9911796707
TMI Blog1999 (4) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... 1996-97 and claimed refund on the basis of the relief available under the Double Taxation Avoidance Agreement. The assessment was completed under section 143(3) of the Income-tax Act and in that order the Assessing Officer disallowed the claim of Double Taxation Relief on the ground that the agreement between India and the Republic of Malta became operative from the fiscal year beginning on 1-4-1996, i.e. from the assessment year 1997-98 onwards. The assessee took up the matter in appeal before the CIT(Appeals) with the claim that the Double Taxation Agreement had become operative in India for the assessment year 1996-97 and so the assessee was entitled to the relief under the agreement. The CIT(Appeals) concurred with the assessee that it was entitled to the relief for the assessment year 1996-97. The appellate authority further held that even if there was any ambiguity regarding the assessment year from which the agreement became operative, that interpretation should be adopted which would favour the assessee and in that sense the relief could not be denied for the assessment year 1996-97. The Revenue is in appeal before the Tribunal with the contention that the CIT(Appeals) was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 1996-97, inasmuch as the provisions of the agreement became applicable only with effect from 1-4-1996. Arguing on the above lines, the learned departmental representative urged us to reverse the order of the CIT(Appeals) and to uphold the finding of the Assessing Officer that the assessee was not entitled to any relief for the assessment year 1996-97 under the provisions of the agreement. 4. Per contra, Shri R. Vijayaraghavan, the learned counsel for the assessee supported the order of the CIT(Appeals) and submitted that the Assessing Officer was in error in his interpretation of the provisions of para 2(b) of article 29 of the agreement. According to the learned counsel, it was on a wrong understanding that the reference in article 29(2)(a) is to the calendar year that the assessee's claim of the relief was denied for the assessment year 1996-97. The learned counsel contended that the year of applicability of the agreement could be interpreted only as the fiscal year beginning on the 1st day of April of the calendar year next following the fiscal year in which the agreement had been entered into and that the agreement having been entered into in the fiscal year 1994-95, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y into force of' this agreement have been complied with. (2) The agreement shall enter into force thirty days after the date of the later of the notifications referred to in paragraph (1) and its provisions shall have effect (a) in India: as regards income for any 'fiscal year' beginning on or after the first day of April of the calendar year next following that in which this agreement enters into force (b) in Malta: as regards income for any 'fiscal year' beginning on or after the first day of January of the calendar year next following that in which the agreement enters into force." It can be seen from clause (a) of paragraph (2) that the provisions of the agreement shall have effect in India in respect of the income of any fiscal year beginning on or after the first day of April of the calendar year next following that in which the agreement enters into force. But then in paragraph (2) it is made clear that the agreement shall enter into force thirty days after the date of the later of the notifications referred to in paragraph (1). That means, even though the agreement had been entered into on 8th February, 1995, it did not take immediate effect; the agreement would bec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 995 to 31-3-1996, which is relevant for the assessment year 1996-97. According to the Revenue, the word 'that' in para (2)(a) refers to the calendar year, because the clause 'that in which the agreement enters into force' qualifies the preceding words 'calendar year 'and so the reference cannot be to anything other than the calendar year, and in that sense, the provisions will be operative in India from 1-4-1996, as the calendar year following the calendar year in which the agreement was entered into is the year 1996. The CIT(Appeals) has concurred with the assessee on the interpretation of the term 'that' appearing in clause (2)(a). But at the same time the appellate authority felt that the other view taken by the Revenue was also possible. But then, when two views were possible, the CIT(A) felt that, that interpretation favourable to the assessee should be preferred. He has relied on a number of decisions for preferring an interpretation favourable to the assessee. 7. On going through the provisions of the agreement, particularly the provisions of article 29, it appears to us that the entire controversy has arisen on a confusion regarding the date on which the agreement entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ign States taking effect without first the Governments of the Contracting States notifying that the legal requirements for entry into force of the agreement have been complied with, especially when there is the clear stipulation that only after 30 days from the date of the later of the notifications the provisions of the agreement shall have effect. From a reading of paragraphs (1) and (2) of article 29, we find that the agreement entered into force on 22-12-1995. Therefore, in India the provisions of the agreement could become operative only from a date after that and not on an earlier date, i.e. 1-4-1995. Even if the interpretation placed by the assessee on the words 'that in which the agreement enters into force' as meaning the fiscal year, is accepted, it can be seen that the provisions could not have become effective in India from the assessment year 1996-97. This can be shown with the following details : Date on which the agreement entered into force in terms of paragraph (2) of article 29 - 22-12-1995 Fiscal year in which the above date falls (as interpreted by the assessee). - Year ending 31-3-1996 (i.e. 1995-96). Calendar year next following the above fiscal year. - 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the statutory provisions later on. However, we are deciding this appeal on our view on the provisions of article 29 of the agreement and not on the subsequent clarification issued by the CBDT to the Chief Commissioner of Income-tax, Kerala. 10. In the above circumstances, we reverse the order of the CIT(Appeals) and decide this ground of appeal in favour of the Revenue. 11. Another ground raised by the Revenue in this appeal is regarding the deletion of the interest levied under section 234A of the Income-tax Act. While making the assessment, the Assessing Officer levied interest under section 234A on the view that there was delay in filing the return of income. The assessee filed the return on 25-3-1997 exercising the option for assessment under section 172(7) and then claiming refund on the basis of the relief under the agreement. The Assessing Officer levied interest under section 234A for the reason that the return had not been filed within the time under section 139(1). In the assessee's appeal, the CIT(Appeals) held that under section 172(7) there was the option given to the assessee to file the return of income to claim the refund and that it was not the statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X
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