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2024 (2) TMI 537 - AT - Income TaxApplicability of the MFN benefits into the India Netherlands DTAA - favorable benefit of lower tax rate of 5% to dividend income - HELD THAT - AR conceded that issue decided in favour of the Revenue because without a separate notification, applicability of the MFN clause and benefit of restricted scope of source taxation in relation to the income on Dividend cannot be allowed to the assessee. As there is no specific notification for the applicability of the MFN benefits into the India Netherlands DTAA. Ld. DR has no objection. In view of the above factual matrix, the Ground No. 1 is dismissed. Charging tax at 15% plus surcharge and cess on assessed income in computation sheet in contrary of levy of tax at 10% in accordance with the assessment order - HELD THAT - We deem it fit and proper to restore the matter for verification purpose and decide the same in accordance with law. Needless to say that the assessee should be given an opportunity of being heard. Levy of interest u/s 234A 234B is consequential in nature - AO is directed to re-compute the interest u/s. 234A 234B, if any, afresh in accordance with law.
Issues involved:
1. Denial of lower tax rate on dividend income under DTAA 2. Charging tax at higher rate than assessed in computation sheet 3. Levy of interest under section 234A and 234B 4. Initiating penalty proceedings under section 270A Issue 1 - Denial of lower tax rate on dividend income under DTAA: The appeal was against the denial of the benefit of a lower tax rate of 5% on dividend income earned under the India-Netherland Double Tax Avoidance Agreement (DTAA). The appellant argued that the Assessing Officer erred in not applying the lower rate of 5% on dividend income as per the DTAA, and also failed to consider the Most-Favored-Nations (MFN) clause in other DTAA agreements. However, it was noted that without a specific notification allowing the applicability of the MFN clause, the benefit could not be granted. The Dispute Resolution Panel upheld the AO's decision, leading to the dismissal of this ground. Issue 2 - Charging tax at higher rate than assessed in computation sheet: The appellant contended that the Assessing Officer wrongly charged tax at 15% plus surcharge and cess on the assessed income, contrary to the 10% tax rate as per the India-Netherlands DTAA. It was decided to set aside this issue for verification by the AO to ensure compliance with the DTAA provisions. The matter was to be decided in accordance with the law, granting the appellant an opportunity to present their case. Issue 3 - Levy of interest under section 234A and 234B: Regarding the levy of interest under sections 234A and 234B of the Income Tax Act, it was deemed consequential in nature. The AO was directed to re-compute any interest due under these sections in compliance with the law. Issue 4 - Initiating penalty proceedings under section 270A: The initiation of penalty proceedings under section 270A was considered premature and thus dismissed at that stage. The issue was not pursued further, and the appeal was partly allowed for statistical purposes. In conclusion, the appellant's appeal before the Appellate Tribunal ITAT Delhi involved various issues related to the assessment year 2021-22. While some grounds were dismissed, others were set aside for further verification or re-computation in accordance with the relevant legal provisions. The judgment highlighted the importance of specific notifications for the applicability of certain clauses in DTAA agreements and emphasized the need for compliance with tax rates as per the applicable treaties.
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