Uniparts India Ltd., New Delhi V. DCIT, New Delhi

ITA 203/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6865 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 09-01-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Residential status; Double taxation relief; Wholly owned subsidiary
• Section: 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER & SHRI AMIT SHUKLA, JUDICIAL MEMBER I.T.AS. NO.201, 202, 203, 204 & 205/DEL/2015 ASSESSMENT YEARS: 2007-08, 2008-09, 2009-10, 2010-20 11 & 2011-12 M/S. UNIPARTS INDIA LIMITED, BLOCK-5, C-6 &7, GRIPWELL HOUSE LSC, VASANT KUNJ, NEW DELHI. VS. CIT, CIRCLE-18(1), NEW DELHI. TAN/PAN: AAACU 0545D (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI R.S. SINGHVI & SHRI SATYAJEET GOYAL, C.A. RESPONDENT BY: SHRI AMIT JAIN, SR.D.R. DATE OF HEARING: 03 04 2018 DATE OF PRONOUNCEMENT: 02 07 2018 O R D E R PER AMIT SHUKLA, J.M.: THE AFORESAID APPEALS HAVE BEEN FILED BY THE ASSESS EE AGAINST THE IMPUGNED ORDER OF EVEN DATE, DATE 10.11 .2014, PASSED BY LD. CIT (APPEALS)-XXI, NEW DELHI, IN RELA TION TO THE ORDER PASSED U/S.154 FOR THE ASSESSMENT YEARS 2007- 08 TO 2011-12. SINCE SAME ISSUE IS INVOLVED IN ALL THE AP PEALS, ARISING OUT OF IDENTICAL SET OF FACTS, THEREFORE, S AME WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS C ONSOLIDATED ORDER. IN APPEAL FOR THE ASSESSMENT YEAR 2007-08, T HE ASSESSEE HAS TAKEN FOLLOWING GROUNDS:- I.T.AS. NO.201 TO 205/DEL/2015 2 1. THAT THE ORDER OF THE LD. APPELLATE AUTHORITY IS AR BITRARY, UNJUSTIFIED, UNLAWFUL AND AGAINST THE LAW AND FACTS OF THE CASE. 2. THAT THE LD. APPELLATE AUTHORITY, WITHOUT APPRECIA TING THE FACTS OF THE CASE, HAS DISALLOWED THE CLAIM OF THE ASSESSEE COMPANY FOR CREDIT OF WITHHOLDING TAX AMOUNTING TO RS. 26,99,165/- DED UCTED BY M/S UNIPARTS USA LTD., USA ON INTEREST PAID TO THE ASSE SSEE COMPANY. 3. THAT THE LD. APPELLATE AUTHORITY HAS FAILED TO APPR ECIATE THE FACT THAT THE ASSESSEE COMPANY HAD TO SUFFER DOUBLE TAX ON INTEREST INCOME EARNED FROM UNIPARTS USA LTD. AS A SUM OF RS . 26,99,165/- HAS BEEN DEDUCTED BY UNIPARTS USA LTD., USA AS WIT H-HOLDING TAX, THE CREDIT OF WHICH HAS NOT BEEN ALLOWED TO THE ASS ESSEE COMPANY AND THE ASSESSEE COMPANY HAD ALSO PAID INCOME TAX O N INTEREST EARNED FROM UNIPARTS USA LTD. IN INDIA AS PER THE P ROVISIONS OF INCOME TAX ACT, 1961. 