TaxTMI 
TaxTMI 
2023 (1) TMI 1198
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....-09 and 2009-10) and 07.02.2020 (for AYs 2010-11 to 2012-13). 2. Shri Ketan Ved, CA appeared on behalf of the assessee and Shri G. H. Sema, Addl. CIT appeared on behalf of the revenue. 3. Common grounds of appeal except variance in amount raised by the assessee in all the assessment years i.e. ground nos. 1 to 3 read as under: "1. That on the facts and in the circumstances of the case and in law, the order passed by the Ld. Commissioner of Income-tax (Appeals) ['CIT(A)'] dated 28 August 2021 under section 250 of the Income-tax Act, 1961 ('IT Act') against the impugned order passed by the Learned Assessing Officer ('Ld. AO') under section 143(3) r.w.s. 254 of the IT Act dated 23 July 2019, is bad in law and on facts. 2.1 That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in remanding back the matter to the Ld. AO for verifying the applicability of the provisions of section 153(5) of the IT Act, in relation to granting of additional interest under section 244A( 1 A) of the Act on the refunds determined by the Ld. AO in the impugned order under section 143(3) r.w.s. 254 of the IT Act dated 23 July 201....
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....anted' as contained in the provisions of section 244A of the IT Act, to mean the date of passing of the order granting such refund instead of the date of actual receipt of such refund to the bank account of the Appellant. 4.3. That on the facts and in-the circumstances of the case and in law, the Ld. CIT(A) erred in not allowing interest under section 244A(I) of the Act, to be granted to the Appellant till the date of receipt of the refund by holding that the Appellant had failed to submit evidence to show that refund was credited several days after the order granting such refund was passed, without appreciating that details of such delay in credit of refund was duly provided in the submissions filed before him." 3.2. Ground nos. 5 and 6 in respect of AY. 2010-11 reads as under: "5.1. That on the facts and in the circumstances of the case and in law, the Ld. AO erred in levying interest under section 234C of the Act amounting to Rs.49,80,400 and the ld. CIT(A) further erred in confirming such levying of interest u/s. 234C without appreciating that the entire income of the Appellant was subjected to tax deduction at source and no tax liability for computatio....
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....ent Support Service Agreement (MSSA) and Research and Development Co-operation Agreement (RDCA). The matter travelled in appeal before the Coordinate bench of ITAT, Kolkata in ITA No. 1889/Kol/2012 in respect of these additions which was allowed vide order dated 25.10.2018 by holding the receipts in MSSA and RDCA as not taxable in India. 5.1. Subsequently, Ld. AO passed the order giving effect to the order of Coordinate Bench of ITAT, Kolkata (supra) on 23.07.2019 u/s. 143(3) r.w.s. 254 of the Act determining total income at Rs.25,57,77,930/- and refund including interest u/s. 244A(1) payable to the assessee at Rs.25,22,16,230/-. From the order giving effect to the appellate order of ITAT, assessee raised the issue before Ld. CIT(A) in not granting of interest u/s. 244A(1A) of the Act and deduction of tax at source on interest payment u/s. 244A(1) of the Act of Rs.11,50,45,854/-. 5.2. Before the Ld. CIT(A) detail and exhaustive submission was made in respect of the applicable law and the relevant provisions to substantiate its claim. Ld. CIT(A) principally agreed with the contentions of the assessee on the issue of not granting of interest u/s. 244A(1A) of the Act but in abse....
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.... the refund is granted. He further stated that section 153(5) of the Act provides for giving effect to the order u/s. 254 within a period of three months from the end of the month in which the order is received by the Pr. Commissioner/Commissioner of Income Tax. 6.1 He also referred to the first proviso to section 153(5) of the Act and submitted that according to it, if it is not possible for the AO to give effect to such order for reasons beyond his control, the AO may request the Pr. Commissioner or Commissioner in writing to provide additional period of six months. Based on this proposition of law, Ld. Counsel submitted that in the instant case, Hon'ble ITAT had passed the order on 25.10.2018, copy of which is placed on record. Ld. AO has passed the order giving effect to the said order (impugned order only on 23.07.2019). Considering these two relevant dates, Ld. Counsel submitted that since more than six months have elapsed after the passing of the order by the Hon'ble ITAT and since there is nothing on record suggesting granting of additional six months for extension of time line by the Pr. Commissioner or Commissioner for passing the effect order Ld. Counsel believes that....
