1985 (9) TMI 120 - AT - Income Tax

Issues Involved:
1. Timeliness of the claim under section 172(7).
2. Applicability of the double taxation avoidance agreement.
3. Relevance of section 44B.
4. Entitlement to refund under section 237 read with rule 41.

Issue-wise Detailed Analysis:

1. Timeliness of the Claim under Section 172(7):

The primary issue was whether the assessee's claim for refund under section 172(7) was filed within the prescribed time limit. The assessee, a non-resident shipping company, filed a return under section 172(3) on 3-10-1975, and the ITO assessed the taxable income under section 172(4) on 31-3-1976. The assessee later submitted a claim for refund on 18-10-1977 and filed a return under section 172(7) on 13-12-1977. The ITO rejected this claim, stating that it was made after the expiry of the relevant assessment year, which ended on 31-3-1977. The Tribunal upheld this decision, emphasizing that the option to claim a regular assessment under section 172(7) must be exercised before the expiry of the assessment year. Since the assessee failed to do so, the summary assessment under section 172(4) became final, and the claim for refund was barred by time.

2. Applicability of the Double Taxation Avoidance Agreement:

The assessee claimed a 50% reduction in the assessed tax under clause (1) of article VI of the agreement between India and Greece for the avoidance of double taxation. However, clause (4) of the same article specifies that this reduction applies only when an adjustment is made under section 172(7). Since the assessee did not file the claim within the stipulated time under section 172(7), the Tribunal held that the relief of a 50% reduction in tax was not available. The summary assessment under section 172(4) did not allow for this adjustment, and thus, the claim was not entertainable.

3. Relevance of Section 44B:

The assessee argued that the insertion of section 44B, effective from 1-4-1976, rendered the option under section 172(7) meaningless. Section 44B deems 7.5% of gross receipts as the taxable income for non-resident shipping companies. The Tribunal acknowledged that while section 44B might make the option under section 172(7) redundant in some cases, it does not do so universally. If the total income assessed under section 172(7) is less than that assessed under section 172(4), the assessee must still exercise the option within the prescribed time to claim a refund. Therefore, the Tribunal concluded that section 44B did not negate the necessity of timely filing under section 172(7).

4. Entitlement to Refund under Section 237 Read with Rule 41:

The assessee also contended that it was entitled to a refund under section 237, read with rule 41, and claimed the refund in Form No. 30. The Tribunal dismissed this argument, noting that Form No. 30 requires the return of income to be filed in the prescribed form, which in this case would be under section 172(7). Since the return was not filed within the time limit, the claim was not valid. Additionally, the Tribunal pointed out that section 199, which deals with tax paid, does not include tax paid under section 172. Therefore, the refund claim under section 237 read with rule 41 was not applicable.

Conclusion:

The Tribunal dismissed the appeal, concluding that the assessee's claims were not maintainable due to the failure to file within the prescribed time under section 172(7), the inapplicability of the double taxation agreement without such a filing, the continued relevance of section 172(7) despite section 44B, and the inapplicability of section 237 read with rule 41 for the refund claim.

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