4. THAT LD. APPELLATE AUTHORITY HAS NOT CONSIDERED TH E FACT THAT THE ASSESSEE COMPANY IS RESIDENT IN INDIA SINCE ITS REG ISTERED OFFICE AND THE MANUFACTURING UNITS ARE SITUATED IN INDIA AND I N ACCORDANCE WITH THE PROVISIONS OF SEC. 5(1) OF THE INCOME TAX ACT, 1961 IS LIABLE TO BE TAXED ON ALL ITS INCOME IN INDIA WHETHER EARNED IN INDIA OR OUTSIDE INDIA. ACCORDINGLY, INTEREST INCOME EARNED IN USA I S ALSO LIABLE TO BE TAXED IN INDIA AND THUS ELIGIBLE TO TAKE CREDIT OF WITHHOLDING TAX DEDUCTED ON INCOME EARNED IN USA. EXCEPT FOR THE VARIATION IN THE FIGURES FOR THE AM OUNT OF WITHHOLDING TAX, ALL THE GROUNDS ARE IDENTICALLY WO RDED IN THE OTHER ASSESSMENT YEARS IMPUGNED BEFORE US. 2. THE FACTS IN BRIEF QUA THE ISSUE ARE THAT ASSESSEE WHO IS RESIDENT OF INDIA HAS A WHOLLY OWNED SUBSIDIARY IN USA NAMED AS M/S. UNIPARTS USA LTD. THE ASSESSEE HAS AD VANCED I.T.AS. NO.201 TO 205/DEL/2015 3 INTEREST BEARING FUND TO ITS WHOLLY OWNED US SUBSID IARY ON WHICH INTEREST INCOME HAS ACCRUED TO THE ASSESSEE F ROM SUCH LOAN. THE US SUBSIDIARY HAS REMITTED THE INTEREST T O THE ASSESSEE IN INDIA AFTER WITHHOLDING THE TAX @15% IN VIEW OF THE ARTICLE 11 OF INDIA US DTAA. THE SAID INTEREST INCOME HAS BEEN DULY DISCLOSED IN THE RETURN OF INCOME FILED B Y THE ASSESSEE IN THE ASSESSMENT YEARS 2007-08 TO 2011-12 . THE DETAILS OF RETURN OF INCOME, INTEREST INCOME EARNED FROM US SUBSIDIARY AND TDS DEDUCTED BY THE US COMPANY ARE A S UNDER:- SL NO. A.Y RETURN INCOME TOTAL INTEREST INCOME INTEREST FROM USA TDS IN USA 1 2007 - O 8 22,89,44,971/ - 63,49,477/ - 1,57,06,146/ - 26,99,165/ - 2 2008- 09 28,02,32,440/ - 2,81,79,606/ - 1,71,85,174/ - 31,61,892/ - 3 2009 - 10 13,76,59,264/ - 2,30,21,801/ - 1,68,23,768/ - 22,42,301/ - 4 2010-11 (-) 20,26,91,934/- 2,73,84,015/ - 1,94,48,930/ - 11,48,784/ - 5 2011-12 (-) 99,48,505/- 1,28,71,281/ - 51,77,715/ - 38,10,326/ - TOTAL 1,30,62,468/ - 3. THE ASSESSEE IN THE RETURN OF INCOME HAS CLAIM ED THE CREDIT OF TAX DEDUCTED AT SOURCE IN USA IN TERMS OF ARTICLE 25 OF THE INDO-US DTAA. SINCE THE SAID CREDIT WAS NOT ALLOWED TO THE ASSESSEE IN THE INTIMATION U/S. 143(1), THE ASS ESSEE FILED AN APPLICATION U/S.154 SEEKING THE CREDIT AGAINST T HE TAX WITHHELD IN USA FOR THE ASSESSMENT YEARS 2007-08 TO 2011- 12. THE ASSESSEES CONTENTION BEFORE THE ASSESSING OFFICER WAS I.T.AS. NO.201 TO 205/DEL/2015 4 THAT THE SAID INTEREST INCOME HAS BEEN REFLECTED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AS WELL AS IN THE RETURN OF INCOME AND THE TAX DEDUCTED AT SOURCE BY THE SUBSID IARY COMPANY AT THE RATE APPLICABLE IN THE DTAA BEFORE M AKING THE PAYMENTS HAS TO BE GIVEN CREDIT AS PER ARTICLE 25 O F THE DTAA. THE ASSESSING OFFICER HOWEVER NOTED THAT ASSESSEE I TSELF HAS STATED THAT THIS INTEREST