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TMI Blog2023 (1) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... giving effect to the order of ITAT, then the delay, if any, in granting the refund will be calculated from the end of the month in which the cumulative time available to the Ld. AO for giving appeal effect expired i.e. the initial time of three months as well as the additional extended time granted by the Pr. Commissioner/Commissioner, to the date on which the actual refund was granted to the assessee. We also direct the assessee to provide all of its cooperation to the Ld. AO as and when called for in this respect. This ground of appeal for all the five years before us is allowed for statistical purposes. TDS done by the Ld. AO on the interest granted u/s. 244A(1) - taxability of interest in terms of Article 12(3)(a) of the India- Italy DTAA - Hon ble High Court of Madras in the case of Ansaldo Energio SPA [ 2016 (5) TMI 945 - MADRAS HIGH COURT] has held that the interest on income tax refund is a debt claim payable by the Revenue in terms of Article 12(3)(a) of the India-Italy Treaty and thus such interest is not taxable and no TDS ought to be done by the AO. We note that Ld. CIT(A) has wrongly interpreted this finding of the Hon ble Madras High Court as application of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the assessee, who being a non-resident, was subjected to TDS - HELD THAT:- As per the provisions of section 234C of the Act, we find it proper to direct the AO to verify and ascertain that the return of income filed by the assessee was entirely subject to TDS and its tax liability on the returned income was in entirety covered by the TDS done. If found so, the interest charged u/s. 234C of the Act be deleted and the refund recomputed accordingly. Thus, this ground of appeal is allowed for statistical purposes. Ground taken for erroneous adjustment of other payments against the refund determined by Ld. AO , we direct the Ld. AO to provide the necessary details to the assessee in respect of adjustment made, for its verification and rebuttal. Based on the clarifications submitted by the assessee in respect of the other adjustments, the Ld. AO is directed to re-consider the adjustment in accordance with the provisions of law. Accordingly, this ground of appeal is allowed for statistical purposes. - ITA Nos.437 to 441/Kol/2021 - - - Dated:- 2-9-2022 - SHRI SONJOY SARMA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER For the Appellant : Shri Ketan Ved, CA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IT Act dated 23 July 2019 and whether necessary approval for delay in passing the order was obtained from Ld. Principal CIT as required under section 153(5) of the Act which was incumbent upon the Ld. AO to do so as per facts and circumstances of the case and in Law. 3.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in deducting taxes at source under section 195 of the IT Act, on payment of interest under section 244A of the IT Act of Rs. 11,50,45,080 to the Appellant as determined in the impugned order under section 143(3) r.w.s. 254 of the IT Act dated 23 July 2019, and the Ld. CIT(A) has further erred in confirming such deduction of taxes at source on interest under section 244A. 3.2 That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that no tax should be deducted at source on payment of interest under section 244A to the Appellant, being, a tax resident of the Netherlands, by application of the Most Favoured Nation (MFN) Clause contained in India-Netherland double Taxation Avoidance Agreement ( DTSS / tax treaty ) read with the restricted scope of taxation of Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire income of the Appellant was subjected to tax deduction at source thereby making the levy of interest under section 234C erroneous. 6.1. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in adjusting other payments amounting to Rs.3,16,027 from the refund arising to the company and the Ld. CIT(A) further erred in confirming adjustment without considering the fact that no such payment was made to the Company. 6.2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not deleting the adjustment of other payments amounting to Rs.3,16,027 as made by the Ld. AO in the computation of refund by holding that the Appellant had failed to provide any details for the same, without appreciating that the entire contention of the Appellant itself was the failure on part of the Ld. AO in providing the details or reasons for making such adjustment whilst computing the refunds due to the Appellant. 4. At the outset, we dispose of the common grounds of appeal for all the assessment years under appeal i.e. ground nos. 1 to 3. For arriving at the conclusion, we are taking the lead case for AY 2008-09 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 244A(1)(a) of the Act, Ld. CIT(A) did not find favour with the detailed submission made by the assessee on the double taxation avoidance treaty application and dismissed the relevant grounds on this issue. 5.4. In respect of appeal relating to AY 2009-10, apart from the other two issues referred above another issue relating to short granting of interest u/s. 244A of the Act i.e. not granting interest upto the date of granting of refund, has been raised by the assessee. This issue was raised before the Ld. CIT(A) by way of an additional ground which was dismissed. On this issue it was submitted by the assessee that the date from which the grant of interest on refund starts is not in dispute, the only dispute is whether the interest should be granted up to the date of preparation of order giving effect to the order passed by ITAT i.e. on 13.11.2019 or up to the date of actual receipt of refund by the assessee i.e. on 02.03.2020. This issue has been raised for other three assessment years also i.e. AYs 2010-11, 2011-12 and 2012-13. 