1999 (4) TMI 113 - AT - Income Tax

Summary

Issues Involved:
1. Applicability of the Double Taxation Avoidance Agreement (DTAA) between India and Malta for the assessment year 1996-97.
2. Levy of interest under section 234A of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Applicability of the Double Taxation Avoidance Agreement (DTAA) between India and Malta for the assessment year 1996-97:

The primary issue was whether the DTAA between India and Malta was applicable for the assessment year 1996-97. The assessee, a non-resident company from Malta engaged in international shipping, claimed relief under the DTAA for the assessment year 1996-97. The Assessing Officer disallowed this claim, stating that the DTAA became operative from the fiscal year beginning on April 1, 1996, i.e., from the assessment year 1997-98 onwards.

The CIT(Appeals) sided with the assessee, stating that the DTAA was applicable for the assessment year 1996-97, and even if there was ambiguity, the interpretation favoring the assessee should be adopted. The Revenue appealed against this decision, arguing that the DTAA became effective in India only from the fiscal year beginning April 1, 1996, as per Article 29 of the agreement, and thus applicable from the assessment year 1997-98.

Upon review, it was established that the DTAA entered into force thirty days after the later of the notifications by the contracting states, which in this case was December 22, 1995, following the notification by the Government of India on November 22, 1995. Consequently, the DTAA provisions were effective in India from April 1, 1996, for the fiscal year 1996-97, relevant to the assessment year 1997-98. The Tribunal concluded that the DTAA did not apply to the assessment year 1996-97.

2. Levy of interest under section 234A of the Income-tax Act:

The second issue was the levy of interest under section 234A for the delay in filing the return of income. The assessee filed the return on March 25, 1997, under section 172(7), claiming a refund based on the DTAA relief. The Assessing Officer levied interest under section 234A, asserting that the return was not filed within the time prescribed under section 139(1).

The CIT(Appeals) deleted the interest, reasoning that under section 172(7), filing the return was optional for claiming a refund and not a statutory obligation. This issue had already been addressed by the Tribunal in a previous order (ITA No. 506 (Coch.)/98), where it was held that interest under section 234A was not leviable for returns filed under section 172(7).

In conclusion, the Tribunal upheld the CIT(Appeals) decision regarding the non-levy of interest under section 234A, aligning with the earlier Tribunal ruling.

Final Decision:

The appeal by the Revenue was partly allowed. The Tribunal reversed the CIT(Appeals) decision on the applicability of the DTAA for the assessment year 1996-97, ruling in favor of the Revenue. However, it upheld the CIT(Appeals) decision on the deletion of interest under section 234A, ruling against the Revenue.