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2019 (7) TMI 363

turn claiming DTAA benefit - AO applied tax as per Income tax Act - assessee filed rectification wherein tax rate was corrected but retain levy of surcharge and education cess - as per DTAA between India and Netherlands, the income tax including surcharge shall not exceed 10% - education cess is surcharge or not HELD THAT:- The DTAA clearly provided that the taxes in India means the income tax including surcharge there as pointed out by the Learned Counsel for the Assessee. Further, clause 11 of the Finance Act 2018 clearly explains that the education cess is nothing but additional surcharge. In the case of J.P. Morgan Securities Asia (P.) Ltd, [2013 (10) TMI 1518 - ITAT MUMBAI] the coordinate Bench of this Tribunal was considering the prov .....

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d education cess and surcharge as well. The assessee filed an application u/s 154 of the Act stating that as per the DTAA between India and Netherlands, the tax rate applicable is 10% only and since the DTAA is beneficial to the assessee, the tax should be levied at 10% only as was done at the time of payment by way of TDS. It was also submitted that the TDS credit was not given and the interest u/s 234A, 234B and 234C was also levied. As there was no response to this application, the assessee filed a subsequent rectification application u/s 154 which was accepted by the A.O. by giving the TDS credit. However, the education cess and surcharge were not deleted. Against this order of the A.O., the assessee filed an appeal before the CIT(A). T .....

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e on the assessee. He has supplied the copies of the screen shots of the orders for the relevant assessment years and as seen therefrom, we find that the rate of tax has been modified and taken @ 10%, but education cess and surcharge and also the interest u/s 234A, 234B and 234C were levied. In the second rectification order, which is before us also, only the TDS credit has been given but the education cess and surcharge and also the interest u/s 234A, 234B and 234C were levied. When the Learned Counsel for the Assessee submitted that without being served with the copy of the order, the assessee cannot be expected to file an appeal against such order, the Ld DR fairly submitted that since the Department is not able to produce the copies of .....

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tion cess is for a particular purpose mentioned therein and cannot be utilised like income tax by the Government and hence it cannot be considered as part of the income tax. 6. Having regard to the rival contentions and the material on record, we find that the tax treaty between India and Netherlands was entered into in 1989 and subsequently amended in the year 1999. Article 2 and para 3 thereof mentions that the existing taxes to which the Convention shall apply in (a) Netherlands; (b) in India is the income tax including surcharge thereon. Article 12 refers to Royalty and Fees for Technical Services and - para 2 thereunder provides that where the recipient is the beneficial owner of the royalties, or fees for technical services, the tax s .....

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of DTAA between India and Singapore. The AO, while processing the assessment u/s 143(1) levied Surcharge and education cess on the interest income. The assessee challenged the action of the AO before the CIT(A). The CIT(A) deleted the Surcharge and education cess on the ground that the scope of adjustment u/s 143(1) is limited and the question of upper ceiling for the rate of tax of interest of Article 11 of DTAA as well as Surcharge and education cess cannot be decided while accepting the return u/s 143(1). 4. We have heard the Ld. DR as well as Ld. AR and considered the relevant material on record. The Ld. AR of the assessee has pointed out that an identical issue has been considered and decided by the Co-ordinate Bench of this Tribunal i .....

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usiness income, there being specific Article to deal with interest income i.e. Article-11, taxation of interest will be governed by the said Article-11. Secondly interest income may be taxed in contracting State in which it arises, according to law of that State but if the recipient is beneficial owner of interest, tax so charged shall not exceed 5% of gross interest if the interest is received from bank and in other cases 12.5% of gross amount of interest. In this case, the assessee is the beneficial owner of interest and tax charged cannot exceed 12.5% of gross interest. Tax has been defined in Article-2(2)(b) as per which income tax included surcharge. Therefore, tax referred to in Article 11(2) @ 12.5% also includes surcharge. Further, .....

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C Asia Pacific Pte. Ltd. v. Asstt. DIT (International Taxation) [2012] 52 SOT 447/22 taxmann.com 310. The Tribunal in case of Sunil V. Motiani v. ITO (supra) has considered the decision of Kolkata Benches of the Tribunal in case of DIC Asia Pacific Pte. Ltd. (supra). Accordingly, following the orders of this Tribunal we do not find any reason to interfere with the order of CIT(A) qua this issue. 7. Respectfully following the same, we hold that the A.O. cannot charge surcharge and education cess over and above 10% of the Income Tax levied on the assessee. Appeals of the assessee are accordingly allowed and the A.O. is directed to delete the adjustments made on account of the education cess and surcharge levied on the assessee for all the fou .....

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