5.5. Further, in respect of AY 2010-11 there are two other grounds in respect of erroneous levy of interest u/s. 234C of the Act and erroneous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. CIT(A) wherein the direction has been given to the Ld. AO for verification of certain facts. 8. We have heard the rival contentions and perused the material available on record. Before adverting on the issue raised before us in respect of claim of interest u/s. 244A(1A) of the Act, we apprise ourselves with the provisions of section 244A(1A) and section 153(5) of the Act, which are reproduced as under : 8.1. [Interest on refunds. 244A. (1) 7[Where refund of any amount becomes due to the assessee under this Act], he shall, subject to the provisions of this section, be entitled to receive, in addition to the said amount, simple interest thereon calculated in the following manner, namely :- (a ) where the refund is out of any tax 8[paid under section-115WJ or] 9 [collected at source under section-206C or] paid by way of advance tax or treated as paid under section-199, during the financial year immediately preceding the assessment year, such interest shall be calculated at the rate of 10[one-half per cent] for every month or part of a month comprised in the period from the 1st day of April of the assessment year to the date on which the refund is granted: Provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the said order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 shall be made within the time specified in sub-section (3). 9. From the perusal of section 244A(1A) of the Act, we note that additional interest under this section is attracted only if the conditions of section 153(5) of the Act are breached. Therefore, from the perusal of section 153(5) of the Act, it emerges that an order giving effect to an order of Hon ble ITAT u/s. 254 of the Act shall be passed by an AO within a period of three months from the end of the month in which the order u/s. 254 is received by the Pr. Commissioner or Commissioner. It is also a fact on record that the order of Co-ordinate Bench of ITAT allowed the appeal of the assessee on the issue of taxability of MSSA and RDCA receipts and, therefore, it was not a case of fresh/de novo assessment as noted in para 39 of the said order placed on record. 10. Thus, on a combined reading of section 244A(1A) and section 153(5) of the Act, undoubtedly, assessee is entitled to additional interest on the refund that may be determined as a consequence of appeal effect order, if a delay occurs in passing an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refund will be calculated from the end of the month in which the cumulative time available to the Ld. AO for giving appeal effect expired i.e. the initial time of three months as well as the additional extended time granted by the Pr. Commissioner/Commissioner, to the date on which the actual refund was granted to the assessee. We also direct the assessee to provide all of its cooperation to the Ld. AO as and when called for in this respect. Needless to say that the assessee be given reasonable opportunity to put up its case. Accordingly, this ground of appeal for all the five years before us is allowed for statistical purposes. 11. On the second issue relating to TDS done by the Ld. AO on the interest granted u/s. 244A(1) of the Act, Ld. AO while assessing the refund amount along with interest u/s. 244A(1) of the Act, did TDS on the interest portion of the said refund. Total refund determined by the Ld. AO vide the appeal effect order is of Rs.25,22,16,230/- which includes interest u/s. 244A(1) of the Act amounting to Rs.11,50,45,084/- Ld. AO has done TDS on behalf of the Govt. of India amounting to Rs.1,20,86,636/- on the interest portion of Rs.11,50,45,080/-. Aggrieved on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icipate in the debtor s profits, and in particular, income from the Government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures. Penalty charges for late payment shall not be regarded as interest for the purpose of this Article. 13. By applying the above provisions of Article 11, ld. Counsel for the assessee submitted that refund of tax by the department qualifies as a debt claim and interest paid for delay on such refund u/s. 244A being income from debt claim would qualify as interest as per Article 11(6) of the Indian-Netherlands DTAA and accordingly, the said interest would be taxed in India @ 10%. However, in furtherance to this, Ld. Counsel invited the attention to the Most Favoured Nation (MFN) clause by virtue of Protocol IV(2) to the India-Netherlands tax treaty whereby Netherlands has been recognized as one of the most favoured nations by the Indian Government. IV. 1. Where tax has been levied at source in excess of the amount of tax chargeable under the provisions of Article 10, 11 or 12, applications for the refund of the excess amount of tax have to be lodged with the competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 2. Notwithstanding the provisions of paragraph I, the tax chargeable in a Contracting State or interest arising in that State and paid to a resident' of the other Contracting State in respect of loans or debts shall not exceed 15 per cent of the gross amount of such interest. 3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State shall be exempt from 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. 