1993 (2) TMI 173 - AT - Income Tax

Assessee s Appeal, Double Taxation Avoidance Agreement, Non-resident Company, Shipping Company

Summary

Issues:
1. Maintainability of appeal under section 172(4) of the Income-tax Act, 1961.
2. Interpretation of Double Taxation Avoidance Agreement between India and Singapore.
3. Applicability of Circular No. 333 issued by the Central Board of Direct Taxes.
4. Relief sought by the assessee for refund of excess taxes paid.

Issue 1: Maintainability of appeal under section 172(4) of the Income-tax Act, 1961:
The appeal was filed by the Agent of a non-resident shipping company against the order of the CIT (Appeals) which held the appeal as not maintainable under section 246 of the Income-tax Act. The ITAT Pune analyzed the provisions of section 172, specifically sub-section (4), and its interaction with section 44B. The ITAT concluded that despite no specific provision for appeal against an order under section 44B, an appeal could be filed as part of an appeal against an order under section 143(3) or 144 as per section 246(a). The ITAT reasoned that section 172(4) may not be treated as an order under section 44B, making it appealable under section 246(a).

Issue 2: Interpretation of Double Taxation Avoidance Agreement between India and Singapore:
The ITAT Pune delved into the Double Taxation Avoidance Agreement between India and Singapore, particularly focusing on Article 9 of the Agreement. Article 9 provided for a reduction of 50% in tax chargeable on income derived from the operation of ships in international traffic. The ITAT emphasized that the provisions of the Agreement prevailed over the relevant provisions of the Income-tax Act, as per Circular No. 333 issued by the Central Board of Direct Taxes. The ITAT held that the ITO should have applied the provisions of the Agreement, especially Article 9, and taxed the relevant income at 50% of the prescribed rate.

Issue 3: Applicability of Circular No. 333 issued by the Central Board of Direct Taxes:
The ITAT Pune referenced Circular No. 333, which clarified that where a Double Taxation Avoidance Agreement provides for a specific mode of computation of income, that provision should be followed, overriding the provisions of the Income-tax Act. The ITAT reiterated that the Agreement with Singapore should prevail over the Income-tax Act, directing the ITO to apply the provisions of the Agreement, specifically Article 9, for tax computation.

Issue 4: Relief sought by the assessee for refund of excess taxes paid:
The ITAT Pune acknowledged that the assessee sought a refund of excess taxes paid due to ad hoc assessment under section 172(4). The ITAT highlighted that the remedy for seeking a refund was available under section 237 of the Income-tax Act, with reference to Article 9 of the Double Taxation Avoidance Agreement. The ITAT emphasized that the ITO was duty-bound to consider the relief sought by the assessee based on the Agreement, as per the directions of the Government, even though the appeal under section 246 was technically not maintainable.

In conclusion, the ITAT Pune dismissed the appeal filed by the assessee but directed that the assessee could seek a refund under section 237 of the Income-tax Act based on the provisions of the Double Taxation Avoidance Agreement with Singapore.