. 7275/Del/2017 ITA No. 8429/Del/2019Siemens International Trading Ltd.
"....7. Credit for TDS must in e very case be give n to the assessee from whose income tax was deducte d at source and paid to the cre dit of the Central Government. If the recipie nt of the inc ome considers that he is no t liable to tax in res pect of the income, wholly o r partly, therefore, does not disclose the amo unt of suc h income in his re turn, the Income-tax Department cannot refuse to give cr edit merely by contending that the income had no t been disclose d in the return filed by the assessee for the asse ssment year. The assessee may as per relev ant prov isions of Income-tax Act, co nsider the income either as not taxa ble in his hands or as being relatable to a differe nt assessment ye ar and he ma y even claim set off of loss or other deduc tio ns against such income. T he assessee may also be no t char geable to tax on the income bec ause o f the ove rriding provisio ns of Double Taxa tion Avo idance A greement and/o r because of the provisio n for exemption o f such income, whe ther wholly or partly, under some provisions o f the Income-tax Act. It wo uld be, the refo re, imprope r and eve n impermiss ible for the re venue to swallow the amount of TDS a fter having rece ived and enjo yed the same. It canno t be igno red tha t ever y item of TDS carries with it an obligation of tr ust and acco untability to re tur n the amount and/or give cre dit for the amount so deducte d depe nding upo n the tax liability of the recipient to be determined in the course o f his assessm ent."
14. The Co-ordinate Bench of ITAT in the case of Supreme Renewable Energy Limited vs. Income Tax Officer [2010] 124 ITD 394 (Che nnai) held that assessee is entitled to TDS even if the income ha s not directly been offered to tax as the same was not liable to tax. The relevant extract of the judgment in this regar d is reproduced below:
"....9. From the a bove it is clear that when a partic ular income is receive d by the assessee after deductio n of tax at source and the 7 ITA No. 7275/Del/2017 ITA No. 8429/Del/2019 Siemens International Trading Ltd.
said TDS has been duly de posited w ith the Go vernment and the assessee has received the requis ite certificate to this effec t, then o n production o f the said certifica te the assessee becom es entitled for the credit of TDS even if the asse ssee has not directly offere d the said income for tax as the assessee considered the same was not lia ble to tax.
10. In vie w of the above-mentione d decisions of the Supreme Court and o rder of this T ribuna l, it is cle ar position of law that whe n TDS is made on a par ticular income which is othe rw ise not liable for tax, the assessee is entitled fo r the said credi t of the TDS. In the case in hand when the assessee has ea rne d interest on deposit mandatory for ac quisition o n installation o f machinery then the interest w as earne d by the ass essee and is direct ly incidental to the acquisitio n i n respect of machinery and there fore the same has been rightly reduce d from the cost of the machinery. In this w ay the assessee has indirectly disclosed income and has offered for as sessment. We are of the considered view that even if the income earne d by the assessee has no t been offered fo r tax be ing no t liable for tax, the assessee is entitle d for credit of TDS made in respect of that income. Accordingly, we se t aside the order of the lower autho rities and ho ld that the assessee is entitle d fo r cr edit of T DS re lating to interes t income of Rs . 51,21,287/- ."
15. The ld. CIT(A) held that the similar addition has been deleted in the case of the asse ssee in the yearlier Assessment Year 2015-16 where the facts are similar to the present case. The finding of the same is as under:
".......5.2 Ground No. 1 & 2: The appe llant in ground number 1 and 2 has submitted that credit fo r TDS has not been allo wed simply on the ground that no income was offe red by him corre s ponding to tax deduc ted. The appellant has stated that the assessing officer in the 8 ITA No. 7275/Del/2017 ITA No. 8429/Del/2019 Siemens International Trading Ltd.
course of the assessment order himself adm itted that income is no t taxable in India in paragraph 3 of the Assessment Order. Des pite this finding, the asse ssing officer pro ceeded to dis allow the credit of withholding tax. The appe llant has quote d a number of judgements where in it has been held that cre dit of TDS is re quired to be allowed to the asses see from whose receipts, Income Tax w as deduc ted a nd paid to the Government of India. The appe llant has quoted a judgement of Esco rt Limited vs. DCIT 15 SOT 368 in this regar d.
5.3 The appe llant was specifically asked to explain as to why the provisio ns of R ule 37BA( 3) are not applicable to him. In this regard, the appellant explained that the rules are sub-ser vient to Section 199 and maybe read in harmony with the said section. It was also submitted that the tax w as de ducted on the instance of the re venue whic h was spe cified in the cer tificate issued under section 197. I t was furthe r s tate d that the term *assessable" s hould not mean that the amount per se is actually taxable . The arguments furnis hed by the appellant ha ve been seen. The basic issue which arises from the afores aid fac ts is that whether the credit fo r T DS is eligible to be refunde d if the co nside ra tion did no t yield any taxable income under the I ncome Tax Act. The rigid and li teral interpretation of Rule 37BA may indicate that credit for tax de ducte d is only available against income dec lared corresponding to such receipts. This is however not logic ally cor rect. Once tax has been deducted and deposited, the deduc tee has a right to claim cre dit of that tax. This is borne out by a number o f judgments quote d by the appellant in his submiss ions and also o n prim a facie facts. T he credit available to the asses see may be eligible to hit as a re fund in case the consideratio n on whic h the tax has been deducte d is not taxable. This is the primary concept of taxation and withholding tax. Therefore, once the appellant's income is no t held to be taxa ble in the current year , the credit for 9 ITA No. 7275/Del/2017 ITA No. 8429/Del/2019 Siemens International Trading Ltd.
tax on s uch rece ipt cannot be de nied to him. The A O there fore , is incor rect in not granting credit by applica tion o f Rule 37BA ."
16. Having gone through the record, we find that no infr action of the Rules or provisions of the Act on this issue. Hence, keeping in view, the order of the ld. CIT(A) for the A.Y. 2016- 17, we hold that the assessee is entitled to credit of TDS/Withholding tax and the consequent refunds thereof.
17. In the result, the appeal o f the Revenue is dismissed and the appeal of the assessees is allowed.
Order Pronounced in the Open Court on 11/03/202 4.
Sd/- Sd/-
(Astha Chandra) (Dr. B. R. R. Kumar)
Judicial Member Accountant Member
Dated: 11/03/2024
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR