Wrong classification in return cannot create tax liability; rectification relief upheld where income was not taxable under the DTAA.

Income received for services rendered to an Indian company was held not chargeable to tax under Article 12 of the India-USA DTAA, and a mistaken reporting under the wrong head in the return did not by itself create tax liability. The Tribunal's view that rectification under section 154 could not be denied merely because no revised return had been filed was upheld, in light of the principle that taxpayers should receive relief clearly due to them. The revenue's challenge failed because no substantial question of law arose.

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Issues: Whether income received for services rendered to an Indian company, though shown under a wrong head in the return, could still be brought to tax or denied rectification under section 154 of the Income-tax Act, 1961.

Analysis: The income in question was found to be not chargeable to tax under Article 12 of the India-USA Double Taxation Avoidance Agreement. The addition arose only because the assessee had mistakenly reported the receipt under the wrong head. The Tribunal also relied on the CBDT's circular directing officers to assist taxpayers in claiming reliefs to which they are clearly entitled, and on the principle that a wrong classification in the return does not by itself create tax liability. In these circumstances, the Tribunal's view that rectification could not be denied merely for want of a revised return was held to be justified.

Conclusion: The challenge to the Tribunal's order failed, and the revenue's appeal was rejected because no substantial question of law arose.

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