WAS NOT TAXABLE IN USA AN D THEREFORE, HE HAS NOT FILED ANY RETURN OF INCOME IN USA. THE A SSESSING OFFICER REJECTED THE ASSESSEES CLAIM AFTER OBSERVI NG AND HOLDING AS UNDER:- A. DTAA ENVISAGES RELIEF FROM TAX PAYABLE ON AN IN COME IN THE RESIDENCE COUNTRY, WHERE TAX IS ALSO PAYABLE ON THE SAME INCOME IN THE SOURCE COUNTRY, THUS ENSURING THAT SAME INCOME IS NOT SUBJECT TO TAXATION IN TWO COUNTRIES. IN OTHER WORDS WHERE AN ASSESSES IS TAXABLE IN RESPECT OF A PARTICULAR INCOME IN ONE CO UNTRY AND HAS PAID TAX THEREON AND FILED ITS RETURN OF INCOME IN THAT COUNTRY INCLUDING THAT INCOME AND THE SAME INCOME IS ALSO T AXABLE IN INDIA, THEN IN SUCH A SITUATION THE ASSESSEE CAN CLAIM CRE DIT FOR TAX PAID IN SUCH OTHER COUNTRY BY SUBMITTING A COPY THE RETU RN OF INCOME FILED IN THAT COUNTRY, WHEREIN THE SAID INCOME & TA X PAID THEREON IS DULY REFLECTED. B. THERE IS NO SCHEME IN D'J'AA FOR THE RESIDENCE COUNTRY TO GIVE CREDIT TO THE TAX WITHHELD IN THE SOURCE COUNT RY, EVEN THOUGH THE CORRESPONDING INCOME IS NOT TAXABLE IN SUCH SOU RCE COUNTRY, CHIEFLY BECAUSE THE SAID INCOME HAS NOT SUFFERED AN Y DOUBLE TAXATION. HERE IT IS PERTINENT TO STATE THAT TDS OR WITHHOLDING OF TAX IS ONLY A MODE OF COLLECTION OF TAX (AS A PRECAUTIO NARY MEASURE) AND IS NOT THE ULTIMATE TEST OF TAXABILITY OF SUCH INCO ME, IN CASE OF ANY YDS OR WITHHOLDING OF TAX WHICH IS NOT DUE FROM THE ASSESSEE THEN SUCH TAX COLLECTING AUTHORITY IS BOUND TO RETURN TH E SAME TO THE I.T.AS. NO.201 TO 205/DEL/2015 5 ASSESSEE AS THE SAID INCOME IS NOT CHARGEABLE TO TA X AT ALL. C. IN THE INSTANT CASE, ASSESSEE HAS ITSELF STATED THAT IT IS NOT TAXABLE IN USA AND HA.: NOT FILED ANY RETURN OF INC OME IN USA. ITS ONLY CONTENTION IS THAT TAX HAS BEEN WITH HELD IN U SA ON THE INCOME WHICH HAS BEEN OFFERED FOR TAXATION IN INDIA AND HE NCE CREDIT FOR SUCH TAX WITHHELD IN USA SHOULD BE GIVEN AND BE ACC ORDINGLY REFUNDED IN INDIA. THUS, IT IS CLEAR THAT IN THIS C ASE, THE INTEREST INCOME IS NOT TAXABLE IN USA BUT HAS ONLY BEEN WITH HELD. IN SUCH A SITUATION THE ASSESSEE IS ELIGIBLE FOR A REFUND IN RESPECT OF TAX SO WITHHELD IN USA., WHICH WAS NOT DUE IN THE FIRST PL ACE, AS THE ASSESSEE IS NOT TAXABLE IN THAT COUNTRY. THUS THE P ROCEDURE AVAILABLE WITH THE ASSESSEE IS TO MAKE A CLAIM OF R EFUND IN USA ON TAX WITHHELD ON AN INCOME, WHICH IS NOT AT ALL TAXA BLE IN USA. 4. LD. CIT (A) TOO HAS CONFIRMED THE ACTION OF THE ASSESSING OFFICER IN THE FOLLOWING MANNER:- 3.3 I HAVE CONSIDERED THE ORDER OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE AND