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TMI Blog2016 (1) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... nd since cess is nothing but an additional surcharge, the tax prescribed under DTAA @ 15% in the instant case shall be deemed to included surcharge and education cess. Hence we hold that when the tax rate is determined under DTAA, then the tax rate prescribed thereon shall have to be followed strictly without any additional taxes thereon in the form of surcharge or education cess. The surcharge and education cess is not leviable when the tax rate is prescribed under DTAA. Hence we do not find any infirmity in the order of the Learned CITA in this regard. - Decided against revneue - I.T.A No. 571/Kol/2013 A.Y : 2010-11 - - - Dated:- 30-11-2015 - Mahavir Singh,Judicial Member, and Shri M. Balaganesh, Accountant Member For The Appellant : Shri D.Naskar, JCIT, ld.DR For The Respondent : Shri Pratyush Jhunjhunwala, Advocate (Lead by Shri J.P Khaitan) ORDER SHRI M.BALAGANESH, AM This appeal of the revenue arises out of the order of the Learned CIT(A)-VI, Kolkata in Appeal No. 23/CIT(A)-VI/Kol/ACIT-CPC/2010-11 dated 28-12-2012 against the intimation dated 23.2.2001 u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is 15% without adding any surcharge and education cess and also stated that in terms of section 90(2) of the Act which provides that where the Central Government has entered into an agreement with the Government of a foreign country for avoidance of double taxation, then in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are are more beneficial to that assessee. The Learned CITA observed that the assessee had received the income in the nature of fees for technical services and in terms of Article 13(2)(a) and 13(4)(c) of the India UK DTAA convention, the tax rate applicable would be 15% . The Learned CITA held that the tax rate to be applicable to the assessee as per DTAA is 15% on which point, the revenue is not in appeal before us. The applicability of Article 13 of DTAA is not the dispute before us. Whether the surcharge and education cess would have to be applied on the tax determined at 15% as per DTAA is the subject matter of dispute. The Learned CITA held that the surcharge and education cess is not to be levied on the tax rate prescribed under DTAA at 15% on fees for technical services by relying on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) The capital gains tax; and (iv) The petroleum revenue tax; (hereinafter referred to as United Kingdom tax ); (b) In India The income-tax including any surcharge thereon; (hereinafter referred to as Indian tax ) 2. This Convention shall also apply to any identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of this Convention in addition to, or in place of, the taxes of that Contracting state referred to in paragraph 1 of this Article. The competent authorities of the Contracting States shall notify each other of any substantial changes which made in their respective taxation laws. ARTICLE 3- General definitions- 1. In this Convention, unless the context otherwise requires: (a) The term United Kingdom means Great Britain and Northern Ireland; (b) The term India means the Republic of India; (c) The term tax means United Kingdom tax or Indian tax, as the context requires,, but shall not include any amount which is payable in respect of any default or omission in relation to the taxes to which this Convention applies or which represents a penalty imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Union, to be called the Education Cess on income-tax , so as to fulfill the commitment of the Government to provide and finance universalized quality basic education, calculated at the rate of two per cent of such income-tax and surcharge [Emphasis supplied] 8. It is thus clear that the education cess, as introduced in India initially in 2004, was nothing but in the nature of an additional surcharge. It was described as such in the Finance Act introducing the said cess. 9. We have also noted that Article 2(1) of the applicable tax treaty provides that the taxes covered shall include tax and surcharge thereon. Once we come to the conclusion that education cess is nothing but an additional surcharge, it is only corollary thereto that the education cess will also be covered by the scope of Article 2. In any case, education cess was introduced by the Finance Act 2004, with effect from assessment year 2005-06 which was much after the signing of India Simngapore tax treaty on 24th January 1994. In view of the specific provisions to the effect, that the scope of Article 2 shall also cover any identical or substantially similar taxes which are imposed by either Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so charged on the same, under Articles 11 and 12, cannot exceed 15% and 10% respectively. The expression tax is defined in Article 2(1) to include income tax and is stated to include surcharge thereon, so far as India is concerned. Article 2(2) further extends the scope of the tax by laying down that it shall also cover any identical or substantially similar taxes which are imposed by either contracting state after the date of signature of the present agreement in addition to, or in place of, the taxes referred to in paragraph 1 . It is clear that the education cess, as introduced in India initially in 2004, was nothing but in the nature of an additional surcharge. It was described as such in the Finance Act 2004 introducing the said cess. We have also noted Article 2(1) of the applicable tax treaty provides that the taxes covered shall include tax and surcharge thereon. Once we come to the conclusion that education cess is nothing but an additional surcharge, it is only corollary thereto that the education cess will also be covered by the scope of Article 2. Accordingly, the provisions of Article 11 and 12 must find precedence over the provisions of the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this issue is covered in favour of assessee by the decision of ITAT in the case of Sunil V. Motiani v. ITO [2013 33 taxmann.com 252/59 SOT 37 (Mumbai-Trib). He has placed a copy of the said order on our record and a copy was also given to Ld. DR. He drew our attention towards the observation of the Tribunal in para-5. 3. On the other hand, Ld. DR submitted that education cess and secondary and higher secondary education cess are considered to be tax payable even when the tax is determined on the basis of DTAA. For this purpose she relied upon the decision of Hon ble Uttarakhand High Court in the case of CIT v. Arthusa Offshore Co. [2008] 169 Taxman 484 and decision of Advance Rulling Authority in the case of Airports Authority of India, In re[2008] 299 ITR 102/168 Taxman 158(AAR-New Delhi). 5. We have heard both the parties and their contentions have carefully been considered. We found that the issue raised by the assessee is covered in favour of the assessee by the aforementioned decisions of Tribunal in the case of Sunil V. Motiani (supra). d) ITO (Intl Taxn) vs M/s M Far Hotels Ltd in ITA Nos. 430 to 435 / Coch / 2011 dated 5.4.2013 (Cochin Tribunal) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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