Place-of-effective-management exclusion supported refund where New Zealand tax residence and liability established that Indian tax was not lawfully due.

Place-of-effective-management residency rules did not apply for the relevant period to companies within the turnover or gross-receipts exclusion in Circular No. 08/2017, which bound the tax department. Once New Zealand residence and tax liability were determined, the income was not liable to Indian tax. Section 155(14A), read with Rule 128, was described as substantive as well as procedural relief for settled foreign-tax liability; procedural requirements could not defeat protection against double taxation. Indian tax not lawfully due was refundable, with interest in accordance with law, and rejection of the refund claim was treated as invalid.

---

---

Issues: Whether the assessee was entitled to refund of Indian income tax paid for the relevant assessment years and rectification under Section 155(14A) after its New Zealand residence and tax liability were determined.

Analysis: The assessee, incorporated in New Zealand, had filed Indian returns on the bona fide assumption that its place of effective management was in India. Circular No. 08/2017 excluded companies having turnover or gross receipts of Rs. 50 crores or less from the application of the place-of-effective-management residency provision for assessment year 2017-18 onwards; the circular bound the Department. The subsequent determination and payment of tax in New Zealand established that the assessee was not liable to Indian tax on the income in question. Section 155(14A), read with Rule 128, was construed as both substantive and procedural, intended to enable relief where foreign-tax liability is settled. Tax not lawfully due cannot be retained, and procedural requirements cannot defeat relief against double taxation.

Conclusion: The assessee was entitled to refund of the Indian tax paid, with interest in accordance with law; the rejection of its refund claim was invalid.

---