Treaty-based foreign income taxation claim restored for fresh adjudication after Form 67 was filed before processing.

A treaty-based claim for special-rate taxation of foreign income, supported by Form 67 filed before processing, was not examined on merits by the first appellate authority, which instead directed the assessee to seek rectification. As the claim had been raised in the return and the dispute required substantive consideration, the matter was restored for fresh adjudication in accordance with law with an opportunity of hearing. The result was remand to the first appellate authority for reconsideration of the treaty benefit claim, without a final determination on the tax treatment.

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Issues: Whether the assessee's claim for taxation of foreign income at the special rate under the double taxation avoidance agreement, supported by Form 67 filed before intimation, required consideration on merits, and whether the matter should be remanded when the first appellate authority declined to adjudicate and directed rectification.

Analysis: The assessee had claimed the treaty benefit in the return and filed Form 67 before the processing of the return. The demand arose because the processing authority taxed the foreign income at normal rates without considering the treaty claim. The first appellate authority did not examine the merits and disposed of the appeal by directing the assessee to seek rectification. In these circumstances, the matter required reconsideration on merits by the first appellate authority with due opportunity of hearing.

Conclusion: The issue was restored to the file of the first appellate authority for fresh adjudication in accordance with law, and the assessee was entitled to reconsideration of the treaty claim.

Final Conclusion: The appeal resulted in a remand for fresh examination of the assessee's claim, without a final adjudication on the merits of the tax treatment.

Ratio Decidendi: Where a treaty-based tax claim supported by record is not examined on merits, and the first appellate authority disposes of the appeal only by directing recourse to rectification, remand for fresh consideration with an opportunity of hearing is warranted.

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