The Mumbai Income Tax Appellate Tribunal ITAT has recently held that lease rental income earned from associated enterprises has no royalty as per Indo-US Direct Tax Avoidance Agreement (DTAA).
Owens Corning Inc.is a company incorporated in the USA and is a group concern of Owens Corning Group of companies, which are leading manufacturers of Glass.
This group has Indian associated companies named M/s. Owen Corning India Pvt. Ltd. (OCIPL) and M/s. Owen Corning Industry India Pvt. Ltd. (OCI IPL). During the year under consideration the assessee has leased out a metal alloy to its Indian Associate OF IPL and received lease rental of Rs. 10.31 crores
The assessee claimed that this is not taxable in India as it is its business receipt and it does not have any permanent establishment in India as per Article 5 of India-USA DTAA
Assessing Officer however took the view that the above said amount of Rs.10.31 crores is in the nature of “royalty” company and accordingly assessed the same as income of the assessee.Against this order the assessee filed an appeal before the ITAT.
Sandeep Bhalla counsel for the assessee contended that assessee has
received identical lease rental income from its Indian associated enterprises in the earlier years also and the same was assessed as royalty by the Assessing Officer.
Kanupriya Damor counsel for the revenue confirmed the decision of the assessing officer.
After considering the contentions of the both parties the division bench of the ITAT comprising B.R. Baskaran (Accountant Member) and Kavitha Rajagopal (Judicial Member) allowed the appeal filed by the assessee and further the bench observe that,
“lease rental income earned by the assessee cannot be treated as royalty income, both under provisions of DTAA and Income Tax Act 1961”.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
