TMI Blog2020 (1) TMI 612X X X X Extracts X X X X X X X X Extracts X X X X ..... year i.e. A.Y. 2012-13 as per the provisions of the section 209 of the Act advance tax was not payable by the assessee being a non-resident company. We find that the Hon'ble Jurisdictional High Court in the case of the DIT (IT) v. NGC Network Asia LLC [ 2009 (1) TMI 174 - BOMBAY HIGH COURT ] held that when a duty is cast on payer to deduct and pay tax at source, on payer s failure to do so interest u/s. 234B cannot be imposed on payee assessee - We direct the Assessing Officer to delete the interest levied u/s. 234B of the Act. Gain arising from roleover of foreign exchange contracts is assessable as capital gains/losses - See assessee own case [ 2019 (7) TMI 1560 - ITAT MUMBAI] - ITA No. 276/MUM/2018, ITA No. 34/MUM/2018, CO. No. 27/MUM/2019 [Arising out of ITA No. 34/MUM/2018] - - - Dated:- 10-1-2020 - Shri C.N. Prasad, Hon'ble Judicial Member And Shri Manoj Kumar Aggarwal, Hon'ble Accountant Member For the Assessee : Shri P.J. Pardiwala And Shri Madhur Agarwal For the Department : Shri Avaneesh Tiwari ORDER PER C.N. PRASAD (JM) 1. These cross appeals a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax @15% as per Article 11 of the India USA DTAA. The assessment was completed u/s. 143(3) of the Act and while computing the income the Assessing Officer brought to tax this interest income @16.2225% i.e. 15% as per Article 11 of India-USA DTAA, Plus 5% surcharge thereon, plus 3% education cess on tax plus surcharge. Assessee preferred appeal before the Ld. CIT(A) contending that the rate of tax to be applied to the income tax refund is only the rate as specified in the DTAA and nothing more. However, the Ld.CIT(A) held that scope of the definition of interest as per Article 11(4) of India USA DTAA does not cover interest granted u/s. 244A of the Act. Ld. CIT(A) held that asset on which the interest income accrued viz TDS is not a debt claim or government bond or security. Accordingly, he rejected the contention of the assessee. 5. Ld. Counsel for the assessee before us, submitted that income tax refund is a debt claim from the income tax authority and falls under the definition interest as per Article 11(4) of the India USA DTAA. Referring to the decision of the Hon'ble Supreme Court in the case of Union of India v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) The Tribunal by the impugned order restored the issue of the rate at which interest is to be charged to tax on income-tax refund received under Section 244A of the Act to the Assessing Officer to be decided in the light of Indo-France DTAA and the decision of the Special Bench of the Tribunal in the matter of Assistant Commissioner of Income Tax vs. Clough Engineering Ltd. [130 ITD 137]. (b) The grievance of the Revenue is with the impugned order following the decision of the Special bench in Clough Engineering Ltd. (c) However we find that the decision in Clough Engineering (supra) of the Special Bench had been followed by the Tribunal in ITA No.183/Mum/2010 [M/s DHL Operations B.V., The Netherlands Vs. Dy. Director of Income Tax]. The issue before the Tribunal was the rate of tax on which Income tax refund is to be taxed i.e. on the basis of the Articles of DTAA or under the Act. The Tribunal on examination of the DTAA in the above case concluded that interest on income tax refund is not effectively connected with the PE (Permanent Establishment) either on asset test or activity test. Therefore, taxable under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies only from the A.Y.2013-14 onwards. Reliance was placed on the Memorandum explaining the provisions of Finance Bill, 2012. Ld. Counsel for the assessee further submitted that the duty is cast on the payer to deduct tax at source and on the payer s failure to deduct such tax, interest u/s. 234B of the Act cannot be imposed on the payee assessee. Reliance was placed on the following decisions in support of his contentions: - 1. DIT (IT) v. Ngc Network Asia LLC [2009] 222 CTR 85 (Bombay HC) 2. DIT (IT) v. White Industries Australia Ltd. (81 taxmann.com 33) [2017] (Kolkata Tribunal) 3. Orient Overseas Container Line Ltd. [2013] 35 taxmann.com 342 (Mumbai ITAT) 4. DDIT v. MGB Metro Group Buying HK Ltd. (29 taxmann.com 164) [2013] (Delhi Tribunal) 5. IAN Peter Morris v. ACIT [2016] 76 taxmann.com 271 (SC) 6. ADIT (IT) v. Alcatel Lucent USA, Inc. [2012] 21 taxmann.com 302 (Delhi ITAT) 13. Ld. DR vehemently supported the orders of the authorities below. 14. We have heard the rival submissions and perused the orders of the authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was liable to be deducted at source at the time of payment. The learned Full Bench of this Court took the view considering the discussion that the assessee would not be liable to pay the interest on the advance tax not so deducted. 5. Under the provisions of the present Act, the issue had come for consideration in the case of Commissioner of Income Tax anr. v/s Sedco Forex International Drilling Co. Ltd., reported in (2003) 264 ITR 320. One of the questions was, as to whether interest could be levied on the assessee under Section 234B of the Act in respect of tax which was not liable to be deducted at source. A learned Bench of the Uttaranchal High Court, after considering the provisions, held as under : Secondly, although section 191 of the Act is not overridden by sections 192, 208 and 209(1)(a)(d) of the Act, the scheme of sections 208 and 209 of the Act indicates that in order to compute advance tax the assessee has to, inter alia, estimate his current income and calculate the tax on such income by applying the rates in force. That under section 209(1)(d) the income-tax calculated is to be reduced by the amount of tax which would be dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer may be directed to verify the contention of the assessee and decide the issue in accordance with law. Keeping in view the submissions of the Ld. Counsel for the assessee we restore this issue to the file of the Assessing Officer for verification and to adjudicate in accordance with law. ITA.No. 34/Mum/2018 (A.Y. 2012-13) 18. Coming to the revenue s appeal, the following grounds have been raised: - 1. Whether on the facts and circumstances of the case, CIT(A) was right in holding that foreign exchange loss on underlying Forward Foreign Exchange Contracts has to be considered on capital account and hence constitute a capital loss when such a contract is not a capital Asset? 2. Whether on the facts and circumstances of the case, CIT(A) was right in holding that foreign exchange loss on underlying Forward Foreign Exchange Contracts is not taxable under the head Income from Other sources, when Forward Foreign Exchange Contract is neither a Capital Asset, nor, it is the business of the assessee to enter into such contracts? 3. The Appellant prays that the order of the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew of the above the appellants pray that the gain of 216,30,000 arising from rollover of foreign exchange forward contracts should be treated as capital gains and allow set off of brought forward capital loss in accordance with the provisions of section 74 of the Income-tax Act. 6. The matter is examined. Considering the decision of my predecessor and the orders of ITAT relied upon, I find that no material to deviate from same. As facts d circumstances remain same, I direct Assessing officer to treat the income under head capital gain. Accordingly grouped grounds 1 to 4 is disposed of as partly allowed. 22. On a perusal of the order of the Ld.CIT(A), we do not see any infirmity in the order passed by the Ld. CIT(A) in holding so and his decision is based on the order of the Tribunal in assessee s case for various assessment years. Accordingly, we reject the ground raised by the revenue. CO. No. 27/MUM/2019 (A.Y. 2012-13) 23. Since we have dismissed appeal of the revenue, the cross objection of the assessee becomes infructuous and accordingly dismissed. 24. In the result, appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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