9911796707
TMI Blog1989 (12) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... e 12(2) of the D.T.A. Convention resulting in a total undercharge of tax of Rs. 37,690. In that view he started proceedings under section 263 by issue of notice dated 23-2-1988. The assessee's counsel appeared before the Commissioner and filed written submissions. It had been stated therein that the rate of tax at 15% was correctly applied by the ITO on interest on short-term deposits with Banks and the Housing Development Finance Corporation and that the said interest satisfied the conditions necessary for applying Article 12(2) of the Convention for Avoidance of Double Taxation between India and the United Kingdom. The Commissioner after referring to Article 12(2) held as under : " It is seen from records that the rate of 15% was not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C. to the Consolidated Tea & Lands Co. (India) Ltd. (a company under the group of James Finlay), copy of the Certificate of Deposit issued by Housing Development Finance Corporation Ltd. He also filed copy of letter dated 11-4-1985 addressed by the assessee to the ITO, A-Ward, Foreign Companies Circle-I, Calcutta and also letter dated 15-6-1983 from Tata Tea Ltd. addressed to the Commissioner of Income-tax, West Bengal-V, Calcutta and copy of letter dated 27-1-1984 addressed by James Finlay P.I.C. to the CIT, West Bengal-V, Calcutta. The arguments of the assessee's counsel were to the following effect : The assessee is a non-resident company. The assessee derived interest of Rs. 68,375 from short-term deposits with banks and Housing Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m is submitted. The terms and conditions of the Deposit Scheme with HDFC are given at pages 7 & 8 of the paper book. In it also the same condition appears that for renewal a fresh prescribed form of application has to be submitted. Thus, whenever a renewal is made it amounts to a fresh deposit. On the commentary contained at page 1014 to section 370 of the Companies Act, 1956 by A. Ramaiya, 11th edition, it is mentioned that renewal of deposits after the expiry of the term will be deemed to be fresh deposit. The photostat copy of page 1014 from the said book is given at page 10 of the paper book. Further, the Commissioner has authorised the assessee to receive in India interest on deposit made with HDFC after October 1981 after deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a resident of the other Contracting State may be taxed in that other State. 2. However, such interest may also be taxed in the Contracting State in which it arises and according to the law of that State, provided that where the resident of the other Contracting State is the beneficial owner of the interest and it is paid in respect of a loan or debt first created after the date of entry into force of this Convention, the tax so charged shall not exceed 15 per cent of the gross amount of the interest. " Clause (2) of Article 12 speaks of charging of interest at a rate not exceeding 15% in respect of interest paid in respect of a loan or debt first created after the date of entry into force of the said Convention. The question that arises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts former conditions and obligation on which the time of payment has been extended. Keday v. Petty, 54 N.E. 798, 800, 153 Ind. 179. " In the case of a deposit it is repayable according to the terms of the agreement. (Abdul Hamid Sahib v. Rahmat Bi AIR 1965 Mad. 427). Thus, when a deposit is renewed on the basis of a fresh application, a new contract comes into existence. So, the deposits renewed by the assessee with HDFC after 23-11-1981 have to be interpreted as loans " first created " and so the tax to be charged was only @ 15%. In the circumstances, there is no error in the assessment order of the ITO. The Commissioner is not justified in setting aside the said assessment order. The impugned order under section 263 dated 14-3-1988 is he ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
