Treaty-based tax rate prevails for interest income, and excess levy is rectifiable as a patent mistake.

A notified India-USA DTAA rate of 15% applied to interest income of a United States resident company, and section 90 required the treaty to prevail where it was more beneficial than the Act. Charging tax at 20% in an intimation under section 143(1)(a) was therefore contrary to the governing treaty position and could be treated as a mistake apparent from the record. On that basis, the excess levy was stated to be rectifiable under section 154, and the taxpayer was entitled to computation at the treaty rate.

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Issues: Whether interest income received by a United States resident company was taxable in India at 15% under the India-USA DTAA and whether charging tax at 20% in the intimation under section 143(1)(a) of the Income-tax Act, 1961 constituted a mistake apparent from the record rectifiable under section 154.

Analysis: The applicable treaty provided a 15% rate for the relevant interest income, and under section 90 of the Income-tax Act, 1961, the treaty provisions prevailed to the extent they were more beneficial to the assessee. The excess levy at 20% was therefore contrary to the governing legal position and did not require any long-drawn reasoning to detect. The revenue authorities were bound to compute tax in accordance with the Act read with the notified treaty, and they could not rely on the assessee's mistaken computation to deny the correct treaty rate. Such overassessment was treated as an error apparent from the record and capable of rectification under section 154.

Conclusion: The assessee was entitled to taxation of the interest income at 15%, and the refusal to rectify the intimation was unsustainable. Relief was granted to the assessee.

Ratio Decidendi: Where a notified double taxation avoidance agreement prescribes a lower tax rate beneficial to the assessee, tax must be computed accordingly, and levy at a higher rate is a mistake apparent from the record liable to rectification.

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