TMI Blog2023 (9) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company because Netherland and Italy both are members of the Organization for Economic Cooperation and Development (OECD) and as per provisions of Article 12(3)(a) of India-Italy DTAA interest earned from Govt. of India by a resident of Italy is not taxable in India, a similar analogy has been applied to the assessee company which is a resident of Netherland. Thus,we set aside the finding of ld. AO and decide the issue in favour of the assessee holding that interest received u/s 244A of the Act by the assessee company based at Netherland from Govt. of India is not taxable. Thus, ground no. 1 raised by the assessee is allowed. Levy of interest u/s 234A - HELD THAT:- We observe that the assessee has filed the return on 08.02.2021 which was within the due date i.e. 15.02.2021. Considering these facts that the return of income has not been filed after the due date interest u/s 234A of the Act cannot be levied. Since the fact that assessee has filed return of income on 08.02.2021 is appearing in the assessment order and since the due date of filing the return was 15.02.2021 there is no delay in filing the return and therefore, interest cannot be levied u/s 234A of the Act. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e receipt of Rs. 21,12,54,080 pertaining to interest income on refund received under section 244A of the Act from the Income Tax Department as Interest income under Article 11 of the Double Taxation Avoidance Agreement between India and the Netherlands ( India-Netherlands DTAA ) without appreciating the application of the Most Favoured Nation (MFN) Clause contained in India- Netherland DTAA read with the restricted scope of taxation of Interest under Article 12 of the India-Italy DTAA. 1.4 That on the facts and in the circumstances of the case, the Ld. AO has erred in taxing, and the Hon ble DRP has further erred in confirming such taxation of, the interest income receipt of Rs. 21,12,54,080 without appreciating the fact that refund of tax payable to assessee was a debt claim payable by the Revenue and, consequently, interest on such refund was income from debt claim payable by the Revenue. 1.5 That on the facts and in the circumstances of the case, the Ld. AO has erred in taxing, and the Hon ble DRP has further erred in confirming such taxation of, the interest income receipt of Rs. 21,12,54,080 without appreciating the fact that CBDT Circular No. 3 of 2022 dated 03 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiation of penalty proceedings 7.1 That on the facts and in the circumstances of the case and in law, the Ld. AO erred in initiating penalty proceedings under section 270A of the Act for under-reporting/mis-reporting of income. The Appellant desires leave to add to or alter, by deletion, substitution or otherwise, any or all of the above grounds of objections, at any time before or during the hearing of the Appeal. The Appellant submits that the above grounds are independent and without prejudice to one another. 3. We will first take up ground nos. 1, 2 3 raised by the assessee wherein the issue is that whether Ld. AO erred in taxing the interest on income tax refund received u/s 244A of the Act disregarding that the assessee is foreign company and in view of the MFN clause in the protocol to the India-Netherland DTAA the interest received u/s 244A of the Act is not taxable. 4. At the outset, ld. Counsel for the assessee submitted that this issue has been decided in favour of the assessee by this Tribunal in its own case in ITA Nos. 437 to 441/KOL/2021 for AY 2008-09 to AY 2012-13 order dated 02.09.2022 and therefore, the interest received u/s 244A(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omes available into the India-Netherlands DTAA by virtue of MFN clause under the said Protocol. Thus, by harmonious reading of the two treaties it follows that the beneficial provision of the India-Italy DTAA will be imported into the reading of India-Netherlands DTAA resulting into accrual of benefit to the assessee. 19.1. Provisions of Article 12(3) (a) of India-Italy DTAA specifies that interest earned by a resident of Italy will not be taxable in India where the payer of such interest is Government of India. Under the treaty negotiations with Italy, India has agreed to a restrictive scope of taxation of interest and thus applying the provisions of India-Italy Treaty read with Protocol of the India-Netherlands treaty the restricted scope of taxability of interest becomes applicable in the present case. 19.2. We note that it is an undisputed fact that Ld. CIT(A) has agreed and found favour with the contention of the assessee on this aspect, however, has dismissed the ground of the assessee by bringing into his observation on the aspect of deeming provision to negate the treatment of interest on income tax refund as a debt claim payable by revenue and making it cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore restricted occurring therein envisages that there could be a benefit on either score i.e. a lower rate or more restricted scope. One does not exclude the other. The other expression used is 'if under any Convention/ Agreement or Protocol signed after 1-9-1989 between India and a third State which is a member of the OECD . This also indicates that the benefit could accrue in terms of lower rate or a more restrictive scope under more than one Convention which may be signed after 1st September 1989 between India and a State which is an OCED member. The purpose of Clause 7 of the Protocol is to afford to a party to the Indo-France Convention the most beneficial of the provisions that may be available in another Convention between India and another OCED country. 19.5. Hon ble High Court of Madras in the case of Ansaldo Energio SPA Vs. CIT (IT) (supra) has held that the interest on income tax refund is a debt claim payable by the Revenue in terms of Article 12(3)(a) of the India-Italy Treaty and thus such interest is not taxable and no TDS ought to be done by the AO. We note that Ld. CIT(A) has wrongly interpreted this finding of the Hon ble Madras High Court as applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terest u/s 234A of the Act. We observe that the assessee has filed the return on 08.02.2021 which was within the due date i.e. 15.02.2021. Considering these facts that the return of income has not been filed after the due date interest u/s 234A of the Act cannot be levied. Since the fact that assessee has filed return of income on 08.02.2021 is appearing in the assessment order and since the due date of filing the return was 15.02.2021 there is no delay in filing the return and therefore, interest cannot be levied u/s 234A of the Act. Thus, ground no. 4 raised by the assessee is allowed. 11. Ground no. 5 is regarding levy of interest u/s 234B of the Act. The same being consequential in nature needs no adjudication. 12. Ground no. 6 relates to erroneous addition amounting to Rs. 9,23,283/- towards refund already issued it is stated that no such refund was granted to the company. This fact needs to be verified at the end of the AO to which necessary opportunity of being heard to be provided to the assessee. Thus, ground no. 6 raised by the assessee is allowed for statistical purposes. 13. Ground no. 7 relates to initiation of penalty proceedings and the same is premature and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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