I DO NOT FIND ANY MERIT IN THE SUB MISSIONS OF THE ASSESSEE. THE PROVISIONS OF SECTION 90 UNDER THE HE AD DOUBLE TAXATION RELIEF UNDER CHAPTER-IX PROVIDES FOR RELIE F FROM DOUBLE TAXATION IF THE INCOME OF THE ASSESSEE IS TAXABLE B OTH IN INDIA AND IN THE CONTRACTING STATE I.E. USA AS PER THE DTAA W ITH USA VIDE ARTICLE 25(2)(A). BUT IN THE PRESENT CASE THE ASSES SEE HAS RECEIVED THE INTEREST INCOME WHICH IS TAXABLE IN INDIA AS TH E ASSESSEE IS RESIDENT IN INDIA BUT THE SAME INTEREST INCOME IS N OT TAXABLE IN USA AS THE ASSESSEE IS NOT A RESIDENT OF USA. THE INTER EST INCOME PAID BY THE USA COMPANY I.E. UNIPARTS USA LTD. IS A DEDU CTOR AND PAYER OF INTEREST AND IS APPARENTLY AN EXPENDITURE FOR TH AT COMPANY AND THERE IS NO QUESTION OF THE SAME BEING TAXABLE IN U SA. IT IS NOT KNOWN AS TO UNDER WHAT CIRCUMSTANCES THE TDS WAS MA DE BY THE DEDUCTOR IN USA WHEN THE SAME IS NOT TAXABLE IN USA . IT IS I.T.AS. NO.201 TO 205/DEL/2015 6 APPARENTLY A CASE OF TDS MADE BY THE DEDUCTOR IN US A WHICH IS OTHERWISE A WHOLLY OWNED SUBSIDIARY OF THE ASSESSEE COMPANY. IT IS NEVER ARGUED OR PLEADED OR PROVED THAT THE INTER EST INCOME OFFERED BY THE ASSESSEE FOR TAXATION IN INDIA IS AL SO TAXABLE IN USA AS PER THE US INTERNAL REVENUE CODE. SO NO CASE IS MADE OUT BY THE ASSESSEE THAT THE INTEREST INCOME HAS SUFFERED DOUB LE TAXATION BOTH IN INDIA AND IN USA TO CLAIM ANY RELIEF U/S 90(L)(A ). AFTER CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM O F THE VIEW THAT THE ASSESSEE IS NOT ELIGIBLE FOR ANY TDS CREDIT IN INDIA OR FOR ANY RELIEF UNDER THE DTAA WITH USA AND ACCORDINGLY THE APPEAL OF THE ASSESSEE IS DISMISSED. 5. BEFORE US, LD. COUNSEL FOR THE ASSESSEE, SHRI R.S. SINGHVI, SUBMITTED THAT, ONCE TDS HAS BEEN DEDUCTED BY THE US COMPANY WHILE REMITTING THE INTEREST, AND THE SA ME INTEREST INCOME HAS BEEN DECLARED AS INCOME ASSESSA BLE TO TAX IN INDIA IN TERMS OF SECTION 5, THEN CREDIT OF THE TAX HAS TO BE GIVEN AS PER ARTICLE 25 OF THE DTAA. THE OBSERVA TION OF THE LD. CIT (A) THAT THE ASSESSEE SHOULD HAVE TAKEN REF UND IN US IS NOT CORRECT, BECAUSE INTEREST INCOME WAS LIABLE TO BE WITHHOLDING TAX IN US AS PER ARTICLE 11 OF DTAA AND DOMESTIC LAWS OF US AND AS SUCH THERE WAS NO OCCASION FOR TH E ASSESSEE TO CLAIM REFUND OF THE TAX DEDUCTED. HE AL SO MADE REFERENCE TO THE RULE 128 WHICH PERTAINS TO FOREIGN TAX CREDIT WHICH SHALL BE ALLOWED TO THE RESIDENT WITH THE TAX PAID BY HIM OUTSIDE INDIA. HE FURTHER RELIED UPON THE JUDGM ENT OF ITAT AHMEDABAD BENCH IN THE CASE OF BHAVIN A. SHAH VS. ACIT (2017) 151 DTR (AHD) (TRIB) 97 . THUS, HE SUBMITTED THAT ASSESSING OFFICER COULD NOT HAVE DENIED THE CR EDIT OF TAX I.T.AS. NO.201 TO 205/DEL/2015 7 PAID ON US ON THE INTEREST INCOME WHICH HAS BEEN SH OWN IN THE RETURN OF INCOME IN INDIA. 