2013 (12) TMI 1105

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.... to the tax @ 12.5% payable on interest income under the provisions of Double Taxation Avoidance Agreement (DTAA). 2. The assessee is a non-resident based in UAE. During the relevant year the assessee had received gross interest income of Rs.7,55,187/- from the partnership firms in India in which the assessee was partner. The assessee was governed by the provisions of DTAA between India and UAE which had specific provisions of taxation of interest income. The AO in addition to taxing the interest income at the rate prescribed, also levied education cess and surcharge. 2.1 The assessee disputed the decision of AO and submitted before CIT(A) that since there was a cap of 12.5% on the rate of tax under DTAA the said tax rate included sur....

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....he decision of the Tribunal in the case of DIC Asia Pacific Pte Ltd. v. 1)in ITA No.1458/Kol/2011 in support of the plea. It was also held in the said case that since surcharge was included in tax rate of 12.5% no further levy of education cess could be made. The ld. AR distinguished the judgment of Hon'ble High Court of Uttarakhand in case of Arthusa Offshore Co. (supra), relied upon by the ld. DR on the ground that the said judgment related to payment of tax under Article-14(2) of DTAA between India and USA and the High Court was not concerned with the interpretation of the Article-11 relating to taxation of interest.   3.1 The ld. DR on the other hand supported the orders of authorities below and placed reliance on the judgmen....

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....e. In other words, in case there is provision for dealing with a particular type of income, such type of income has to be dealt with by those provisions. Therefore, though interest income may have been assessed as business income, there being specific Article to deal with interest income i.e. Article-11, taxation of interest will be governed by the said Article-11. Secondly interest income may be taxed in contracting State in which it arises, according to law of that State but if the recipient is beneficial owner of interest, tax so charged shall not exceed 5% of gross interest if the interest is received from bank and in other cases 12.5% of gross amount of interest. In this case, the assessee is the beneficial owner of interest and tax ch....