2016 (3) TMI 248 - HC - Income Tax

Interest u/s 244A - refund arising on account of Double Taxation Relief u/s 90 - Held that - Examining the claim for interest on refund granted, considered the fact that the relief under Section 90 of the Act is available in respect of the income tax which is payable both in India as well as in the other Countries with which India has DTAA. Therefore, relief under Section 90 of the Act is to be allowed while computing the tax liability in India by virtue of credit being given to the extent that tax has been paid abroad. Therefore, the tax payable is to be computed on the income to be assessed. Thereafter the credit which is available to the assessee in view of DTAA is to be taken into account and if there is any excess which the assessee has paid into the Indian Treasury, then, he is entitled to the refund of the same which would also carry interest in terms of Section 244A of the Act.

Summary

Issues:
Challenge to order under Section 260A of the Income Tax Act, 1961 regarding interest u/s 244A on refund arising from Double Taxation Relief u/s 90.

Analysis:

Issue 1: Challenge to Tribunal's Order on Interest u/s 244A
The appellant challenged the Tribunal's order regarding the interest u/s 244A of the Income Tax Act, specifically focusing on the refund arising from Double Taxation Relief u/s 90. The Assessing Officer initially determined the income and tax liability for the respondent assessee, which led to a subsequent refund. The appellant contended that interest under Section 244A was not payable on this refund as it was a consequence of Double Tax Avoidance Agreement (DTAA) relief, which, according to the appellant, did not fall under the purview of Section 244A. The Commissioner of Income Tax (Appeals) disagreed and directed the Assessing Officer to recompute the interest payable, considering the tax paid in India either in advance or through TDS. The Tribunal upheld this decision, stating that the DTAA relief reduced the tax payable in India, making the respondent entitled to a refund and interest under Section 244A.

Issue 2: Interpretation of Section 244A and DTAA Relief
The crux of the dispute revolved around the interpretation of Section 244A of the Income Tax Act and its applicability to refunds arising from DTAA relief under Section 90. The Revenue argued that interest under Section 244A was only applicable to refunds from tax paid or collected in India as advance tax or TDS, excluding refunds from DTAA relief. However, both the Commissioner of Income Tax (Appeals) and the Tribunal held that the DTAA relief impacted the tax liability in India, making the respondent eligible for a refund and interest under Section 244A. The courts emphasized that the relief under Section 90 of the Act applies to income tax payable in both India and other countries with DTAA, and any excess tax paid in India due to DTAA relief warrants a refund with interest as per Section 244A.

Issue 3: Dismissal of Appeal
Ultimately, the High Court dismissed the appeal, finding no substantial question of law arising from the Tribunal's order. The court clarified that the interest being paid was on the advance tax and TDS paid by the respondent in India, which was found to be in excess after considering DTAA relief. The court emphasized that the relief under DTAA impacts the tax liability in India, entitling the assessee to a refund and interest under Section 244A. The court concluded that the Revenue's contentions aligned with the directions of the lower authorities, and the proposed question did not present any substantial legal issue, leading to the dismissal of the appeal without costs.