Treaty-based tax collection suspension supports nil withholding relief where MAP is invoked and revenue is secured.

A nil withholding certificate under Section 197 was held available where the taxpayer had invoked the mutual agreement procedure under the treaty, furnished a bank guarantee, and sought deferment of tax collection under the governing memorandum. The refusal to grant relief on the ground that the benefit arose only after formal admission of the matter, or that expiry of the assessment year made the request infructuous, was found inconsistent with Article 27 and the memorandum. Those instruments contemplated suspension of collection for prior, current, and future taxable years once the procedure was invoked and revenue was secured, so later admission could not defeat entitlement to consideration of the certificate.

---

---

Issues: Whether the petitioner was entitled to a nil withholding certificate under Section 197 for the assessment year 2010-11 on the basis of the mutual agreement procedure under the treaty and the memorandum governing deferment and suspension of tax collection.

Analysis: The petitioner's claim had been supported by the invocation of the mutual agreement procedure, the furnishing of a bank guarantee, and the treaty-based arrangement for deferment and suspension of collection during pendency of the procedure. The refusal to grant relief proceeded on the assumption that the benefit arose only after formal admission of the matter under the procedure and that the expiry of the assessment year made the request infructuous. The Court held that this approach was inconsistent with Article 27 of the treaty and the memorandum, which contemplated suspension of collection in respect of prior, current, and future taxable years once the procedure was invoked and the revenue was secured. The later admission of the matter could not defeat the petitioner's entitlement to consideration of the certificate.

Conclusion: The petitioner was entitled to the nil withholding certificate, and the orders rejecting the application and revision were not sustainable.

---