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10-01-2020, Citibank Overseas Investment, Section 244A, 234B, Tribunal Mumbai

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8 months 1 week ago #12048 by amit
Section - 244A, 234B, 209, 195, 18A, 191, 208, 209(1)(a)(d)
Order Date - 10-01-2020
Favouring - Assessee Partly
Court - Tribunal Mumbai
Appellant - Citibank Overseas Investment Corporation
Respondent - DCIT
Justice - C.N. PRASAD JM & MANOJ KUMAR AGGARWAL AM
Citation - 120Taxpundit112
Appeal No. - ITA No. 276/MUM/2018
Asstt. Year - 2012-13

Order

PER : C.N. PRASAD (JM)

1. These cross appeals and cross objection are filed by the assessee and revenue against the order of the Ld. Commissioner of Income-tax (Appeals)–56, Mumbai [hereinafter for short “Ld. CIT(A)”] dated 18.10.2017 for the A.Y. 2012-13.

2. Assessee has raised following grounds in its appeal: -

1. The Commissioner of Income-tax (Appeals)-56, Mumbai [hereinafter referred to as "the CIT(A)"] erred in holding that income tax refund under section 244A of the Income-tax Act ("the Act") is not a debt - claim and therefore interest thereon is not covered under Article 11 of the India-USA Double tax Avoidance Agreement ("the DTAA") for concessional tax treatment and hence normal rates apply.

2. The CIT(A) erred in holding that the Deputy Commissioner of Income-tax (International Taxation) - 2(1)(1), Mumbai ("the Assessing Officer" / "the AO") has rightly applied the rate of tax being 16.2225% [i.e. 15% (as per Article 11 of the India US DTAA) + 5% (surcharge) + 3% (education cess)] on the interest income of Rs.20,83,836 received on the Income-tax refund, as against the tax rate of 15% applicable per Article 11 of the DTAA.

Re. Relief No. 2

3. The CIT(A) erred in directing the AO to verify the reason for failure on part of the payer to deduct tax at source for deciding whether interest under section 234B is leviable notwithstanding that for the year under consideration advance tax was not payable because tax was deductible on the entire income of the Appellant, being a non-resident.

Re. Relief No. 3

4. The CIT(A) erred in directing the AO to verify the reason for failure on part of he payer to deduct tax at source for deciding whether interest under section 234C is leviable notwithstanding that for the year under consideration advance tax was not payable because tax was deductible on the entire income of the Appellant, being a non-resident.

3. Ground Nos. 1 and 2 of grounds of appeal of the assessee are in relation to dispute about rate of tax to be charged on the interest refund u/s. 244A of theAct.

4. Briefly stated the facts are that, the assessee during the assessment year under consideration received interest of ₹.20,83,836/- u/s. 244A of the Act. Assessee in its return of income offered the said interest income to tax @15% as per Article 11 of the India– USA DTAA. The assessment was completed u/s. 143(3) of the Act and while computing the income the Assessing Officer brought to tax this interest income @16.2225% i.e. 15% as per Article 11 of India-USA DTAA, Plus 5% surcharge thereon, plus 3% education cess on tax plus surcharge. Assessee preferred appeal before the Ld. CIT(A) contending that the rate of tax to be applied to the income tax refund is only the rate as specified in the DTAA and nothing more. However, the Ld.CIT(A) held that scope of the definition of ‘interest” as per Article 11(4) of India – USA DTAA does not cover interest granted u/s. 244A of the Act. Ld. CIT(A) held that asset on which the interest income accrued viz TDS is not a debt claim or government bond or security. Accordingly, he rejected the contention of the assessee.

5. Ld. Counsel for the assessee before us, submitted that income tax refund is a debt claim from the income tax authority and falls under the definition “interest” as per Article 11(4) of the India –USA DTAA. Referring to the decision of the Hon'ble Supreme Court in the case of Union of India v. Tata Chemicals Ltd [43 taxmann.com 240], Ld. Counsel for the assessee submitted that the Hon'ble Supreme Court held that interest payment u/s. 244A of the Act is a statutory obligation. Interest u/s. 244A of the Act is a kind of compensation of use and retention of the money

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