2011 (2) TMI 1513 - AT - Income Tax

Rectification of mistake - error apparent on the face of record - Whether the application of Article 24 of the Treaty (Limitation of Relief) article GCC was to be denied the benefit of the Treaty? - payment to GCC was in the nature of Royalty or not? - HELD THAT - It is found that an error apparent on record has crept into the order of the Tribunal dated 25th June 2010. The same is rectified by deleting para 21 of the said order and substituting the same with necessary corrections. The M.A. filed by the assessee is allowed.

Summary

Issues:
1. Applicability of Article 24 of the Treaty (Limitation of Relief).
2. Nature of payment to GCC - whether in the form of Royalty.
3. Error in holding that Royalty did not arise in India under Article 12(7) of the Treaty.

Analysis:
1. The first issue revolved around the applicability of Article 24 of the Treaty, with the Department contending that GCC was not eligible for tax Treaty benefit due to payments made to a bank account in Jersey instead of Singapore. However, the Applicant argued that GCC had offered the payment to tax in Singapore, as confirmed in a letter, thus challenging the Department's stance. The Tribunal noted that the AO had applied the Treaty in subsequent orders, accepting its applicability, and ultimately dismissed the Department's appeal, affirming that the Treaty benefit was available to GCC.

2. Moving on to the second issue, the Tribunal addressed whether the payment to GCC constituted Royalty. The Tribunal considered the provisions of Article 12(7) of the Treaty and held that the payments in question were not assessable in India, concluding that the applicant could not be deemed an assessee in default. The Tribunal's decision favored the applicant, emphasizing that the Royalty did not arise in India under the Treaty's provisions.

3. Lastly, the Tribunal rectified an error in its previous order by substituting a paragraph with the correct interpretation of Article 24 of the India-Singapore Treaty. The Tribunal clarified that the limitations of benefit provisions under Article 24(1) applied only to income from a source in one Contracting State, subject to tax by reference to the amount remitted to the other Contracting State. Considering the specifics of the case, the Tribunal determined that Article 24 did not apply, as the income paid by SET Satellite (Singapore) Pte Ltd to GCC in Jersey was subject to tax in Singapore, not falling under the purview of Article 24. Consequently, the Tribunal dismissed the first ground of appeal by the Revenue, affirming the entitlement of the assessee to benefits under the India-Singapore Treaty.

In conclusion, the Tribunal allowed the Miscellaneous Application filed by the assessee, with the judgment pronounced on February 11, 2011.