Revisional jurisdiction and treaty tax credit: revision beyond notice failed, while Oman dividend credit under the DTAA was upheld.

A revisional order under section 263 was held unsustainable where it went beyond the show-cause notice and sought to disturb an assessment completed after specific enquiries; revision cannot rest on a mere change of opinion when the Assessing Officer had adopted a plausible view after hearing the assessee. On treaty relief, dividend income received in Oman qualified for deemed tax credit under Article 25(4) of the India-Oman DTAA read with section 90 because the Omani exemption was shown to be a tax incentive linked to economic development, and the competent foreign clarification plus consistent prior treatment supported that view. The revision failed and treaty credit was upheld.

---

---

Issues: (i) Whether the revisional order under section 263 of the Income-tax Act, 1961 was sustainable when it travelled beyond the show-cause notice and disturbed an assessment made after due enquiry. (ii) Whether dividend income received in Oman was entitled to deemed tax credit under Article 25(4) of the India-Oman DTAA read with section 90 of the Income-tax Act, 1961.

Issue (i): Whether the revisional order under section 263 of the Income-tax Act, 1961 was sustainable when it travelled beyond the show-cause notice and disturbed an assessment made after due enquiry.

Analysis: The assessment had been completed under section 143(3) after specific queries on the dividend tax credit claim and the assessee's replies on the treaty position and Omani law. The revisional authority could not enlarge the scope of the proceedings beyond the matters put to the assessee in the notice. An order under section 263 can be made only after the assessee is heard on the very errors proposed to be revised. The assessment order also could not be treated as erroneous merely because another view was possible, where the Assessing Officer had made enquiries and adopted a plausible view.

Conclusion: The revisional order was not sustainable and was liable to be quashed.

Issue (ii): Whether dividend income received in Oman was entitled to deemed tax credit under Article 25(4) of the India-Oman DTAA read with section 90 of the Income-tax Act, 1961.

Analysis: Article 25(4) deems tax payable in the contracting state to include tax that would have been payable but for a tax incentive designed to promote economic development. The Omani clarification showed that exemption of dividend income under Article 8(bis) was introduced to promote investment and economic development, and the Omani assessments consistently treated the dividend as exempt on that basis. The Tribunal was justified in relying on the clarification issued by the competent Omani authority and in applying the consistent treatment adopted in earlier years. The Revenue's attempt to deny the benefit by recharacterising the income and disputing the Omani exemption was rejected.

Conclusion: The assessee was entitled to deemed tax credit on the dividend income.

Final Conclusion: The revision under section 263 could not stand, and the assessee's claim to treaty-based tax credit was upheld; the appeals were dismissed.

Ratio Decidendi: A revisional order cannot extend beyond the show-cause notice or substitute a mere change of opinion where the assessment was made after enquiry, and treaty tax credit must be allowed where the foreign exemption is shown to be a tax incentive for economic development within the meaning of the DTAA.

---