6. ON THE OTHER HAND, LEARNED DEPARTMENT REPRES ENTATIVE STRONGLY RELIED UPON THE ORDER OF THE ASSESSING OFF ICER AND LD. CIT (A) AND SUBMITTED THAT ONUS WAS ON THE ASSESSEE TO SHOW THAT THE TAX WHICH HAS BEEN WITHHELD BY THE US COMP ANY WAS ACTUALLY NOT SUBJECTED TO TAX AS PER THE DOMESTIC L AW OF US WHICH HAS BEEN NOTED BY THE ASSESSING OFFICER AND T HEREFORE, BOTH ASSESSING OFFICER AND LD. CIT (A) HAS RIGHTLY DENIED THE CREDIT TO THE ASSESSEE. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PE RUSED THE RELEVANT FINDINGS GIVEN IN THE IMPUGNED ORDER. HEREIN THESE CASES, ONLY ISSUE INVOLVED IN ALL THE APPEALS IS ALLOWABILITY OF CLAIM OF WITHHOLDING TAX CREDIT DED UCTED BY US BASED SUBSIDIARY OF THE ASSESSEE COMPANY IN USA ON PAYMENT OF INTEREST LOAN. IT IS NOT IN DISPUTE THAT INTERES T INCOME EARNED BY THE ASSESSEE FROM US COMPANY IS LIABLE FO R TAX IN INDIA AS PER SECTION 5. THE US SUBSIDIARY COMPANY W HILE REMITTING THE INTEREST PAYMENT FOR THE IMPUGNED ASS ESSMENT YEAR HAS WITHHELD THE TAX IN ACCORDANCE WITH ARTICL ES 11 AND 25 OF INDO-US DTAA @ 15% OF THE GROSS AMOUNT WHICH IS THE RATE PRESCRIBED IN PARAGRAPH 2 OF ARTICLE 11. THE S AID CREDIT HAS BEEN DENIED BY THE REVENUE AUTHORITIES ON THE G ROUND THAT; FIRSTLY , ASSESSEE HAS NOT FILED ITS RETURN OF INCOME IN US FOR CLAIMING THE REFUND OF THE WITHHOLDING TAX IF T HE SAID AMOUNT IS NOT TAXABLE IN US; SECONDLY , THERE IS NO SCHEME I.T.AS. NO.201 TO 205/DEL/2015 8 UNDER THE DTAA FOR THE RESIDENT TO GIVE CREDIT OF T HE TAX WITHHELD IN THE SOURCE COUNTRY IF THE SAME IS NOT T AXABLE IN THE SOURCE COUNTRY, THEREFORE, IT IS NOT A CASE OF DOUBLE TAXATION; THIRDLY , WHICH IS THE GROUND TAKEN BY THE LD. CIT(A) TO DENY THE CREDIT IS THAT, INTEREST PAID BY THE US COMPANY WHO IS A DEDUCTOR IS ACTUALLY AN EXPENDITURE FOR TH AT COMPANY AND THEREFORE, THERE IS NO QUESTION OF SAME BEING T AXABLE IN USA; AND LASTLY , IT HAS NOT BEEN SHOWN AS TO UNDER WHICH PROVISION THE TDS WAS MADE BY THE DEDUCTOR IN USA. FIRST OF ALL, THE RELEVANT CLAUSE OF ARTICLE 11 (WHICH IS RE LEVANT FOR DECIDING THE FIRST APPEAL) READS AS UNDER:- ARTICLE 11 INTEREST 1. INTEREST ARISING IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER STATE. 