TaxTMI 
TaxTMI 
2015 (5) TMI 1036
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....iew of paragraph (6) of article 12 of the DTAA between India and the United Kingdom, paragraph (2) of article 12 of the DTAA between India and the United Kingdom is not applicable and, hence, the interest paid on refund by the Income-tax Department it will be treated as the business income ?" 3. The appellant-assessee is engaged in a business of oil exploration. It is a non-resident company. Originally, the assessment was completed on March 8, 2005. The bone of the contention in this case relates to the taxability and the rate at which the amounts received by the appellant by way of interest on the refund ordered in respect of excess tax paid on behalf of the employees of the assessee. As already noted, the appellant was engaged in oil exploration as non-resident of India. The tax was computed at the rate of 15 per cent. on the basis of the provisions of article 12 of the Double Taxation Avoidance Treaty (hereinafter referred to as "the Treaty"). Subsequently, the matter was reopened under section 154 of the Income- tax Act, 1961 (hereinafter referred to as "the Act"). The same was dropped. Still thereafter the proceedings were initiated under section 147 of the Act. The Assessi....
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....ia can be taxed in England. However, clause (2) provides that the said interest can also be taxed in the Contracting State in which it arises (which in this case is India) as tax was paid by the Government of India in the Income-tax Department on the excess tax paid on behalf of the assessee-appellant's employees. It is to be taxed, according to the law in India, namely, the Income-tax Act, 1961, as it stands. The limitation which is cast is that when the beneficial owner of the interest so charged is a resident of the other State which means that since the appellant is resident of England, the tax so charged should not exceed 15 per cent. of the gross amount of the interest. Therefore, the appellant would contend that the tax should have been charged at 15 per cent. of the interest received which the appellant became entitled to on the basis of excess tax paid. 8. As matters stood there if there was no other provision to consider, the appellant would indeed be justified in offering 15 per cent. to taxation. But if we come to clause (6), we notice that clause (6) expressly provides that the provisions of paragraph (1), inter alia, will not apply, if the beneficial owner of i....
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....s a case where being a non-resident Indian and otherwise liable to be assessed as such, the appellant was taxed under section 44BB of the Act. He would submit that at any rate, the interest income which is derived under the refund order from the Income-tax Department should also be assessed under section 44BB and taxed under sub-section (2) at the rate of 10 per cent. His argument is immediately met by Shri H. M. Bhatia, who points out that substantial question of law is not raised in this matter. To the same, Shri Posti would respond and submit that the court is not confined to the substantial question of law which has been framed and any substantial question of law which may arise can also be considered and framed and answered. In fact, Shri H. M. Bhatia would submit that such a question was not even raised before the appellate authority and it was also not raised before the Tribunal and it does not lie into the mouth of the appellant to raise the same in this proceeding under section 260A of the Act. To the same, Shri Posti would submit that even if the matter is not raised before the first appellate authority, it has always been the law that the appellate authority must conside....
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....lant also drew our attention to a judgment, reported in Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom) [FB] of the Full Bench of the Bombay High Court, wherein the Full Bench, inter alia, took the following view (headnote) : "The basic purpose of an appeal in an Income-tax matter is to ascertain the correct tax liability of the assessee in accordance with law. Therefore, at both the stages, either before the Appellate Assist ant Commissioner or before the Appellate Tribunal, the appellate authority can consider the proceedings before it and the material on record before it for the purpose of determining the correct tax liability of the assessee. The appellate authorities, of course, cannot travel beyond the proceedings and examine new sources of income. For this purpose, other separate remedies are provided to the Department under the Income-tax Act. But, apart from this, there is nothing in section 254 or section 251 of the Income-tax Act, 1961, which would indicate that the appellate authorities are confined to considering only the objections raised before them or allowed to be raised before them either by the assessee or by the Department, as the case ma....
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....y determine any issue which- (a) has not been determined by the Appellate Tribunal ; or (b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub- section (1). (7) Save as otherwise provided in this Act, the provisions of the Code of Civil Procedure, 1908 (5 of 1908), relating to appeals to the High Court shall, as far as may be, apply in the case of appeals under this section." 13. On a conspectus of these provisions, the legal effect of the section would appear to be that the appeal is normally to be heard on the substantial questions of law formulated and the appellant can be allowed to argue only in regard to the same. It is also open to the respondent to point out that though a substantial question of law has been formulated but in fact and in law, the said question of law is really not a substantial question of law. The High Court is to deliver judgment on the basis of the decision on the question of law framed and it also provides that the High Court may also decide the appeal on any other substantial question of law which may not have been formulated. The only condition i....
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....or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent. of the aggregate of the amounts specified in sub-section (2) shall be deemed to be profits and gains of such business chargeable to tax under the head 'Profits and gains of business or profession' : Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or section 44DA or section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. (2) The amounts referred to in sub-section (1) shall be the following, namely :- (a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connection with, or supply of plant and machinery on hire used or to be used in the prospecting for, or extraction or production of, oils in India ; and (b) the amount received or deemed to be received in India by or on behalf of the assessee on account of the provision of services and faci....
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.... for the appellant would point out that, on the one hand, under the Treaty, the Department lays store by clause (6) of article 12, which provides for the amount being treated as business profits if it is in connection with the permanent office carrying on business in India through a permanent establishment. He contends that it is incongruous to still contend that it will not fall within the four corners of sub-section (2) of section 44BB of the Act. 19. We are of the view that there may not be merit in the contention of the learned counsel for the appellant. What section 44BB of the Act provides for is a special provision in respect of income in the form of profits derived by non-residents engaged in business, providing services and facilities, supplying plant and machinery used for extraction or production of mineral oils. Profits is deemed at 10 per cent. of the amounts mentioned in sub- section (2). The said amount is to be treated as the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" and then we pass on to the method of computing the amounts for the purpose of sub-section (1) which is provided in sub-section ....