TMI Blog2005 (11) TMI 375X X X X Extracts X X X X X X X X Extracts X X X X ..... sh High Court in case of CIT v. Vishakhapatnam Port Trust , 144 ITR 146 and the CBDT s own circular No. 333 dated April 2, 1982. The appellant contend that they had opted for rates of tax prescribed under the tax treaty but had adopted the beneficial rate of tax applicable to dividends, provided in I.T. Act, in terms of section 90(2). The appellant pray that the order of Assessing Officer be amended and he be directed to tax interest income at 15 per cent. 2. Briefly stated, the facts are that the assessee company is a company incorporated in U.S.A. During the year, the assessee company had income from Capital Gains, dividend and interest. In the return of income, the assessee claimed the benefit of DTAA between India and USA but while completing the assessment, the Assessing Officer has calculated the tax on interest at the rate of 20 per cent against 15 per cent as provided in Article 11 of DTAA between India and USA. On appeal, learned CIT(A) upheld the assessment order by holding that since the assessee has applied the rate of tax as per Income-tax Act for capital gains and dividend incomes and since the rate of tax as per DTAA is applied by the assessee for only int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur of the assessee. 4. As against this, learned DR of the revenue supported the orders of authorities below and contended that pick and choose policy should not be allowed to the assessee. Reliance was placed on the book "Principles of International Tax Law", copy of one page of which was submitted and kept on record. Our attention was drawn to the first line of this page which reads as under : "Most jurisdictions allow the taxpayer to choose either the domestic tax regime or the tax treaty." It was contended that in view of the above, the assessee cannot be allowed to apply local rates as per Income-tax Act for Dividend and Capital Gains incomes and rate as per DTAA for interest income. 5. We have considered the rival submissions and perused the materials on record and have also gone through the provisions of relevant articles of DTAA between India and U.S.A. and we are inclined to accept the contentions of learned counsel of the assessee because we find that for all these three sources of income i.e., dividend, capital gains and interest, Articles 10, 11 and 13 of the DTAA provide that these incomes are taxable as per domestic law. A cap has been provided in Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d therein, or performs in that other State independent personal services from a fixed base situated therein, and the dividends are attributable to such permanent establishment or fixed base. In such case the provisions of article 7 (business profits) or article 15 (Independent Personal services), as the case may be, shall apply. 5.Where a company which is a resident of a contracting State derives profits or income from the other contracting State, that the other State may not impose any tax on the dividends paid by the company except insofar as such dividends are paid to a resident of that other State or insofar as the holding in respect of which the dividends are paid is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company s undistributed profits to a tax on the company s undistributed profits, even if the dividends paid or the undistributed profits consists wholly or partly of profits or income arising in such other State. Article 11 1.Interest arising in a contracting State and paid to a resident of the other contracting State may be taxed in that other State. 2.However, such interest may also be tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interest, being a resident of a contracting State, carries on business in the other contracting State in which the interest arises, through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the interest is attributable to such permanent establishment or fixed base. In such case the provisions of article 7 (Business profits) or article 15 (Independent Personal Services), as the case may be, shall apply. 6.Interest shall be deemed to arise in a Contracting State when the payer is what State itself or a Political sub-division, local authority, or resident of that State. Where however, the person paying the interest, whether he is a resident of a contracting State or not, has in a contracting State a permanent establishment or a fixed base, and such interest is borne by such permanent establishment or fixed base, then such interest shall be deemed to arise in the Contracting State in which the permanent establishment or fixed base is situated. 7.Where, by reason of a special relationship between the payer and the beneficial owner or between both of them and some other person, the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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