TaxTMI 
TaxTMI 
2023 (9) TMI 1312
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....erest income on refund received under section 244A of the Act from the Income Tax Department as income of the appellant without following the directions of the Hon'ble Dispute Resolution Panel ('DRP') to verify whether any favorable order was passed by any court in the assessee's own case allowing the claim of the non-taxability of interest income. 1.2 That on the facts and in the circumstances of the case, the Ld. AO has erred in taxing the said receipt of Rs. 21,12,54,080 pertaining to interest income as income of the appellant without appreciating the favorable order of Hon'ble Kolkata Tribunal in the assessee's own case (ITA No. 437 to 441 of 2021 dated 02 September 2022 for AY 2008-09 to AY 2012-13) wherein in the context of taxability of interest income, applicability of MFN Clause in the protocol to the India- Netherland DTAA was allowed and it was held as not taxable in India. 1.3 That on the facts and in the circumstances of the case, the Ld. AO has erred in taxing, and the Hon'ble DRP has further erred in confirming such taxation of, the receipt of Rs. 21,12,54,080 pertaining to interest income on refund received under section 244A of the Act from the In....
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....d at the flat rate as per the India-Netherlands DTAA and no surcharge or education cess shall be applicable on it. 4. Erroneous levy of Interest under section 234A 4.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in levying interest under section 234A of the Act amounting to Rs. 20,23,347 without appreciating the fact that the company has filed its ROI on 08 February 2021 i.e. within the due date of 15 February 2021 and there would not arise any consequential interest under section 234A of the Act. 5. Erroneous levy of Interest under section 234B 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 234B of the Act amounting to Rs. 2,22,56,817. 6. Erroneous addition of refund already issued 6.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in adding refund already issued amounting to Rs. 9,23,283 to the demand arising to the Company without considering the fact that no such refund was granted to th^ Company. 7. Initiation of penalty proceedings 7.1 That on the facts an....
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....tax refund held to be not taxable in the hands of the assessee has been dealt by this Tribunal reads as follows: "19. We have heard the rival contentions and perused the material available on record. Admittedly, it is a fact on record that assessee is covered by the India-Netherlands DTAA. It is also a fact undisputed that by virtue of Protocol IV(2) which is a part of the India-Netherlands Treaty gives benefits of Most Favoured Nation clause to the assessee. On the perusal of the said Protocol, it is evident that if the provisions of a tax treaty entered into by India after signing of India-Netherlands DTAA i.e. after 21.01.1989 with another OECD member country is more beneficial either in terms of its scope and coverage or tax rate vis-a-vis the India-Netherlands DTAA then the said provisions shall also apply into the India-Netherlands DTAA. Factually, it is noted that India Italy DTAA came into force on 23.11.1995 i.e. post 21.01.1989 and hence, the beneficial provisions available to the assessee under the India-Italy Treaty on the aspect of taxability of interest as in the present case will get force of attraction and becomes available into the India-Netherlands DTAA b....
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....oidance of double taxation, then in relation to the assessee to whom such agreement applies, the provisions of the Act shall apply to the extent they are more beneficial to the assessee. Thus, in the conspectus of the MFN clause by virtue of Protocol to India-Netherlands Treaty, the more beneficial provisions of India-Italy Treaty becomes available to the assessee to which even the Ld. CIT(A) has not disputed. In our considered view, there is nothing which has been deemed under the Treaty provisions and the provisions of section 90 of the Act, which are all based on the negotiated terms between the countries to arrive at the double taxation avoidance agreement between themselves. We further note that Hon'ble High Court of Delhi in the case of Steria (India) Ltd. Vs. CIT in W.P.(C) 4793/2014 and CM Appl. 9551/2014 dated 28.07.2016 observed that in terms of the Protocol there can be a benefit to the assessee either of a lower rate or a more restricted scope and one does not mean to exclude the other. "15. The Court finds no warrant for the above restrictive interpretation placed on Clause 7 of the Protocol. The words 'a rate lower or a scope more restricted' occurring th....
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....s to taxability of the interest on income tax refund. Therefore, since the assessee is benefitted with the protocol to the India-Netherland treaty dated 21.01.1989 and the favorable provisions of India-Italy tax treaty are applicable on the assessee company because Netherland and Italy both are members of the Organization for Economic Cooperation and Development (OECD) and as per provisions of Article 12(3)(a) of India-Italy DTAA interest earned from Govt. of India by a resident of Italy is not taxable in India, a similar analogy has been applied to the assessee company which is a resident of Netherland. Thus, taking a consistent view, we set aside the finding of ld. AO and decide the issue in favour of the assessee holding that interest received u/s 244A of the Act by the assessee company based at Netherland from Govt. of India is not taxable. Thus, ground no. 1 raised by the assessee is allowed. 8. Ground no. 2 is alternate in nature and the same becomes infructuous. 9. Ground no. 3 is consequential in nature which led to levy of surcharge and education cess. Thus, ground nos. 1, 2 & 3 are allowed. 10. Ground no. 4 relates to erroneous levy of interest u/s 234A of the Ac....