Treaty-based tax rate on interest income excludes separate surcharge and education cess in return processing.

Where interest income is taxed under a treaty-prescribed rate in the India-Singapore DTAA, surcharge and education cess cannot be added separately while processing the return under section 143(1). The Tribunal followed its coordinate bench on the same treaty issue and held that, once the treaty rate governs the charge on interest income, the additional levies do not form part of that rate for separate inclusion at the processing stage. The appellate order deleting the surcharge and education cess was therefore left undisturbed, and the Revenue's appeal failed.

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Issues: Whether surcharge and education cess could be separately levied while processing the return under section 143(1) where the assessee claimed the treaty rate of tax on interest income under the India-Singapore DTAA.

Analysis: The assessee, being a Singapore tax resident, offered interest income at the treaty rate. The adjustment made while processing the return was challenged on the ground that the scope of section 143(1) is limited. Following the coordinate bench decision on an identical treaty-based issue, the Tribunal noted that where the DTAA prescribes a specific rate for interest income, that rate governs the charge, and surcharge and education cess are not to be added separately. The Tribunal therefore found no reason to disturb the appellate order deleting the additional levy.

Conclusion: The separate levy of surcharge and education cess was not sustainable, and the assessee succeeded on the issue.

Final Conclusion: The Revenue's appeal failed, and the deletion of the additional tax components was upheld.

Ratio Decidendi: Where tax on interest income is governed by a treaty-prescribed rate, surcharge and education cess cannot be added separately to that rate in processing under section 143(1) if the treaty rate is otherwise applicable.

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