9911796707
TMI Blog2000 (3) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... style-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-priority:99; mso-style-qformat:yes; mso-style-parent:""; mso-padding-alt:0in 5.4pt 0in 5.4pt; mso-para-margin-top:0in; mso-para-margin-right:0in; mso-para-margin-bottom:10.0pt; mso-para-margin-left:0in; line-height:115%; mso-pagination:widow-orphan; font-size:11.0pt; mso-bidi-font-size:10.0pt; font-family:"Calibri","sans-serif"; mso-ascii-font-family:Calibri; mso-ascii-theme-font:minor-latin; mso-fareast-font-family:"Times New Roman"; mso-fareast-theme-font:minor-fareast; mso-hansi-font-family:Calibri; mso-hansi-theme-font:minor-latin;} <![endif]--> M.A. BAKSHI, JUDICIAL MEMBER AND PRADEEP PARIKH, ACCOUNTANT MEMBER For the Appellant : S.E. Dastur and P.J. Pardiwalla For the Respondent : D.J. Tralshawala ORDER M. A. Bakshi, J.M. We find it convenient to dispose of these three appeals of the assessee, for the assessment years 1992-93 to 1994-95, involving common issue, by this consolidated order. 2. The common issue involved in these appeals is relating to the rate of tax chargeable on the income of the company for the respective as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his jurisdiction under section 263 of the Income-tax Act, 1961. After giving an opportunity of being heard and considering the objections on behalf of the appellants the Commissioner held as follows:- That for assessment years 1992-93 to 1994-95 the rate of tax applicable in the case of domestic companies was 45 per cent. That since the surcharge at the rate of 15 per cent was payable by the domestic companies the effective rate of tax payable by the domestic companies was 51.75. As per Clause 2 of Article 14 of the convention between the Government of Republic of India and the Government of United States of America the difference in the tax rates should not exceed 15 per cent. In this case the effective rate of tax in the case of domestic companies being 51.75 per cent the levy of tax in the case of companies other than domestic companies would go up to 66.75 per cent. However, since the Finance Act imposes tax at the rate of 65 per cent only, therefore the difference of tax between the domestic companies and other than domestic companies has been maintained at less than 15 per cent. That therefore, the Assessing Officer was not justified in restricting the rate of tax in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was payable at the rate of 8 per cent. The rate of tax in the case of companies other than domestic companies was 65 per cent. The convention takes note of the difference in the tax rates of the domestic companies and the foreign companies at 15 per cent. It is clear that the rate of tax mentioned in the convention is the rate at which income-tax is chargeable under the Finance Act without surcharge. The learned counsel pointed out that if the surcharge is included in the rate of tax payable by the domestic companies, then the difference between the rate of tax payable by the domestic companies and the rate of tax payable by other companies in assessment year 1989-90 or 1990-91 is not 15 per cent but less than 15 per cent. It is therefore claimed that the restriction placed under the convention is on the difference in the rate of tax without taking into account the surcharge. The surcharge, according to the learned counsel, is charged on the income-tax in respect of certain assessees as provided under the Finance Act. In the case of foreign companies there is no surcharge on income-tax. In the case of domestic companies a surcharge of 15 per cent is charged. The Central Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus less than 15 per cent and therefore, the Assessing Officer was not justified in restricting the rate of tax to 60 per cent in the case of the appellant company. Our attention was invited to the decision of the Authority of Advance Ruling reported in the case of Application No. P-16 of 1998 (supra) where a reference has been made to the decision of the Supreme Court and on that basis held that in case of conflict between laws of two nations the same is to be decided in favour of national law. The CIT, according to the learned DR, was thus justified in invoking his jurisdiction under section 263 and setting aside the orders of the Assessing Officer. 7. In counter reply the learned counsel for the assessee pointed out that the CIT (Admn.) has given a definite finding about the rate of tax chargeable in the case of the assessee and therefore, the contention on behalf of the revenue to the contrary is misconceived. Even otherwise an order under section 263 without recording a definite finding would be invalid in view of the decision of the Bombay High Court in the case of CIT v. Gabriel India Ltd. [1993] 203 ITR 108. The learned counsel for the assessee further invited our at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If tax liability is imposed by this Act, the agreement may be resorted to for negativing or reducing it. (c)In case of difference between the provisions of the Act and of the agreement, the provisions of the agreement prevail over the provisions of this Act and can be enforced by the appellate authorities and the Court. 9. Thus, if as per the agreement between the two countries there is a restriction in the rate of tax chargeable in the case of foreign countries, the effect shall have to be given to the provisions of the agreement in preference to the provisions of the Act. We, therefore, have to concentrate on clause 2 of article 14 of the agreement. It will be useful to reproduce the said clause as under:- A company which is a resident of the United States may be subject to tax in India at a rate higher than that applicable to the domestic companies. The difference in the tax rate shall not, however, exceed the existing difference of 15 percentage points. 10. It is observed from clause 2 of Article 14 reproduced above that a company which is resident of United States of America is permitted to be subjected to tax in India at a rate higher than applicable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce in the rate of tax excluding surcharge. 12. Before we record our conclusion in respect of the interpretation of clause 2 of article 14 of the convention between the two countries, it is necessary in our view to consider the contention on behalf of the revenue that the surcharge is nothing but income-tax as held by the Supreme Court in the case of K. Srinivasan (supra). We have no doubt in our mind that surcharge is part of income-tax. Nevertheless the rate of income-tax and the surcharge are two different connotations recognised not only under the Income-tax Act, 1961 but also under the Constitution of India. Though surcharge has been held to be part of income-tax, yet it is recognised as a separate category and the collection is treated differently than the tax levied at the specified rates. The income-tax is a broader concept. It includes additional tax, surcharge etc. Different connotations may however be used for describing each part of the income-tax. As in the case of income, agricultural income though part of income, is treated differently under the Income-tax Act, 1961. Similarly the mere fact that the surcharge is part of income-tax does not necessarily mean that i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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