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2018 (12) TMI 1511 - ITAT DELHIInterest earned on income-tax refund - taxed as income from other sources as per Article 12(2) of the DTAA between Indian and UK - income accrued in India - Held that:- A careful perusal of the order of the Tribunal and the order giving effect to the directions of the ITAT amply makes it clear that the decision of a coordinate bench of this Tribunal in the case of ACIT, Dehradun vs Clough Engineering Ltd. [2011 (5) TMI 562 - ITAT, DELHI] is applicable to the facts of the case and the interest on income-tax refund cannot be treated as effectively connected with PE of the assessee and has to be taxed as per beneficial provisions of the treaty between the two countries. In view of the decisions in the case of Clough Engineering Ltd. (supra) and the stand taken by the revenue in assessee’s own case for earlier years, we are of the considered opinion that the interest earned on income-tax refund has to be taxed as income from other sources as per Article 12(2) of the DTAA between Indian and UK at 15% on gross basis. With this view of the matter, we uphold the contention of the assessee and direct the learned AO to levy the tax on the interest of income-tax refund at 15% on gross basis. Now coming to the appeal of the revenue challenging the directions of the DRP in respect of interest free foreign bank account and also foreign exchange gains on reinstatement of bank balance of foreign bank account during the year. At the outset, it is brought to our notice by the learned AR that for the Asstt. Year 2006-07, a coordinate bench of this Tribunal considered both these issues at length and reached a conclusion that the interest earned outside India has to be excluded and also that the gain on account of fluctuations of foreign exchange on reinstatement of balance lying in the foreign bank outside India should not be subjected to tax in India at all. There is no change of facts for this year from the earlier years. We, therefore, find it difficult to take a different view from the one taken. While respectfully following the same, we hold these two issues in favour of the assessee and find the grounds of appeal of the revenue devoid of merits.
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