TMI Blog2010 (6) TMI 636X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment under section 143(3) dated 17-1-2001 of the Income-tax Act wherein total income was assessed at Rs. 12,05,28,310. While making the assessment, the Assessing Officer had made certain additions/disallowances. 4. Aggrieved, assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), assessee raised the following grounds : "1.The Assessing Officer has erred in applying the ratio of the ruling given by the authority for Advance Rulings (AAR) in the case of Societe Generate to the appellant Bank and in levying tax on the appellant bank at the rate applicable to normal non-resident companies." 5. Before the Ld. CIT(A), assessee submitted as follows : "The provisions of section 245S(1) of the Income-tax Act, 1961, an advance ruling shall be binding only on the applicant who had sought it and in respect of the transaction in relation to which the ruling had been sought. The assessee further submitted that considering the fact that Article 26(2) of the Indo-French DTAA and Article 24(2) of the Indo-Mauritian DTAA are different from each other, the advance ruling in the case of Societe Generale is not applicable to the appellant bank. The assessee sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act and hence these types of assessees would be chargeable at the rates prescribed for domestic companies. To curtail this controversy explanation 1 was inserted to section 90 by the Finance Act 2001 with retrospective effect from 1-4-1962 which reads as under : For the removal of doubts, it is hereby declared that the charge of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company . Therefore, now it is clear that tax rates prescribed in the Finance Act has to be applied even if an assessee company is covered by the provisions of DTAA. Further similar view was taken in the case of Chohung Bank v. Dy. Director of Income-tax (Int. Taxation)-1(2), Mumbai [2006] 102 ITD 45 (Mum.). In that case, it was held as under : It is one thing to say that provisions of agreement will prevail over the provisions of the Income-tax Act in so far as assessability of an item is concerned and it is a different thing to say that the agreement (DTAA) will also control the applicability of the Finance Act which provides the rates for differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the concept of national and in the same circumstances and in the same circumstances and held that when different tax treatments are being given to the assessee on the basis of criterion connected with requirements regarding residence of the tax-payer, it would not be covered by the scope of non-discrimination clause. Further, the concept of discrimination based on nationality was also discussed in explanatory notes on UN Model Convention from which the language in most of DTAA s including the Indo Korean DTAA and Indo-French DTAA has been borrowed. The relevant article in UN Model Convention is article 24. The non-discrimination clause in article 24(1) of UN Model Convention and so the article 25(1) of Indo-Korean DTAA provided that the term national in article 3( g ) of Indo Korean DTAA showed that those who may be entitled to invoke article 25 of Indo Korean DTAA are individuals (possessing the nationality of a Contracting State), legal persons, partnerships and associations. Further, from article 3( g ) of Indo-Korean DTAA, it appears that corporate bodies are not covered in the definition of nationals . Since, legal person comes side by side with individual in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distributing dividend cannot be discriminated. From this definition also, one does not find any case of discrimination as Indian domestic company and non-resident company fall in two different sets. Within the group (or set) there should not be any discrimination on the basis of nationality [Paras 10.1 and 10.2]. Explanation was inserted in section 90 with retrospective effect from 1A. 1962. It clearly provides that charging of a foreign company at a higher rate will not be regarded as less favourable as compared to domestic company. The department also issued a Circular No. 14 of 2001 to explain the effect of the Explanation. The Explanation introduced in 2001 by the Finance Act, 2001 with retrospective effect from 1A. 1962 is no way in conflict with the DTAA with Korea. Therefore, the amendment made in section 90 by way of insertion of Explanation is applicable insofar as it is not in conflict with the provisions of DTAA [Paras 11.1 and 11.2]. Therefore, there is no conflict of the Explanation to section 90 with the DTAA with Korea, as the areas of operation of Explanation to section 90 and article 25(1) are in different fields. Explanation clarifies the position as it a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Assessing Officer in respect of the expenditure of Rs. 35,48,153 incurred on purchase of fixed assets." 11. Before the Ld. CIT(A), assessee submitted as follows : "Considering the specific provisions of Article 7(3) of the Double Taxation Avoidance Agreement between India and Mauritius, the total expenditure incurred by it for the purposes of it s business is deductible in computing it s total income and the CIT(A) ought to have directed the Assessing Officer accordingly. He further submitted that the Assessing Officer be directed to delete the disallowance to made by him and recompute it s total income and tax thereon accordingly." 12. The Ld. CIT(A) confirmed the disallowance made by the Assessing Officer in respect of the expenditure of Rs. 35,48,153 incurred on purchase of fixed assets. 13. Aggrieved, assessee preferred an appeal before us. The Ld. Counsel for the assessee brought to our notice that the issue is covered by the decision of the Mumbai Tribunal in ITA No. 714/Mum./01 for assessment year 1997-98 wherein it has been held as follows : "We find that identical issue came up before the Tribunal in the case of the same assessee in ITA No. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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