TMI Blog2013 (11) TMI 429X X X X Extracts X X X X X X X X Extracts X X X X ..... been invoked by tax payers through the Competent Authority in USA. It does not mean that the invocation of the MAP proceedings by Competent Authority by the tax payer has been admitted for the future consideration by the authorities. Order of CIT rejecting revision application u/s 264 is not sustainable in law as it is in the face of Article 27 of the DTAA entered into between USA and India and clause 6 (iii) of MOU entered into between Competent Authority in USA and India in respect of application made to any of them under the MAP proceedings. - Decided in favor of assessee. - Writ Petition No. 1455 of 2013 - - - Dated:- 25-10-2013 - Mohit S. Shah, C.J. And M. S. Sanklecha,JJ. For the Petitioner : Mr. Percy Pardiwala, Sr. Advocate with Ms. Aarti Sathe and Mr. Kalpesh Turalkar For the Respondent : Mr. Vimal Gupta with Mr. Tejveer Singh and Mrs. S. V. Bharucha JUDGMENT (Per M. S. Sanklecha, J.): RULE, returnable forthwith and by consent of the parties, taken up for final disposal. 2 By this petition under Article 226 of the Constitution of India, the petitioner challenges the order dated 21 March 2013 passed by the Director of Income Tax (Internat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of which he is resident (in this case, the petitioner is resident of USA), notwithstanding that he has remedies available under the domestic laws of the other Contracting State i.e. India. Under the MAP proceedings provided under Article 27 of DTAA, the authorities of both India and USA endeavor to resolve the dispute raised by the individual tax payer by Mutual Agreement; (e) In accordance with the provisions of Article 27 of the DTAA, the petitioner on 13 November 2006 preferred an application before the competent authority of USA, seeking its assistance in respect of its stand that its income received from respondent No.1 is not taxable in India for fiscal years 2001 to 2007 (i.e. Assessment Year 200102 to 200708). For subsequent Assessment Years 200809 to 200910 also the petitioner requested the competent authority of USA to include them in the pending MAP proceedings. On 3 November 2009, the petitioner made an application for inclusion of Assessment Year 201011 in the pending MAP proceedings; (f) Keeping in view the hardship faced by the tax payer during pendency of the MAP proceedings, the competent authorities of India and USA under the DTAA entered into Memorandum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not pending before the MAP authorities as informed by the Foreign Tax Division (FTD) of the Central Board of Direct Taxes (CBDT). (At the hearing, Mr. Vimal Gupta, learned Senior Counsel for the revenue informs us that there is a typographical error and should be read as financial Year 200910). Consequently, respondent No.3 directed respondent No.1 to deduct tax at 8.6094% in respect of all payments made by respondent No.1 to the petitioner; (k) On 17 December 2010, the competent authority of USA under the DTAA issued a certificate confirming that Withholding tax application in respect of Assessment Year 201011 i.e. financial Year 2010 is being considered under the MAP proceedings. Consequent to the aforesaid communication dated 17 December 2010 from the competent authority of USA, the petitioner made an application on 28 December 2010 to respondent No.3. By the above application, a modification of order dated 15 December 2010 was sought by seeking the grant of necessary certificate of Nil Withholding tax under Section 197 of the Act in respect of Assessment Year 201011. However, no order on the same was passed; (l) On 31 May 2011, the petitioner filed a Revision Application un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct of subsequent Assessment Year 201011. (b) The impugned order ignores the fact that the Appellant had made its application to the competent authority in USA on 3 November 2009 for admission of Assessment Year 201011 to MAP proceedings. The fact that the above application has been made is also acknowledged on 17 December 2010 by the competent authority in USA and also by the competent authority in India in September 2012. Inspite of the aforesaid, the impugned order holds that at the time when the application for issuance of certificate under Section 197 of the Act was made by the petitioner and also when the order rejecting the application was passed by the Assessing Officer, there were no MAP proceedings pending in respect of Assessment Year 201011. This finding is contrary to the application dated 3 November 2009 which is on record and ignored in the impugned order. (c) The respondent No.4 in the impugned order holds that as the financial Year 200910 i.e. Assessment Year 201011 had already expired/ended, then the entire proceedings for an order under Section 197 of the Act has become infructuous. This finding is in the face of Clause 6 (iii) of the MOU which provides that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g a Nil Tax Withholding order as the acceptance of the petitioner's claim for Assessment Year 201011 in MAP proceedings came much after the end of the Assessment Year 201011. Therefore, in the absence of a certificate being available during the course of the Assessment Year, the petitioner could not be granted a certificate of Nil Withholding Tax under Section 197 of the Act. Thus, the respondent No.1 was duty bound to have deducted tax in the absence of any order under Section 197 of the Act in respect of any payment made or amount credited to the petitioner during the previous year relevant to the Assessment Year 201011. In view of the above, it was submitted that the impugned order called for no interference. 6 As is evident from Article 27 of the DTAA entered into between USA and India, a procedure for resolving a conflict between the DTAA and the tax regime in one of the Contracting States has been evolved and is known as Mutual Agreement Procedure i.e. MAP. If the tax payer in any one or both of the Contracting States considers the action of the one of the Contracting State would result in his being charged to tax not in accordance with the provisions of the convention, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication dated 3 November 2010 to the Competent Authority in USA. Besides, in terms of the MOU, the petitioner furnished a bank guarantee of Rs.6,07,55,238/- securing the revenue. However, respondent No.3 being the Assessing Officer by an order dated 15 December 2010 informed the petitioner that no Nil Withholding Tax Certificate can be issued to the petitioner as the FTD of CBDT had informed the respondent No.3 that no request for inclusion of Assessment Year 201112 i.e. financial Year 201011 had been received for MAP. However, at the hearing, we are informed that it is a typographical error on the part of respondent No.3 i.e. the Assessing Officer, and it should read as financial Year 200910. It must be pointed out that no affidavit of respondent No.3 to clarify the above position has been filed. Therefore, the basis of the order dated 15 December 2010 is suspect. Be that as it may, in any case on 17 December 2010, the Competent Authority of USA informed the petitioner that the petitioner's application for MAP in respect of the Assessment Year 201011 was being considered by the Competent Authority. On the basis of the aforesaid clarification, the petitioner sought rectification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax payer is entitled to apply for MAP procedure and claim deferment/suspension of assessment and collection of tax within three years of receipt of notice from the authorities. In this case, notice had been issued to respondent No.1 to deduct the tax in respect of payment being made by it to the petitioner only on 8 August 2013. If the submission of the revenue were to be accepted, then Article 27 of the DTAA providing for a period of three years to move the Competent Authority from the date of the receipt of the notice would be rendered redundant. This understanding of ours is further supported by MOU which in clause 6 (iii) thereof, inter alia, provides that Withholding tax on income can be a subject matter of MAP for prior, current and future taxation years. Consequently, this also supports our understanding that even when an Assessment Year for which a certificate as sought has expired, yet the suspension of assessment and collection of taxes will take place, if the proceedings are under consideration of Competent Authorities under the MAP. The collection and assessment of taxes will stop at least from that date when the MAP proceedings are commenced for Assessment Year 2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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