Bombay High Court
The Commissioner Of Income Tax ... vs Piaggio And C S.P.A on 20 December, 2023
Author: Neela Gokhale
Bench: K. R. Shriram, Neela Gokhale
2023:BHC-OS:15251-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 916 OF 2018
The Commissioner of Income Tax (International
Taxation) Pune ....Appellant
V/s.
M/s Piaggio & C. S. P.A. ....Respondent
----
Mr. Suresh Kumar for Appellant.
Mr. Nishant Thakkar a/w Ms Jasmin Amalsadvala i/b Lumiere Law Partners
for Respondent.
----
CORAM : K. R. SHRIRAM &
Dr. NEELA GOKHALE, JJ.
DATED : 20th DECEMBER 2023
P.C. :
1 The following questions of law are proposed:
"1 Whether on facts and circumstances of the case and in law, the
Hon. ITAT has erred in holding that the Royalty agreement dated
01.04.2008 is a new agreement and not an extension of the License
and Technical Assistance agreement dated 27.03.1998 and apply tax
rate of 10.56% under section 115A instead of 20% under the India-
Italy DTAA.
2 Whether on the facts and circumstances of the case and in law, the
order of the Hon. ITAT is perverse in law in as much as decision was
arrived at in light of mis-appreciation of facts."
2 Respondent (assessee) is a Foreign company based in Italy. The
assessee is in the business of manufacture of motorized two wheelers and
three and four-wheeled light goods transport vehicles. The assessee
received royalty income and technical fees for the services rendered in India
to its AEs namely Piaggio Vehicles Pvt. Ltd. Since the international
transactions were above Rs.15 crores the case was referred to the Transfer
Meera Jadhav
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Pricing Officer (TPO). The order u/s 92CA(3) of the Income Tax Act 1961
(the Act) was passed on 09th January 2015 and no adjustment was made to
the value of international transactions of the assessee. Various issues came
up for consideration but the appeal is restricted to the application of tax
under Section 115A of the Act. The assessee and its AEs had entered into an
agreement dated 26th March 1998 valid for a period of 10 years. The parties
entered into another agreement dated 1 st April 2008 for a period of 10
years. The issue for consideration was whether the second agreement was a
continuation of the first agreement or it was a separate agreement and that
would decide whether the tax payable was at 10.56% or 20% under Section
115A of the Act.
3 In the draft assessment order dated 16 th March 2015, the AO
concluded, after considering both the agreements, i.e., one dated 26 th
March 1998 and other dated 1st April 2008, that the second agreement was
only an extension of the first agreement and, therefore, the tax rate
applicable will be 20% and not 10.56%. Upon appellant filing the objection
to the draft assessment order, the matter was referred to the Dispute
Resolution Panel (DRP) under Section 144C(5) of the Act. The DRP, on this
issue simply said the action of the AO is found proper and hence needs no
interference. No independent findings were given.
3 Appellant carried the matter to the Income Tax Appellate Tribunal
(ITAT), which, by its order and judgment pronounced on 21 st March 2017,
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accepted the submissions of the assessee that the agreement dated 1 st April
2008 was a separate and independent agreement and not an extension of
the agreement dated 26th March 1998.
4 The Tribunal heard the parties extensively and has analysed both the
agreements and came to a factual finding that agreement dated 1 st April
2008 was an independent agreement. In paragraph 26 of the impugned
judgment, the ITAT has spelt out the difference between two agreements
and also the law as prevailing. One of the factors which has influenced the
ITAT to arrive at the conclusion that the old agreement provided the
trademarks to be used by assessee were only restricted to Ape 501 and Ape
601, whereas, as per the new agreement assessee has provided the license
to manufacture and sell the vehicles under the name of Ape, which
encompasses all kinds of vehicles. The ITAT also has considered the fact that
assessee in view of the extended license provided also launched Ape city
diesel of three wheelers under Ape brand which was different from Ape 501
and Ape 601 brands, which it could not have done under the old
agreement. The ITAT also observed that the territory which was covered
under the old agreement was different from the territory that was covered
under the new agreement and so on.
5 In view of these differences, the ITAT came to the conclusion that the
agreement dated 1st April 2008 was an independent agreement and distinct
from the earlier agreement dated 26 th March 1998 and not an extension of
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the first agreement.
6 Since these are factual findings and in our view possible findings and
by no stretch of imagination can be termed perverse, no substantial
questions of law arise.
7 Appeal dismissed.
(Dr. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.)
Meera Jadhav