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....he date following the date of expiry of the time allowed under sub-section (5) of section 153 to the date on which the refund is granted." 8.2. "153(5) Where effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer or the Transfer Pricing Officer, as the case may be, wholly or partly, otherwise than by making a fresh assessment or reassessment or fresh order under section 92CA, as the case may be, such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner: Provided that where it is not possible for the Assessing Officer or the Transfer Pricing Officer, as the case may be, to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner/Commissioner on receipt of such request in writing from....
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.... it for statistical purposes. 10.1. In our considered understanding, powers of the Commissioner Appeals are contained in section 251 of the Act which does not give him the power to set aside the matter to Ld. AO and allow the ground of appeal for statistical purposes. Accordingly, what the Ld. CIT(A) has done is not in accordance with the provisions of section 251 of the Act. However, we note that as in the case of appeal before the Ld. CIT(A), even before us, Ld. Counsel for the assessee has not brought on record any information/document to demonstrate that there is a delay in passing the appeal effect order which has breached the time limits prescribed in section 153(5) of the Act so as to entitle the assessee for claim of additional interest u/s.244A(1A) of the Act. From the submissions made by the Ld. Counsel of the assessee which are more in the nature of apprehensions, we find it proper to remit the matter on this issue to the file of Ld. AO for the limited purpose of verification of records to take note of the date on which the office of the Pr. Commissioner/Commissioner received the order of the Tribunal and if any approvals as required under the proviso to section 153(5....
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....A) in his order has not disputed on the applicability of the protocol/MFN clause of India-Netherlands DTAA to import the provisions under India-Itally DTAA to the extent they are more beneficial to the assessee. Ld. Counsel further pointed out that despite the said acceptance by the Ld. CIT(A), he has observed that it would be erroneous to allow for the application of the deeming provision created in the context of the reading of the provisions i.e. interest on refund would be a debt obligation owed by the Government within the ambit of India-Itally DTAA to the case of the assessee, who is in reality governed by India-Netherlands DTAA and not India-Itally DTAA. By observing so, Ld. CIT(A) dismissed the ground raised by the assessee on this issue for all the five years. Aggrieved, the assessee is in appeal before this Tribunal. 12. Before us, Ld. Counsel reiterated the submissions made before the Ld. CIT(A) and referred to the India-Netherlands DTAA which came into force on 21.01.1989. He referred to Article 11 of the said treaty dealing with taxation of interest, relevant extract of which are reproduced as under: "1. Interest arising in one of the States and paid to a r....
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....ate or scope as provided for in that Convention or Agreement on the said items of income shall also apply under this Convention." 14. On our specific query on the binding force of the protocol to a tax treaty, ld. Counsel referred to the decision of Coordinate Bench of ITAT, Kolkata in the case of DCIT Vs. ITC Ltd. (2002) 82 ITD 239 (Kol) and also to the decision of Hon'ble High Court of Delhi in the case of Steria India Ltd. Vs. CIT (2016) 386 ITR 390 (Del.). He also invited attention to the decision of Hon'ble High Court of Delhi in the case of Concentrix Services Netherlands Vs. ITO TDS in Appeal No. WP(C) No.9051/2020 dated 22.04.2021 wherein it was held that protocol is an integral part of the tax treaty and no separate notification is required for applicability of provisions of protocol. Similar view was taken by the Hon'ble High Court of Karnataka in the case of Apollo Tyres Ltd. Vs. CIT (IT) in W.P. No. 31737 of 2016. In this context, Ld. Counsel thus pointed out that India had entered into a tax treaty with Italy who is a member of OECD on 23.11.1995 i.e. after the date of signing of India-Netherlands Tax Treaty, which was on 21.01.1989. Thus, ld. Counsel submitted that....
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....axation. He, thus submitted that Ld. AO in the present case has paid the interest on refund to the assessee on behalf of the Government of India under the provisions of section 244A(1) of the Act and thus by applying the MFN clause contained in India-Netherlands DTAA with restrictive scope of taxation of interest in the India-Italy DTAA, the said interest income is exempt from tax in India. 16. To buttress his contention, he placed reliance on the decision of Hon'ble High Court of Madras in the case of Ansaldo Energio SPA Vs. CIT (IT) (2016) 384 ITR 312 (Mad.) wherein it was held that interest on income tax refund is a 'debt claim' payable by revenue and in terms of Article 12(3)(a) of the India Italy DTAA such interest is not taxable and no TDS ought to be done by the AO. He pointed out to the substantial question of law dealt with by the Hon'ble Madras High Court in the case, which is reproduced as under: "(i) Whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in holding that interest under section 244A of the Act on refund of income tax is not covered within the term 'interest' under Article 12(4) and accordingly, the s....
