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TMI Blog2015 (12) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... For The Respondent : Dr. U. Anjaneyalu, CIT ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER These appeals by the assessee are directed against the common order of the Commissioner of Income-tax(Appeals) dated 25.3.2014 for the assessment years 2000-01, 2001-02 and 2002-03, respectively. 2. The facts of the case are that the assessee is a company registered under the laws of Italy. The assessee is a non-resident as per the Income-tax Act. It is engaged in the business of designing, building and supplying full range of plant solutions on different types of packages such as turnkey, engineering and individual components, worldwide and is a global power generation player and covers the entire power generation spectrum. 2.1 The assessee and its subsidiary company Ansaldo Services Pvt. Limited (ASPL) entered into separate contracts with NLC and executed them during the assessment years under consideration. 2.2 The CIT(A) passed an order on 29/09/2011 u/s. 251 of the I.T. Act upholding the additions made by the AO to the income of the assessee from NLC contracts. The CIT(A) also held that profit and tax should be determined by following the judgement dated 11.05. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of profit. Therefore, even if the debt is connected with the receipts of the PE, it cannot be said to be effectively connected with such receipts because the responsibility to pay the tax lies on the shoulders of the assessee-company from the final profit ascertained as on the last date of the previous year and on closing the books of account. It is for the company to pay the tax from any source available with it. It so happened in this case that the tax got automatically deducted from the receipts of the PE by operation of law. Such collection of tax by force of law would not establish effective connection of the indebtedness with the PE as ultimately it is only the appropriation of profit of the assessee company. However, we may add that we do not venture to say that the interest income has to be necessarily business income in nature for establishing the effective connection with the PE because that would render provision contained in paragraph 4 of Article XI redundant. Thus, there may be cases where interest may be taxable under the Act under the residuary head and yet be effectively connected with the PE. The bank interest in this case is an example of effective connection b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m and that is the reason the expression Attributable is used in US Model Conventions. Therefore the term appearing in US Model Conventions have the same meaning as the expression Effectively Connected . The expression Attributable as used in Article 11(5) of the India-USA DTAA has therefore to be construed as equivalent to Effectively connected . The technical explanation referred to by the learned counsel for the Assessee whereby it has been observed that the term Attributable is to be given a narrower meaning than the expression Effectively Connected , we find that the said technical explanation is in the context of attribution of profits of the PE and is relevant to taxation of an Indian enterprise having PE in USA. Nevertheless, the expression attributable even if held to be equivalent to the expression effectively connected in the light of the commentary by Klaus Vogel, referred to above, then the case of the Assessee would stand squarely covered in favour of the Assessee by the decision of the Special Bench in the case of Clough Engineering (supra). Following the same, we hold that the interest income on income tax refund is to be charged to tax only under Articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Contracting State shall be exempt from tax in that State if: (a) The payer of the interest is the Government of that Contracting State or a local authority thereof; or (b) The interest is paid to any agency or instrumentality (including a financial institution) which may be agreed upon in this behalf by the two Contracting States. 4. The term interest as used in this Article means income from Government securities, bonds or debentures, whether or not secured by mortgage and whether or not carrying a right to participate in profits and debt-claims of every kind as well as all other income assimilated to income from money lent by the taxation law of the State in which the income arises. 5. The provisions of paragraphs 1 and 2 not apply if the recipient of the interest, being a resident of a Contracting State, carries on business in the other Contracting State, in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt-claim in respect of which the interest is paid is effectively connected with such permanent establishment or f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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