Beneficial treaty rate prevails over domestic tax rate where the DTAA offers lower taxation and the omission is apparent from the record.

The Tribunal held that a rectification application filed after the limitation amendment was still governed by the earlier four-year period, because the order sought to be corrected predated the amendment and the curtailed limitation could not extinguish an existing right. It also found that the assessee had raised the India-UK DTAA rate in its written submissions, making the omission to apply the treaty rate an apparent mistake from the record. Applying section 90(2), the Tribunal directed taxation of fees for technical services at the more beneficial treaty rate rather than under section 115A, with grossing up where tax was borne by the payer.

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Issues: (i) Whether the miscellaneous application under section 254(2) of the Income-tax Act, 1961, filed after the amendment reducing the limitation period, was time-barred. (ii) Whether the earlier order required rectification so that fees for technical services were taxed at the beneficial rate under the India-UK DTAA instead of section 115A of the Income-tax Act, 1961.

Issue (i): Whether the miscellaneous application under section 254(2) of the Income-tax Act, 1961, filed after the amendment reducing the limitation period, was time-barred.

Analysis: The amended provision reduced the period for filing a rectification application from four years to six months. The order sought to be rectified had been passed before the amendment came into force, and the application was filed after the amendment. Relying on the principle that a curtailed limitation period should not destroy a vested right of action already available under the earlier law, the Tribunal held that the pre-amendment limitation governed the application.

Conclusion: The miscellaneous application was held to be within limitation.

Issue (ii): Whether the earlier order required rectification so that fees for technical services were taxed at the beneficial rate under the India-UK DTAA instead of section 115A of the Income-tax Act, 1961.

Analysis: The assessee had specifically raised the applicability of the treaty rate in its written submissions, and the Tribunal held that the issue formed part of the record. Since section 90(2) gives effect to the more beneficial provision, and Article 13(2) of the India-UK DTAA provided a lower rate than section 115A, the earlier omission to apply the treaty rate was treated as an apparent mistake. The Tribunal therefore amended the operative findings and directed taxation at the beneficial treaty rate, with grossing up of the tax borne by the payer.

Conclusion: The assessee was held entitled to taxation at 15% on gross receipts under the India-UK DTAA.

Final Conclusion: The rectification applications were allowed and the earlier order was modified so that the treaty rate, being more beneficial, governed the taxation of fees for technical services.

Ratio Decidendi: Where a beneficial treaty provision applies under section 90(2) of the Income-tax Act, 1961, it prevails over the domestic charging provision for the same income, and a rectifiable omission to apply that beneficial rate can be corrected under section 254(2) if it is apparent from the record.

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