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TMI Blog2013 (12) TMI 1105X X X X Extracts X X X X X X X X Extracts X X X X ..... urcharge - Therefore, tax referred to in Article 11(2) @ 12.5% also includes surcharge – Following DIC Asia Pacific Pte Ltd [2012 (6) TMI 686 - ITAT, KOLKATA] – Decided in favour of assessee. - IT Appeal No.276 (Mum.) 2012 - - - Dated:- 27-2-2013 - RAJENDRA SINGH and VIJAY PAL RAO , JJ. For the Appellant : Rakesh K. Milwani. For the Respondent : Ms. Neerja Pradhan. ORDER:- PER : Rajendra Singh This appeal by the assessee is directed against the order dated 14.11.2011 of CIT(A) for the assessment year 2008-09. Though the assessee has raised three grounds of appeal, the only effective issue is whether the assessee is liable to pay education cess and surcharge in addition to the tax @ 12.5% payable on interest income und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticle-11(2), the interest income can be taxed in the contracting State in which it has arisen according to the law of that state and if recipient is beneficial owner of interest, tax so charged shall not exceed 5% of gross interest if the interest is paid by the bank and in other cases 12.5% of the gross interest. It was pointed out that Article 2(2)(b) clearly provides that income tax included any surcharge thereon and, therefore, tax @ 12.5% mentioned in Article 11(2) included surcharge also. It was further submitted that the nature of education cess was same as surcharge and therefore both education cess and surcharge were included in the tax leviable at 12.5%. The ld. AR referred to the decision of the Tribunal in the case of DIC Asia P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partner. The interest income is no doubt taxable as the same had arisen from the sources in India. However there is Double Taxation Avoidance Agreement (DTAA) between India and UAE and, therefore, tax has to be computed under the provisions of DTAA which is beneficial to the assessee. There are specific Articles in DTAA dealing with taxation of income under different heads. The business profit is governed by Article-7 whereas interest income by Article-11. Under para-7 of Article-7 where business profit includes items of income which are dealt with separately in any other Article of the agreement, provisions of those Articles should not be affected by the provisions of this Article. In other words, in case there is provision for dealing wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under DTAA. The judgment of AAR in the case of Airports Authority of India, IN RE (supra), is also distinguishable as in that the court was concerned with taxability of business income and it was held that under Article 5(3) of DTAA with USA, preparatory and auxiliary type of work was excluded from the purview of PE and therefore, there being no PE it was held that income from software maintenance was liable to be taxed in India. The high Court was not concerned with taxability of interest income as per the treaty. 5.1 In view of the fore-going discussion, we hold that tax payable @ 12.5% under Article 11(2) of FTAA is inclusive of surcharge and education cess. We, therefore, set aside the order of CIT(A) and allow the claim of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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