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Issues Involved:
The judgment involves determining whether taxes paid in excess and interest paid by revenue authorities to a UK company constitute 'debt-claims of every kind' under the Double Taxation Avoidance Agreement between India and the United Kingdom. Taxes Paid in Excess: The applicant, a UK company, sought clarification on whether taxes paid in excess of tax due, along with interest, would be considered 'debt-claims of every kind' under the DTAA. The company had received income from various sources in India, and the Assessing Officer later discovered a refund due to the company. The interest on this refund was determined under section 244/243 of the Income-tax Act, and the company argued that it should be taxed according to the DTAA provisions. The judgment clarified that the interest income, arising in India due to delayed refund, should be assessed as per the DTAA, specifically paragraph 2 of article 12. It was established that the applicant did not have a permanent establishment in India, and the interest was statutory, not arising from business operations. Therefore, the interest paid on delayed refund falls under paragraph 2 of article 12 of the DTAA, and the application was successful. Interest Paid by Revenue Authorities: The second issue pertained to interest of a specific amount paid by revenue authorities under section 244/243 of the Income-tax Act, along with tax refunds due to the UK company. The company argued that this interest should qualify as 'income from debt-claims of every kind' under the DTAA. The judgment analyzed the provisions of the DTAA, particularly article 12, and concluded that the interest paid on delayed refund, being a debt owing and payable, was not connected to any permanent establishment in India. The interest arose solely due to the delay in refunding excessive tax collections, falling under paragraph 2 of article 12 of the DTAA. Therefore, both questions raised by the applicant were answered affirmatively in favor of the company.
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