9911796707
TMI Blog1990 (12) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... ouble Taxation Avoidance Agreement between Government of India and France. We find no discussion on this point in the assessment order and for the first time, it was raised as a preliminary objection to the disallowance under section 40A(5) before the CIT(A). The CIT(A) disposed of this point by observing as under : " I have carefully considered the submissions of the assessee and in my opinion they do not carry any force. Article XIX of the treaty clearly lays down that laws in force in either of the contracting States will continue to govern the income in the respective contracting State except where express provision to the contrary is made in the agreement. There is no express provision in the agreement that the disallowances to be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as the IAC is concerned, he has to go by the provisions of the I.T. Act which has placed reasonable limits on the expenditure by way of remuneration to the executives and other administrative members of the staff. This objection of the assessee has to be rejected. " 3. The learned counsel for the assessee contended that the assessee is a French resident and, therefore, its assessment in India was subject to the Double Taxation Avoidance Agreement (DTAA) entered into between Government of India and France, under section 90 of the Income-tax Act. Article III(3) thereof, he submitted, provides that while determining the industrial and commercial profits of a permanent establishment, a deduction of expenses wherever incurred including the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 983, dated 29-5-1989, wherein, in similar circumstances, the Tribunal held that the applications of the provisions of section 44C would be in violation of Art. III(3) and, therefore, would not apply. The learned Departmental Representative, on the other hand, supported the orders of the departmental authorities and submitted that the decision rendered in the context of section 44C would not be applicable with regard to the provisions of section 40A(5) as there is apparently no conflict between the two. 4. We have heard the parties and considered their rival submissions. As a matter of principle, we agree with the learned counsel for the assessee that the provisions of DTAA would prevail over the provisions of the Income-tax Act, in view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses and without any restriction. Section 40A(5), on the other hand, provides for restrictive deduction, i.e. Rs. 5,000 p.m. as salary and 1/5th or Rs. 12,000 p.a. as perquisites, benefit or amenity. There seems to be prima facie conflict between the two. However, on a close look of the provision of section 40A, one finds that it is not so. Section 40A(5) is subject to the provisions of section 40A(1). It reads : "The provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provision of this Act relating to the computation of income under the head 'Profits and gains of business or profession'." Thus, all the provisions of section 40A, including sub-section (5) are made applicable notwit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also other provisions of the Act dealing with Computation of income under the head 'Profits and gains of business or profession'. Art. III(3) provides for computation of the industrial and commercial profits by deducting all expenses and is thus a provision providing for computation of income under the head "Profits and gains of business or profession". It would be a provision under section 90 of the Act and would be subject to the restrictive clauses of section 40A(5). There is no conflict between the provisions of DTAA and the Income-tax Act. One overrides the other as per the specific provisions of the statute. We, therefore, reject the contention of the assessee and hold that the CIT(A) was justified in deciding the matter against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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