2015 (1) TMI 239 - HC - Income Tax

DTAA between India and Portugal - Effect of amendment on 30.08.1999 made under Notification No. S.O. 693 (E) Held that - A provision has been incorporated in the Indo-Netherlands DTAC by virtue of paragraph 5 of Article 12 of the same, whereby the very same make available clause, which is to be found in the DTAA between India and USA read with the memorandum of understanding connected therewith, has been incorporated into Indo-Netherlands convention by way of amendment on 30.08.1999, by notification No. S.O. 693 (E) - it is evident that the Authority for Advance Rulings had not considered the amendment thus, the Ruling cannot stand thus, it is set aside and the matter is remitted back to the AAR for fresh consideration Decided in favour of assessee.

Summary

Issues:
1. Consideration of Double Taxation Avoidance Agreement between India and Portugal in ruling by Authority for Advance Rulings.
2. Non-consideration of memorandum of understanding concerning fees for included services in ruling.
3. Incorporation of make available clause from Indo-USA DTAA into Indo-Netherlands convention.
4. Correctness of Authority for Advance Rulings' decision.
5. Setting aside the impugned ruling and remitting the matter for fresh consideration.

In the judgment, the petitioner raised concerns regarding the ruling by the Authority for Advance Rulings, highlighting that the authority did not take into account the Double Taxation Avoidance Agreement (DTAA) between India and Portugal, an OECD country, while interpreting the Indo-Netherlands Double Taxation Avoidance Convention. Additionally, the petitioner argued that the memorandum of understanding regarding fees for included services in the Indo-USA DTAA was not considered. The petitioner contended that the authority's refusal to consider the Indo-Portuguese DTAA or the Indo-USA DTAA was unjustified, as only the Indo-Netherlands DTAC was deemed relevant.

The respondent's counsel defended the Authority for Advance Rulings, asserting that while the Indo-Portuguese DTAA was correctly excluded from consideration, the Indo-USA DTAA's provision had been incorporated into the Indo-Netherlands convention through an amendment on 30.08.1999. This incorporation included the make available clause from the DTAA between India and the USA, along with the connected memorandum of understanding. The respondent emphasized that the authority had overlooked this crucial amendment in its decision-making process.

Consequently, the High Court found the impugned ruling unsustainable and set it aside. The matter was remitted back to the Authority for Advance Rulings for a fresh and unbiased reconsideration of the entire issue. The writ petition was allowed in favor of the petitioner, granting an opportunity for a comprehensive review of the case without being influenced by the previous ruling's observations.