DDIT (IT) 4(2), MUMBAI V. PRINCIPAL LIFE INERNATIONAL EMERGING MARKETS SEPARATE ACCOUNT, MUMBAI

ITA 1866/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84244 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: L
• Next Hearing Date: 02-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK A PERAMPURNA
• Keywords: Double taxation relief
• Section: 143(3); 244A; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'L' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 1866/MUM/2013 (ASSESSMENT YEAR: 2007-08) DY. DIRECTOR OF INCOME TAX VS. M/S. PRINCIPAL LIFE - INTERNATIONAL (INTERNATIONAL TAXATION) 4(2) ROOM NO. 11, SCINDIA HOUSE BALLARD PIER, MUMBAI 400038 EMERGING MARKETS SEPARATE ACCOUNT C/O. BSR & CO., KPMG HOUSE KAMLA MILLS COMPOUND 448, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI 400013 PAN - AACCI6548D APPELLANT RESPONDENT APPELLANT BY: SHRI VIVEK A. PERAMPURNA RESPONDENT BY: NONE DATE OF HEARING: 11.11.2014 DATE OF PRONOUNCEMENT: 11.11.2014 O R D E R PER D. MANMOHAN, V.P. THIS IS AN APPEAL FILED AT THE INSTANCE OF THE REVE NUE AND IT PERTAINS TO AY 2007-08. 2. THE ONLY GROUND URGED BY THE REVENUE READS AS UNDER : - 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE CIT(A) IS CORRECT IN HOLDING THAT ARTICLE UNDER WHI CH INTEREST U/S. 244A OF I.T. ACT, 1961 IS TAXABLE CANNOT BE DECIDED IN PROCEEDINGS U/S 154 WITHOUT APPRECIATING THE FACT THAT INTEREST ISSUED U/S. 244A BEING APPARENTLY NOT IN THE NATURE OF INTEREST ON DEBT IS CLEARLY TAXABLE UNDER ARTICLE 23 OF THE INDIA-USA D TAA. 3. FACTS NECESSARY FOR DISPOSAL OF THE APPEAL ARE AS U NDER. THE ASSESSEE IS A NON-RESIDENT CORPORATE ENTITY REGISTERED WITH SEB I AS FII, RESIDENT OF USA. IN RESPECT OF AY 2007-08 ASSESSMENT WAS COMPLETED U NDER SECTION 143(3) OF THE ACT ON 07.10.2009 AND A REFUND OF ` 1,56,80,446/- WAS DETERMINED. INTEREST UNDER SECTION 244A WAS GRANTED TO THE TUNE OF ` 21,47,532/-. SUBSEQUENTLY THE AO WAS OF THE OPINION THAT REFUND OF INTEREST HAS TO BE TREATED AS INCOME, AS DEFINED IN ARTICLE 23 OF THE DTAA BETWEEN INDIA AND ITA NO. 1866/MUM/2013 M/S. PRINCIPAL LIFE - INTERNATIONAL EMERGING MARKETS SEPARATE ACCOUNT 2 USA AND, THEREFORE, TAXABLE IN THE HANDS OF THE ASS ESSEE COMPANY UNDER THE HEAD OTHER SOURCES. THEREFORE PROCEEDINGS WERE I NITIATED UNDER SECTION 154 OF THE ACT TO BRING TO TAX THE INTEREST INCOME. THE CASE OF THE ASSESSEE IS THAT ANY ITEM OF INCOME WHICH HAS NOT BEEN DEFINED IN PA RTICULAR WOULD FALL UNDER ARTICLE 23 OF THE DTAA WHEREAS INTEREST ON REFUND I S EXPRESSLY COVERED IN ARTICLE 11 OF THE DTAA. THE AO REJECTED THE CONTENT ION OF THE ASSESSEE IN THE PROCEEDINGS UNDER SECTION 154 OF THE ACT AND ACCORD INGLY HELD THAT THERE IS SHORT DEDUCTION OF TDS OF ` 5,75,968/-. 4. ON AN APPEAL FILED BY THE ASSESSEE THE LEARNED CIT( A) OBSERVED THAT THE ISSUE OF TAXABILITY OF INCOME TAX REFUND WAS CO NSIDERED BY THE ITAT SPECIAL BENCH, DELHI IN THE CASE OF CLOUGH ENGINEER ING LTD. 130 ITD 137 WHEREIN IT WAS HELD THAT INCOME TAX REFUND IS TAXAB LE UNDER PARA 2 OF ARTICLE 11 OF DTAA. AT ANY RATE, WHETHER INTEREST IS TAXABL E UNDER ARTICLE 11 OR ARTICLE 23 IS A DEBATABLE ISSUE AND HENCE IT IS HEL D TO BE BEYOND THE SCOPE OF PROCEEDINGS UNDER SECTION 154 OF THE ACT. THEREFORE THE ORDER PASSED UNDER SECTION 154 WAS ANNULLED. AGGRIEVED, REVENUE IS IN APPEAL BEFORE US. 5. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE LEARNE D D.R. FAIRLY ADMITTED THAT THE ISSUE STANDS SQUARELY COVERED BY THE DECISION OF THE ITAT SPECIAL BENCH (SUPRA). HOWEVER, HE SUPPORTED THE ST AND OF THE REVENUE BY SUBMITTING THAT ARTICLE 23 IS APPLICABLE IN THE INS TANT CASE. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED D.R. AND PERUSED THE RECORD. IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE ITAT, DELHI (SUPRA) WE ARE OF THE VIEW THAT THE ISS UE IS AT LEAST A DEBATABLE ONE AND HENCE BEYOND THE PALE OF SECTION 154 OF THE ACT. WE THEREFORE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER PASSED BY CIT(A). ACCORDINGLY THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH NOVEMBER, 2014. SD/- SD/- (N.K. BILLAIYA) (D. MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATED: 11 TH NOVEMBER, 2014 ITA NO. 1866/MUM/2013 M/S. PRINCIPAL LIFE - INTERNATIONAL EMERGING MARKETS SEPARATE ACCOUNT 3 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 11, MUMBAI 4. DIRECTOR OF INCOME TAX (IT)-II, MUMBAI 5. THE DR, L BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.