TMI Blog2014 (7) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of Indo-UK Treaty and arose in the other contracting state, may be taxed in other state and the said receipt of the family pension is beyond the purview of Article 23 of Indo-UK DTAA and the same is covered by the residuary article 23(3) of this Convention and, therefore, it was rightly taxed in U.K. i.e. source country - CIT(A) rightly held that the family pension received by the assessee from the employer of deceased wife of the assessee was rightly taxed at source in UK and no amount of family pension is thus taxable in India. Following the decision in DCIT v. Mideast India Ltd. [2009 (1) TMI 311 - ITAT DELHI-G] the expression "may be taxed in that other state" mentioned in Article 23(3) authorizes only the contracting state of source to tax such income and by necessary implication, the contracting state of resident is precluded from taxing such income, specially when the tax has been deducted by the contracting state of source and contracting state of the residence cannot tax it again in the hands of resident assessee - the income received by the assessee from employer of deceased wife of the assessee and when the country of source has deducted tax and assessee received a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee is beneficially owned by him as a resident of the Contracting State. 4. The grounds raised by the Revenue in the appeal related to AY 2006-07 read as under:- On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in:- (I) Deleting the addition of ₹ 21,89,622/- made on account of pension received from Royal Bank of Scotland/Nat West Ltd., U.K.; (II) Accepting the assessee's contention that the pension of ₹ 21,89,622/- was not covered by Article 20(1) of the DTAA between India and U.K., without appreciating the fact that the amount received by the assessee cannot be treated as different from 'pension' covered by Article 20(1) of the DTAA as (a) the DTAA between India and UK nowhere mentions the word 'family pension' and (b) the para 2 of Article 20 of the DTAA between India and UK defining the pension does not refer to the recipient of pension and if the income is characterized as pension the taxability is to be decided under the Article dealing with the pension, irrespective of the recipient; (III) Without prejudice to ground no. (2) above, and even assuming that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the India UK DTAA Treaty. Now, the aggrieved revenue is before this Tribunal in these second appeals. 6. We have heard rival arguments of both the parties and carefully perused the record placed before us including first paper book filed by the assessee spread over 58 pages, second paper book spread over 30 pages containing decisions relied by the assessee and written brief synopsis. Ld. DR submitted that pension and family pension are two separate terms with different meanings and family pension received by the assessee does not fall under Article 20(1) of Indo-UK, DTAA rather the same falls under Article 23(1) of India UK DTAA which is taxable in India in the hands of assessee. The DR further submitted that the CIT(A) wrongly held that family pension received by the assessee from UK is covered under Article 23(3) of Indo-UK DTAA. The DR also contended that the CIT(A) erred in law and on facts of the case in holding that the amount of family pension received by the assessee is covered by Article 23(3) of Indo-UK DTAA overlooking the provisions of Article 23(1) of the said agreement. 7. The DR also contended that Article 23(1) is specific and not residuary like Article 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee) was never the employee of County Natwest Bank ltd, (now known as RBS); rather it was his wife (Smt. Nishi Thapar) who was working with the said bank who died on 22.04.1989. On death of the wife of the assessee, the assessee became entitled to family pension as per the Natwest Market Pension Fund Scheme, which acted as a trustee of its employees and further, on death of the employees, the said trust was given the responsibility to provide for the family pension to the dependants or surviving members of the deceased family (copy of said scheme is enclosed at pages 8 to 28 of this note, as has also been referred by Ld. CIT (A) at pages 8 and 9 of the order pertaining to AV 2000-01, 2002 03 and 2003-04). (c) That further, it is submitted that the family pension received by the assessee is also beyond the purview of Article 23 (1) of Indo - UK DTAA, as the said article specifically excludes income paid out of trusts or the estates of deceased persons in the course of administration and here it is submitted that the amount of family pension received by Sh. Karan Thapar has been paid out of the trust of the deceased created by the employer of the deceased in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance on the judgment Sanjay Kumar Modi v. DIT reported in 278 ITR 374, relevant extract is as below: It has now become an elementary principle of law that the subsequent development having nexus to the original cause of action can be brought in the parent proceeding to cut short the litigation and for the ends of justice. The basic object of the justice delivery system is to put an end to the controversy between the parties as early as possible and comprehensively, even taking note of the subsequent development, particularly when the subsequent development has nexus or having origin to the fundamental controversy involved in the petition. 6. That the third argument of the assessee is that the Article 23 (3) of Indo UK DTAA clearly gives right to the source state (here it is UK), to tax the income as and when it accrues or is paid to an individual and thus, the resident state, is precluded to tax the same income again and to support the said proposition the assessee would seek to place its reliance on the following judgments: a. Copy of order of Hon'ble ITAT Delhi in the case of DCIT v. Mideast India ltd. reported in 28 SOT 395. b. Copy of jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rther even on the merits of the case, the issues that need to be addressed are as follows: (a) Whether the amount so received by the assessee falls under Article 23(1) of the India-U.K treaty? (b) Whether the amount so received by the assessee falls under Aticle23 (3) of the India-U.K Treaty? (c) Whether the term may be taxed in the other state gives the right to the Indian tax authorities to tax when tax has been deducted by the source state. With regard to the issue stated at clause (a) above, Article 23(1) deals with all other items of income not dealt with in any of the foregoing Articles of this Convention, which is beneficially owned by a resident of Contracting State, wherever arising except the following exception: 1. It should not be income paid out of trusts or the estates of deceased person in the course of administration. As rightly pointed out by the assessee, the amount is being received by Shri Karan Thapar as nominee of the deceased and therefore the assessee cannot be considered as the beneficial owner. Further the family pension is being paid out of the Trust or estate of the deceased and administered by the Bank and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India Ltd. (supra) through its order dated 15.12.2009. 13. The ld. Counsel of the assessee also placed reliance on the decision of ITAT Mumbai Bench 'L' in the case of Ms Pooja Bhatt v. DCIT [2008] 26 SOT 574 (Mumbai) wherein it was held that when the film artist assessee is a resident of India who had participated in an entertainment show performed in Canada in the year under consideration i.e. 1994-95 and had received certain sum for the participation and tax was also deducted at source in Canada in respect of said receipt/income, then in this situation, in view of Article 18 of DTAA between India and Canada, amount so received by the assessee could not be taxed in India. ITAT, Mumbai Bench interpreting the expression may be taxed in para 1 in Article 18 held that this expression gives only an option to the other contracting state to tax the income but does not preclude the contracting state of residence to assess the said income. Accordingly, such expression authorize only contracting state of source to tax such amount and by necessary implication the contracting state of residence is precluded from taxing such income. The relevant para 6 of this decision reads as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed family member. 15. Coming to Article 23, we observe that Article 23(1) stipulates about the items of income beneficially owned by the residents of a contracting state wherever arising, other than the income paid out of trust or estates of the deceased person in the course of administration which are not dealt within the foregoing articles to the Article 23 of this Convention shall be taxable only in that contracting State. Article 23(2) is neither related to pension nor related to family pension. Article 23(3) starts with a word notwithstanding the provisions of paragraph 1 and 2 of this article meaning thereby items of income of a resident of a contracting state not dealt with in the foregoing articles of Convention arising in the other contracting state may be taxed in that other state. In our considered opinion, Article 23(3) is related to the items of income which are not included in the foregoing articles to Article 23(3) of this Convention, then notwithstanding the provisions of paragraphs (1) and (2) of Article 23, the same arising in the other contracting state may be taxed in that other state. Meaning thereby family pension which was not within the ambit of foreg ..... X X X X Extracts X X X X X X X X Extracts X X X X
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