TaxTMI 
TaxTMI 
2000 (3) TMI 1081
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....wala ORDER M. A. Bakshi, J.M. We find it convenient to dispose of these three appeals of the assessee, for the assessment years 1992-93 to 1994-95, involving common issue, by this consolidated order. 2. The common issue involved in these appeals is relating to the rate of tax chargeable on the income of the company for the respective assessment years. The relevant facts in this case are that the appellant, viz., Bank of America is a resident of the United States. It had filed the returns of income for assessment years 1992-93 to 1994-95 in India. Assessments under section 143(3) had been completed for the said assessment years. In the case of domestic companies, the rate of tax provided under the respective Finance Acts is 45 per cent. Besides, surcharge at the rate of 15 per cent is chargeable. In the case of companies other than domestic companies the rate of tax provided under the respective Finance Act is 65 per cent. However, no surcharge is payable by a company other than a domestic company. The appellant company is admittedly a company other than a domestic company and therefore under the provisions of the Income-tax Act read with the Finance Acts of the respective asses....
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....ld go up to 66.75 per cent. However, since the Finance Act imposes tax at the rate of 65 per cent only, therefore the difference of tax between the domestic companies and other than domestic companies has been maintained at less than 15 per cent. That therefore, the Assessing Officer was not justified in restricting the rate of tax in the case of the appellant bank to 60 per cent only". The CIT(A) has accordingly directed the Assessing Officer to levy tax at the rate of 65 per cent for the respective assessment years. 4. Being aggrieved the assessee is in appeal against the decision of the CIT for the respective assessment years. It has been contended that section 90 of the Income-tax Act, 1961 provides for entering into an agreement with a Government of any country outside India by the Central Government for the granting of relief in respect of income etc. Our attention has been drawn to the convention between the two countries. Reference has also been made to the Circular No. 333 of the Central Board of Direct Taxes (F. No. 506/42/81-FTD), dated 2nd of April, 1982 wherein it has been clarified that in the event of any specific provision in the double taxation avoidance agr....
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....nto account the surcharge. The surcharge, according to the learned counsel, is charged on the income-tax in respect of certain assessees as provided under the Finance Act. In the case of foreign companies there is no surcharge on income-tax. In the case of domestic companies a surcharge of 15 per cent is charged. The Central Government could levy a surcharge in respect of the foreign companies as in the case of domestic companies it was contended. However, the mere fact that the Central Government have not levied surcharge on the income-tax payable by the foreign companies, it cannot be said that the difference in the rates of tax payable by the foreign companies does not exceed 15 per cent of the rate of tax payable by the domestic companies, it was contended. 5. It has further been contended that the decision of the authority of the advance ruling reported in the case of Application No. P-16 of 1998, In re [1999] 236 ITR 103 and relied upon by the CIT is distinguishable on facts. Similarly, the decision of the Supreme Court in the case of CIT v. K. Srinivasan [1972] 83 ITR 346 , relied upon by the CIT is claimed to be misplaced. It is not disputed that surcharge is payable on th....
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.... on behalf of the revenue to the contrary is misconceived. Even otherwise an order under section 263 without recording a definite finding would be invalid in view of the decision of the Bombay High Court in the case of CIT v. Gabriel India Ltd. [1993] 203 ITR 108. The learned counsel for the assessee further invited our attention to section 2(37A), which defines the rate or rates in force. It was, accordingly, contended that the contentions advanced on behalf of the revenue are without any merit and therefore, appeals of the assessee may be accepted. 8. We have given our careful consideration to the rival contentions. The dispute involved in these appeals revolves on the interpretation of Clause 2 of Article 14 of the convention between the Government of Republic of India and the Government of United States of America. The convention between the two countries has statutory recognition under section 90 of the Income-tax Act, 1961. The Assessing Officer is empowered to make an assessment of any assessee in accordance with the provisions of the Act. Section 4 of the Income-tax Act, 1961 is the charging section. It provides that where a Central Act enacts that income-tax shall be char....
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.... in the tax rate shall not, however, exceed the existing difference of 15 percentage points. 10. It is observed from clause 2 of Article 14 reproduced above that a company which is resident of United States of America is permitted to be subjected to tax in India at a rate higher than applicable to the domestic companies provided the difference between the rate of tax applicable to the companies which are resident of United States of America is not more than 15 percentage points of the rate of tax applicable to the domestic companies. In the case of K. Srinivasan (supra) their Lordships of the Supreme Court have held that income-tax includes surcharge. If one were to work out the difference between the tax paid by the domestic companies and other than domestic companies including surcharge, then it cannot be said that the rate of 65 per cent applicable to the companies other than domestic companies exceeds the limits prescribed under clause 2 of article 14 of the agreement. However, it is well established principle of law in regard to interpretation of the agreements that the same should be construed as to effectuate the intention of the parties and not to defeat it. The Court is b....
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....etc. Different connotations may however be used for describing each part of the income-tax. As in the case of income, agricultural income though part of income, is treated differently under the Income-tax Act, 1961. Similarly the mere fact that the surcharge is part of income-tax does not necessarily mean that it can have no separate identity or description. It may be useful to refer to Articles 270 and 271 of the Constitution of India. Article 270 provides that tax on income other than agricultural income shall be levied and collected by the Government of India and distributed between Union and the States in the manner provided in Clause 2. Article 271 provides as under:- Notwithstanding anything in Articles 269 and 270 Parliament may at any time increase any of the dues or taxes referred to in those Articles by a surcharge for purposes of the Union and the whole proceeds of any such surcharge shall form part of the consolidated fund of India. 13. It is therefore abundantly clear that even under the Constitution the income-tax and the surcharge have been treated differently. Therefore, no wonder that the two countries viz., Government of Republic of India and the Government of U....