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....supra) without realising what they were actually indicating. The statement found in paragraph 38 of the decision in Tata Chemicals Ltd.'s case (supra) to the effect "refund due and payable to the assessee is debt owed payable by the revenue" is actually a perfect statement of law. It is certainly a theorem, but not Euclid's theorem. Therefore, the law as we see is well settled to the effect that what was due as a refund and what was payable as interest on such refund are debt claims within the meaning of Article 12.4. As a consequence, they satisfy the parameters of Article 12.3(a). Hence, the first question of law is answered in favour of the appellant. Consequently, the second question of law does not arise for consideration. The appeal stands allowed. There will be no order as to costs." 17.1. He thus finally submitted that though the Ld. CIT(A) has accepted the applicability of the provisions of India-Italy DTAA but held that the decision of Hon'ble Madras High Court (supra) interpreting the provisions of the said DTAA cannot be applied as it would be equivalent to applying another "deeming provisions". 18. Per contra, Ld. Sr. DR strongly countered the submissions....
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....egotiations with Italy, India has agreed to a restrictive scope of taxation of interest and thus applying the provisions of India-Italy Treaty read with Protocol of the India-Netherlands treaty the restricted scope of taxability of interest becomes applicable in the present case. 19.2. We note that it is an undisputed fact that Ld. CIT(A) has agreed and found favour with the contention of the assessee on this aspect, however, has dismissed the ground of the assessee by bringing into his observation on the aspect of 'deeming provision' to negate the treatment of interest on income tax refund as a 'debt claim' payable by revenue and making it covered for deduction of tax at source. In our considered understanding, we do not ascribe to the view taken by the Ld. CIT(A) on his observation of bringing in the aspect of 'deeming provision' so as to make the interest on income tax refund subject to deduction of tax at source. 19.3. We note that protocol to a treaty is an integral part of the treaty under consideration and carries the same binding force as the MFN clause therein. The DTAA are the agreements between the two jurisdictions at a country level which are based on negotiation....
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.... a State which is an OCED member. The purpose of Clause 7 of the Protocol is to afford to a party to the Indo-France Convention the most beneficial of the provisions that may be available in another Convention between India and another OCED country." 19.5. Hon'ble High Court of Madras in the case of Ansaldo Energio SPA Vs. CIT (IT) (supra) has held that the interest on income tax refund is a 'debt claim' payable by the Revenue in terms of Article 12(3)(a) of the India-Italy Treaty and thus such interest is not taxable and no TDS ought to be done by the AO. We note that Ld. CIT(A) has wrongly interpreted this finding of the Hon'ble Madras High Court as application of 'deeming provisions' and, therefore, we set aside the finding of the Ld. CIT(A) on this aspect. Accordingly, we direct the Ld. AO to refund the TDS done on the interest paid to the assessee on the Income Tax refund under section 244A(1) of the Act. To sum up, we hold that in the present case of the assessee, the beneficial provision restricting the scope of taxability of interest in terms of Article 12(3)(a) of the India- Italy DTAA namely, non-taxability of interest on income tax refund by virtue of it being a 'debt....
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.... in the case of M/s. Novartis India limited, ITA No. 1249/Mum/2010 dated 18.3.2011 has decided a similar issue in favour of the assessee by referring to an unreported judgement of the Hon'ble Bombay High Court in the case of Citi Bank vs. c/T in ITA No.6 of 2001 dated 17.7.2003, wherein the claim of the assessee for interest was upheld upto the date when the Pay Order is "actually received by the assessee pursuant to the order sanctioning the refund". Therefore, following the aforesaid precedents, in our view, the assessee is justified in seeking interest u/s 244A of the Act upto the date of receipt of the refund order, i.e. 6.4.2010. Thus, on this aspect, assessee succeeds." 21. Considering the facts on record and the judicial precedents, in our view the ground raised by the assessee for claiming interest u/s. 244A(1) up to the date on which actual refund was received i.e. 02.03.2020 is justified. Accordingly, we direct the Ld. AO to recompute the interest due to the assessee in compliance with our aforesaid decision. Accordingly, this ground of appeal for all the four years is allowed. 22. In respect of AY 2010-11 for the grounds relating to erroneous levy of interest u....