TMI Blog2016 (4) TMI 337X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee as a mere typographical error. The Hon’ble High Court affirmed the stand of the Tribunal, whereby the claim of the assessee for exemption under section 10B of the Act was allowed considering that a mere typographical error in mentioning section 80IB of the Act in the return of income would not disentitle the assessee’s claim for exemption under section 10B of the Act. - Decided in favour of assessee Addition on interest income - interest income was liable to be assessed on accrual basis or receipt basis - Held that:- As relying on Article 11(1) of the India-Cyprus Double Taxation Avoidance Agreement (DTAA) to mean that the interest income in question is liable to be taxed on payment/receipt basis and not on accrual basis, as sought to be made out by the Assessing Officer. The plea of the assessee that by an inadvertent error such amount has been included as income on accrual basis, such solitary error cannot be construed to mean that assessee has not been following the cash basis of accounting regularly. In our considered opinion, the plea of the assessee is quite justified, and in any case, the applicable legal position on any point has to be arrived at by keeping in mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in scrutiny assessments or under section 143(1) of the Act. 2.4 The Ld. AO, while framing the draft assessment order, has erred in disregarding the order of the Ld. CIT(A) - 11, wherein, the latter had already adjudicated the impugned issue in favour of the Appellant. 2.5 Without prejudice to the above, the Appellant prays before this Hon'ble Tribunal to exercise its inherent powers and grant the Appellant its bonafide claim of charging its income to tax at the beneficial rates prescribed in the DTAA. Prayer The Appellant prays that it is entitled to claim the beneficial provisions of India-Cyprus DTAA and accordingly, its income ought to be taxed at the lower/ beneficial rate prescribed therein. 3 On the facts of the case and in law, the Ld. Assessing Officer/DRP erred in making addition to the returned income on account of interest of ₹ 8,37,49,570/-, on accrual basis as against receipt basis , adopted by the Appellant. 3.1 The Ld. AO/DRP has erred in law by disregarding the provisions of DTAA, which provide for taxation of only those interest income, which were paid to the non-resident. 3.2 The Ld. AO/DRP has erred in law by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me filed. In other words, the Assessing Officer did not allow the benefit of the lower rate of tax prescribed in the India-Cyprus Double Taxation Avoidance Agreement (DTAA). This is the first area of difference between the assessee and the Revenue. 3.1 Secondly, the interest income earned from CCDs was declared by the assessee for taxation on receipt basis, whereas the Assessing Officer taxed it on accrual basis. This is the second area of difference between the assessee and the Revenue before us. 3.2 In so far as, the first issue relating to the applicable rate of tax is concerned, there is no dispute to the fact that the rate of tax prescribed in the India-Cyprus Double Taxation Avoidance Agreement (DTAA) with respect to the stated income is 10%, and the Assessing Officer denied the claim of the assessee on the ground that the S.I Schedule in the form of return of income was not filled up by the assessee and, therefore, the income was taxed at the normal rate of 43.23%. The assessee has been consistently pointing out that non filling-up of the schedule for S.I in the form of return of income was an inadvertent mistake. In this context, assessee had explained that the comput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee did not fill-up Schedule-SI in the form of return of income has singularly prevailed with the lower authorities in denying the benefit of the concessional rate of tax prescribed in the India- Cyprus Double Taxation Avoidance Agreement (DTAA). The assertions of the assessee that such non filing-up of the Schedule-S.I in the form of return of income is an inadvertent omission has been rejected. In our considered opinion, the lower authorities have completely misdirected themselves in refusing assessee s claim for being taxed at the concessional rate of 10% prescribed in the India-Cyprus Double Taxation Avoidance Agreement (DTAA). Notably, the accepted history of the case depicted by the assessment under section 143(3) for assessment year 2009-10, as well as the manner of drawing up computation of tax on income furnished by the assessee before the Assessing Officer reflects that such an omission was indeed an inadvertent mistake. Notably, the statement of total income including the computation of tax on income as furnished by the assessee is contained in a Note, which is reproduced hereunder:- 5. The company is a tax resident of Cyprus and is entitled to beneficial provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first issue is concerned, assessee succeeds. 7. In so far as second issue is concerned, relevant facts are that assessee had invested ₹ 606.50 crores in the CCDs of seven real estate companies in India and interest earned thereon to the extent of ₹ 15,56,49,334/- was offered to tax in the return of income. Instead, the Assessing Officer assessed the income at ₹ 23,93,98,904/-, thereby making an addition of ₹ 8,37,49,570/-. This addition was made on the ground that interest income was liable to be assessed on accrual basis. The relevant details in this regard are enumerated in Para- 4.1 of the assessment order. The assessee company resisted such action of the Assessing Officer in the course of assessment proceedings as also in the course of the hearing before us. The main point raised by the appellant is that having regard to Article 11 of the India-Cyprus Double Taxation Avoidance Agreement (DTAA) interest income in question is liable to be taxed in India on the basis of payment. In support of such proposition, the Ld. Representative for the assessee has placed reliance on the following decisions:- 1. DIT v. Siemens Aktiengesellschaft (Bom HC) (ITA No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in Article 11(1) of the India-Cyprus Double Taxation Avoidance Agreement (DTAA) to mean that the interest income in question is liable to be taxed on payment/receipt basis and not on accrual basis, as sought to be made out by the Assessing Officer. Thus, in principle, we uphold the plea of the assessee. 9.2 Before parting, we may also refer to the point made out by the Revenue that assessee itself is inconsistent in offering to tax such interest income in as much as ₹ 4,38,356/- receivable from Park Development Pvt. Ltd. has been offered to tax on accrual basis in the return of income filed. Therefore, according to the Revenue, the plea of the assessee that interest income has been offered by the assessee on receipt basis consistently, is not so. In this context, the plea of the assessee was that by an inadvertent error such amount has been included as income on accrual basis. It has been further canvassed that such solitary error cannot be construed to mean that assessee has not been following the cash basis of accounting regularly. In our considered opinion, the plea of the assessee is quite justified, and in any case, the applicable legal position on any point has t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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