2. HOWEVER, SUCH INTEREST MAY ALSO BE TAXED IN THE CON TRACTING STATE IN WHICH IT ARISES, AND ACCORDING TO THE LAWS OF TH AT STATE BUT IF THE BENEFICIAL OWNER OF THE INTEREST IS A RESIDENT OF T HE OTHER CONTRACTING STATE, THE TAX SO CHARGED SHALL NOT EXCEED : (A) 10 PERCENT OF THE GROSS AMOUNT OF THE INTEREST IF S UCH INTEREST IS PAID ON ALOAN GRANTED BY A BANK CARRYING ON A BONA FIDE BANKING BUSINESS OR BY A SIMILAR FINANCIAL INSTITUTION (INC LUDING AN INSURANCE COMPANY) ; AND (B) 15 PER CENT OF THE GROSS AMOUNT OF THE INTEREST IN ALL OTHER CASES. 8. ERGO, PARAGRAPH 1 CLEARLY STATES THAT IF THE IN TEREST IS ARISING IN A SOURCE STATE WHICH IS PAID TO THE RESI DENT STATE THEN IT MAY BE TAXED IN THE RESIDENT STATE. THIS IN TER ALIA I.T.AS. NO.201 TO 205/DEL/2015 9 MEANS THAT INTEREST ARISING IN A SOURCE STATE IS LI ABLE TO BE TAXED IN THE RESIDENT STATE. PARAGRAPH 2 HOWEVER LA YS DOWN THAT SUCH INTEREST MAY ALSO BE TAXED IN THE SOURCE STATE IN WHICH IT ARISES AND ACCORDING TO LAW OF THE SOURCE STATE BUT IF THE BENEFICIAL OWNER IS THE RESIDENT STATE THEN THE TAX WAS CHARGED SHALL NOT EXCEED 10% AS PER CLAUSE (A) AND 15% AS PER CLAUSE (B). THUS, INTEREST CAN ALSO BE TAXED IN THE SOURCE STATE IN WHICH IT ARISES ACCORDING TO LAWS OF THE S OURCE STATE AND THEN IN THAT CASE THE TAX SO CHARGED SHALL NOT EXCEED 10% OR 15%. IT CAN BE INFERRED THAT THE TAXABILITY OF T HE INTEREST IN THE SOURCE STATE HAS TO BE IN ACCORDANCE WITH THE L AWS OF THAT STATE; AND IF SUCH TAX HAS BEEN DEDUCTED, THEN ARTI CLE 25 OF THE SAID TREATY PROVIDES CREDIT OF SUCH TAXES WHICH HAS TO BE GIVEN BY THE RESIDENT STATE WHICH IS CLEAR FROM PAR AGRAPH 2 OF THE ARTICLE 25. THE RELEVANT PARAGRAPHS 1 AND 2 OF ARTICLE 25 READ AS UNDER:- ARTICLE 25 RELIEF FROM DOUBLE TAXATION 1. IN ACCORDANCE WITH THE PROVISIONS AND SUBJECT TO THE LIMITATIONS OF THE LAW OF THE UNITED STATES (AS IT MAY BE AMER.ZED FROM TIME TO TIME WITHOUT CHANGING THE GENERAL PRINCIPLE HEREOF), THE UNITED STATES SHALL ALLOW TO A RESIDENT O: CITIZEN OF THE UNITED STATES AS A CREDIT AGAINST THE UNITED STATES TAX ON INCOME (A) THE INCOME-TAX PAID TO INDIA BY OR ON BEHALF OF SUC H CITIZEN OR RESIDENT; AND (B) IN THE CASE OF A UNITED STATES COMPANY OWNING AT LE AST 10 PER CENT OF THE VOTING STOCK OF A COMPANY WHICH IS A RESIDENT OF INDIA AND FROM WHICH THE UNITED STATES COMPANY RECE IVES I.T.AS. NO.201 TO 205/DEL/2015 10 DIVIDENDS, THE INCOME- TAX PAID TO INDIA BY OR ON B EHALF OF THE DISTRIBUTING COMPANY WITH RESPECT TO THE PROFITS OU T OF WHICH THE DIVIDENDS ARE PAID. FOR THE PURPOSES OF THIS PARAGRAPH, THE TAXES REFER RED TO IN PARAGRAPHS 1(B) AND 2 OF ARTICLE 2 (TAXES COVERED) SHALL BE CONSIDERED AS INCOME TAXES. 