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TMI Blog2020 (9) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... interest of Rs. 2,62,69,721 by applying transfer pricing provisions (under chapter X of the Act) to tax in India disregarding the provisions of Article 11 of India-Cyprus DTAA, which provides for taxability of interest only on paid basis; 2.2 Ought to have considered the fact that assessee is a resident of Cyprus and liable to be taxed on interest income as per Article 11 of Indo Cyprus DTAA, which states that interest is chargeable to tax only when it is arising and paid to non-resident. 2. The additional ground of appeal for the assessment year 2011-12 is exactly the same but the amount of interest adjustment involved, impugned in this appeal, is Rs. 55,08,678. 3. On a perusal of petitions seeking admission of additional grounds, and having heard the rival contentions on the same, these additional grounds were admitted by us. These additional grounds were, accordingly, taken up for hearing. 4. When the hearing commenced on merits, on 11th August 2020 and, thereafter, on 13th August, 2020, it was pointed out that in the event of the additional grounds of appeal being allowed, all other issues raised in the appeals will be rendered infructuous. Our attention was invited to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the issues which hold that taxability of interest under Indo Cyprus tax treaty could only be done on cash basis. When he was asked whether these decisions have dealt with the implications of article 3(2), read with definition under section 43(2), and whether, in the absence of such an analysis- which is relevant in the present context, these decisions could be treated as per incuriam, learned counsel submitted that answering this question will need reference to a lot of papers. He then withdrew his consent for the virtual court and prayed that the matter be adjourned for hearing before a physical court. 7. While we refrain from making any observations on the manner in which, and stage at which, the consent for virtual hearing was withdrawn, we see merits in this matter being referred to a bench of three of more Members under section 255(3) of the Act. The reason is this. In all the coordinate bench decisions, there is no discussion whatsoever to the connotations of the expression 'paid' and these decisions simply proceed on the basis that because the expression 'paid' is used article 11(1) of Indo Cyprus tax treaty, the taxability of interest can only be on cash basis. The expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to be examined in some detail, and that exercise can at best be conducted by a bench of three or more members so that the decision is unfettered by the decisions of the division benches in this regard. The issue raised in these appeals needs to be decided in a holistic manner, unfettered by the decisions of the division benches, examining all the relevant facets, including the facets which are germane in the present context have remained to be examined by the coordinate benches. 8. Having said that we may add that we are alive to the fact that there is a decision of Hon'ble jurisdictional High Court, in the case of Director of Income Tax Vs Siemens AG which does observe as follows: As regards first question is concerned, the Income Tax Appellate Tribunal referred to para 1 to 3 of Article IIX-A of the Double Taxation Avoidance Treaty with the Federal German Republic, as per notification dated 26th August 1985, held that the assessment or royalty or any fees for technical services should be made in the year in which amounts are received and not otherwise. Counsel for the revenue relied upon the Special Bench decision in assessee's own case, which, in our opinion, has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd has to treated as equivalent to "paid to the payee", by Hon'ble Supreme Court is to be assigned to the treaty of the undefined treaty expression "paid". Obviously, this exercise was not done by the coordinate bench, nor this aspect of the matter was pointed out by the learned counsel appearing before Their Lordships, and thus Their Lordships had no occasion to examine this aspect of the matter either. To this extent, the impact of judgment of Hon'ble Supreme Court's judgment in the case of Standard Triumph Motor (supra) remained unexamined. That aspect of the matter is thus, de hors the judgment of Hon'ble jurisdictional High Court, does seem to be in an unchartered territory on which call may indeed be taken by the Tribunal. 10. As we part with this note recommending constitution of a special bench, we may add that, in our humble understanding, such a reference is not contrary to the principles of judicial discipline. In the event of a doubt about the correctness of the earlier decision or, extending that logic a little further, correctness of the path the earlier decisions have traversed to come to a conclusion, it is open to the bench to make a reference to for constituting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qually, and perhaps much more, true for many of us too. As Hon'ble Supreme Court has said, in the case of Distributors (Baroda) (P.) Ltd. v. Union of India [(1985) 155 ITR 120 1 (SC)], "To perpetuate an error is no heroism. To rectify it is the compulsion of the judicial conscience. In this, we derive comfort and strength from the wise and inspiring words of Justice Bronson in Pierce v. Delameter (A.M.Y. at page 18) : 'a judge ought to be wise enough to know that he is fallible and, therefore, ever ready to learn : great and honest enough to discard all mere pride of opinion and follow truth wherever it may lead : and courageous enough to acknowledge his errors'." There is, thus, no heroism in perpetuating an error in approach to a judicial exercise. The conclusions, even after the exercise of detailed analysis as discussed earlier is conducted, may or may not be the same as the coordinate benches have arrived, even if rather serendipitously, but that does not really matter. Once we realize that there was something lacking in our approach last time, there cannot be any justification in continuing to adopt the same approach yet again. It is, after all, one of the fundamental duties, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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