15. Based on the above reference, ld. Counsel submitted that under the India Italy Treaty, definition of interest un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of law in favour of the assessee. Relevant extracts reproduced as under: 24. As an alternative submission, it was contended by Mr. T. Ravikumar, learned Standing Counsel that the question whether the interest payable by the Government was a debt claim within the meaning of Article 12.4, did not arise for consideration in Tata Chemicals Ltd's case (supra) at all and that what was found in paragraph 38 of Tata Chemicals Ltd's case (supra) was only a passing reference. Therefore, relying upon the decision of the Supreme Court in CCE v. Srikumar Agencies AIR 2008 SCW 942, it was contended by the learned Standing Counsel that stray observations found in judgments cannot be taken to be an expression of a proposition of law and that judgments are not to be read as Euclid's theorem. 25. For a moment, we will keep aside the decision of the Supreme Court in Tata Chemicals Ltd.'s case (supra) and have a plain look at Section 244-A of the Income Tax Act. Under Sub-section (1) of Section 244-A, an assessee is made entitled to receive in addition to any amount of refund that has become due to him, simple interest calculated in the manner provided therein. Subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on the finding given by the Ld. CIT(A) to submit that assessee s case if allowed, will be equivalent to applying a deeming provisions . He thus, stated that Ld. AO has rightly deducted tax at source on the interest paid to the assessee u/s. 244A(1) of the Act. 19. We have heard the rival contentions and perused the material available on record. Admittedly, it is a fact on record that assessee is covered by the India-Netherlands DTAA. It is also a fact undisputed that by virtue of Protocol IV(2) which is a part of the India-Netherlands Treaty gives benefits of Most Favoured Nation clause to the assessee. On the perusal of the said Protocol, it is evident that if the provisions of a tax treaty entered into by India after signing of India-Netherlands DTAA i.e. after 21.01.1989 with another OECD member country is more beneficial either in terms of its scope and coverage or tax rate vis - vis the India-Netherlands DTAA then the said provisions shall also apply into the India-Netherlands DTAA. Factually, it is noted that India Italy DTAA came into force on 23.11.1995 i.e. post 21.01.1989 and hence, the beneficial provisions available to the assessee under the India-Italy Tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered into an agreement with the Government of any country outside India for granting relief of tax or as the case may be, for avoidance of double taxation, then in relation to the assessee to whom such agreement applies, the provisions of the Act shall apply to the extent they are more beneficial to the assessee. Thus, in the conspectus of the MFN clause by virtue of Protocol to India-Netherlands Treaty, the more beneficial provisions of India-Italy Treaty becomes available to the assessee to which even the Ld. CIT(A) has not disputed. In our considered view, there is nothing which has been deemed under the Treaty provisions and the provisions of section 90 of the Act, which are all based on the negotiated terms between the countries to arrive at the double taxation avoidance agreement between themselves. We further note that Hon ble High Court of Delhi in the case of Steria (India) Ltd. Vs. CIT in W.P.(C) 4793/2014 and CM Appl. 9551/2014 dated 28.07.2016 observed that in terms of the Protocol there can be a benefit to the assessee either of a lower rate or a more restricted scope and one does not mean to exclude the other. 15. The Court finds no warrant for the above restrict ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short granting of interest u/s. 244A(1) of the Act for assessment years 2009-10 to 2012-13, we refer to the facts of assessment year 2009-10. This issue was raised before the Ld. CIT(A) by way of an additional ground, wherein it was contended that AO has not granted interest in 244A(1) from the date of order giving effect i.e. 13.11.2019 up to the date on which actual refund was received by the assessee i.e. 02.03.2000. It is noted that the date from which the grant of interest on refund starts is not in dispute. The only dispute is in respect of whether the interest should be granted up to the date of preparation of order giving effect or it should be granted up to the date on which actual refund was received by the assessee. In this respect Ld. Counsel for the assessee placed reliance on the decision of Coordinate Bench of ITAT, Mumbai in the case of Small Industries Development Bank of India Vs. DCIT in ITA No. 3707/Mum/2012 dated 15.09.2017 wherein it was held that assessee was justified in seeking interest u/s. 244A up to the date of receipt of the refund voucher. Relevant portion of the said decision in para 7 is reproduced as under: We have carefully considered the riv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Hon ble High Court of Bombay in the case of DIT(IT) Vs. WNS Global Services (UK) ltd. (2013) 32 taxmann.com 54 (Bom.), wherein he invited our attention to the substantial question of law placed at Sl. No. 6 which is reproduced as under: (6) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the assessee being non-resident and the entire income of the assessee subject to TDS u/s. 195 of the Act and hence no liability arises u/s. 234B and 234C of the Act? 22.1. Hon ble High Court answered this question in favour of the assessee. The relevant extract of the decision is reproduced as under: 6. So far as Question (6) is concerned, the Counsel for the parties state that the issue raised therein stands covered in favour of the Respondent- Assessee and against the Revenue by the decision of this Court in the matter of DIT (International Taxation) vs. NGC Network Asia LLC (2009) 313 ITRR 187 (Bom.) Since the Tribunal in the impugned order has followed the decision of this Court in the matter of NGC Network Asia LLC (supra) in granting relief to the Respondent-Assessee, we see no reason to entertain Ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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