2. (A) WHERE A RESIDENT OF INDIA DERIVES INCOME WHICH , IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, MAY BE TAXE D IN THE UNITED STATES, INDIA SHALL ALLOW AS A DEDUCTION FROM THE T AX ON THE INCOME OF THAT RESIDENT AN AMOUNT EQUAL TO THE INCOME-TAX IN THE UNITED STATES, WHETHER DIRECTLY OR BY DEDUCTION. SUCH DEDUCTION SH ALL NOT, HOWEVER, EXCEED THAT PART OF THE INCOME-TAX (AS COMPUTED BEF ORE THE DEDUCTION IS GIVEN) WHICH IS ATTRIBUTABLE TO THE INCOME WHICH MAY BE TAXED IN THE UNITED STATES. THUS, THE PARAGRAPH 2 CLEARLY PROVIDES THAT IF THE RESIDENT OF INDIA DERIVES INCOME WHICH MAY BE TAXED IN US, THEN INDIA HAS TO ALLOW THE DEDUCTION FROM THE TAX ON THE INCO ME OF THE RESIDENT ON THE AMOUNT EQUAL TO THE TAX PAID IN US WITH A DEDUCTEE. 9. HERE IN THIS CASE IT IS NOT IN DISPUTE THAT TAX HAS BEEN DEDUCTED BY THE SOURCE STATE, I.E., USA ON THE INTE REST INCOME OF THE RESIDENT OF INDIA, HOWEVER, IT IS NOT CLEAR UNDER WHICH PROVISION SUCH AMOUNT OF INTEREST PAID BY THE US CO MPANY TO THE INDIAN COMPANY IS LIABLE FOR TAX UNDER THE US L AWS. THE TDS CERTIFICATE PERHAPS WILL GIVE THE CLARITY IN TH IS REGARD, BECAUSE THERE MIGHT BE MENTION OF PROVISION OR CODE UNDER WHICH THE TAX HAS BEEN WITHHELD. THUS, FOR THE LIMI TED PURPOSE THE MATTER IS REMANDED BACK TO THE ASSESSIN G OFFICER I.T.AS. NO.201 TO 205/DEL/2015 11 TO EXAMINE THE TDS CERTIFICATES WHICH SHALL BE SUBM ITTED BY THE ASSESSEE; OR ASSESSEE CAN PROVIDE ANY OTHER DOC UMENTS TO SHOW THAT WITHHOLDING OF THE TAX BY THE US COMPANY IS IN ACCORDANCE WITH THE LAW OF THE US STATE. IF THE TDS CERTIFICATE IS PRODUCED BY THE ASSESSEE, THEN SUCH TAX WHICH HA S BEEN WITHHELD, ASSESSING OFFICER HAS TO GIVE CREDIT OF S UCH WITHHOLDING TAX BY THE US COMPANY WHICH IS THE MAND ATE OF ARTICLE 25. ACCORDINGLY, WITH THIS DIRECTION THE MA TTER IS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 2 ND JULY, 2018. SD/- [J.S. REDDY] [AMIT SHUKLA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 2 ND JULY, 2018 PKK: COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR ASSISTANT REGISTRAR I.T.AS. NO.201 TO 205/DEL/2015 12 DATE 1. DATE OF DICTATION .06.2018 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER .06.2018 3. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P.S./PS 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P.S./PS 7. DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 10. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER 11. DATE OF DISPATCH OF THE ORDER