9911796707
TMI Blog2006 (9) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... mination clause of the Indo-Korea Double Taxation Avoidance Agreement ("the DTAA") and taxing the appellant s income at the rate of 48 per cent instead of 35 per cent." 2. At the time of hearing, the ld. Counsel for the assessee fairly conceded that the only issue in both the appeals is covered against the assessee by the decision dated 25-11-2005 of the ITAT D Bench in ITA No. 4948/Mum./05 for the assessment year 2002-03 in assessee s own case. However, he submitted that there have been several developments on the interpretation of the non-discrimination article of the Double Tax Avoidance Agreements (DTAAs) signed by India and to override the favourable rulings given by the judiciary the Legislature has amended the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. Subsequently the provisions of section 90 are amended by virtue of an Explanation . The insertion of this Explanation indicates that the Legislature has accepted the fact that without such Explanation foreign companies are entitled to the benefit of the non-discrimination article of the respective DTAA. Even the CBDT had clarified the same position in the form of a letter in the case of ABN AMRO Bank. Thus, he submitted that the following arguments do not hold good after amendment of section 90 : ( a )Higher rate of tax on foreign companies does not result in discrimination. ( b )The non-discrimination article ( taxation ) does not apply to rate of tax . ( c )The provisions of the Finance Act prevails over the DTAAs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that in the context of discrimination on account of rate of tax, it is submitted that the DTAA signed by India with certain countries such as UK, Germany, Bulgaria, Canada etc. specifically permit taxation of the Permanent Establishment at a rate higher than the rate applicable to domestic companies. However, the DATA between India and Korea does not contain such specific provision. He relied on the provisions of relevant para of the articles are as under : India-UK "2. The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it India to levy tax at a higher rate on the Indian Permanent Establishment of a Korean company as compared to tax rates applicable to an Indian enterprise. 5. With regard to reliance on article 25(2), the Counsel placed reliance on the provisions of article 25(2) of the DTAA. In terms of article 25(2) the taxation of the Indian Permanent Establishment of the Korean enterprise "shall not be less favourably levied in that other State (India) than the taxation levied on enterprises of that other State (India) carrying on the same activities". The aforesaid provision restricts discrimination as compared to an enterprise of India. An enterprise in simple terms is a business unit. Thus an enterprise could be an Indian company or an India ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e DTAA between India and Korea, India cannot levy tax on the Indian Permanent Establishment of a Korean enterprise at a rate higher than the rate applicable to : ( a )an Indian company ( b )an Indian co-operative society Further, Explanation to section 90 provides that if the foreign company (permanent establishment) is charged tax at a rate higher than a domestic company then the same is not to be considered as less favourable charge for the foreign company. However, the Explanation does not provide that if the foreign company (permanent establishment) is charged tax at a rate higher than the rate applicable to a co-operative society then the same is not to be considered as less favourable charge for the foreign company. In abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f provisions of section 80P the income earned by a co-operative society from banking business is deductible from taxable income and not chargeable to tax. The appellant submits that the tax benefit available to a co-operative society in terms of the provisions of section 80P should be considered as a special benefit for fulfilling the social obligations etc. The appellant does not wish to claim the benefit of section 80P. The appellant merely claims the tax rate applicable to a co-operative society on its income without any specific tax exemptions i.e., the rate of 35 per cent. 8. On the other hand, the ld. D.R. contended that the only issue involved in both the appeals is squarely covered against the assessee in assessee s own case ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
