DILIP DHARMSEY KHATAU, MUMBAI V. ITO (IT) 3(1)(1), MUMBAI

ITA 5386/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3004 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 06-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 19-11-2015
• Court: TRIBUNAL
• Department Lawyers: MRS SURBHI SHARMA SR DR
• Assessee Lawyers: MRS D J JARIWALA
• Keywords: Residential status; Rectification of order; Double taxation relief; Maximum Marginal Rate; Earning of tax free income; Permanent establishment; Revised return
• Section: 143(3); 54; 263; 90; 154

Judgement Text

, , D, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NO.5386/MUM/2015 ASSESSMENT YEAR: 2010-11 DILIP DHARMSEY KHATAU, 881/888, ATLANTA, 209, NARIMAN POINT, MUMBAI-400021 / VS. ITO 3 ( 1 ) ( 1 ) SCINDIA HOUSE, 1 ST FLOOR, BALLARD ESTATE, MUMBAI-400038 (ASSESSEE ) (REVENU E) P.A. NO. AABPK3729R !' / ASSESSEE BY MRS. D.J. JARIWALA (AR) / REVENUE BY MRS. SURBHI SHARMA ( SR. DR) # $ % & / DATE OF HEARING : 06/06/2016 % & / DATE OF ORDER: 29/06/2016 / O R D E R PER ASHWANI TANEJA (ACCOUNTANT MEMBER): THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI- 56 {(IN SHORT CIT(A)}, DATED 27.10.2015 PASSED AG AINST DILIP DHARAMSEY KHATAU 2 RECTIFICATION ORDER U/S 154 OF THE AO FOR THE ASSES SMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED CIT (APPEALS) HAS ERRED IN HOLD ING THAT THE AO HAS CORRECTLY REJECTED THE RECTIFICATIO N APPLICATION FILED BY THE APPELLANT U/S. 154 OF THE INCOME- TAX ACT, 1961 CLAIMING RELIEF U/S. 90 OF THE ACT ON THE GROUND THAT THERE IS NO APPARENT MISTAKE SINCE THE RELIEF HAD NOT BEEN CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME FILED BY HIM. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT (APPEALS) HAS ERRED IN HOLD ING THAT THE APPELLATE AUTHORITIES HAVE POWERS TO ENTERTAIN FRESH CLAIM ONLY IF THE ASSESSMENT ORDER IS PASSED U/S. 143(3) AND NOT IF THE RETURN IS PROCESS ED U/S. 143(1). 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LEARNED CIT (APPEALS) HAS ERRED IN HOLD ING THAT SINCE THE A.O. IN THE PRESENT CASE HAS ACCEPTE D THE INCOME RETURNED BY THE APPELLANT UNDER THE PROVISIONS OF SEC. 143(1) WHICH IS WITH THE PROVISI ONS OF LAW, THERE IS NO MISTAKE IN THE ORDER OF THE A.O. W HICH COULD BE RECTIFIED AND THERE IS NO GROUND TO DEFER FROM THE STAND TAKEN BY THE A.O. 4. THE APPELLANT PRAYS THAT THE LEARNED ITO BE DIRE CTED TO ALLOW APPROPRIATE RELIEF IN TERMS OF DTAA BETWEEN I NDIA AND SINGAPORE AS CLAIMED BY THE APPELLANT IN THE RECTIFICATION APPLICATION AND ACCORDINGLY, THE A.O. BE DIRECTED TO A) TAX THE INTEREST INCOME OF RS. 2,17,22,013/- @ 1 5% ONLY INSTEAD OF @ 30.9% ACTUALLY CHARGED TO THE APPELLANT, IN TERMS OF ARTICLE 11 OF DTAA BETWEEN I NDIA AND SINGAPORE AND B) EXCLUDE SHORT TERM CAPITAL GAINS OF RS. 12,84,59 8/- FROM THE COMPUTATION OF TAXABLE INCOME IN TERMS OF ARTICLE 13 OF DTAA BETWEEN INDIA AND SINGAPORE AND DELETE TAX CHARGED OIL SAID INCOME.' 2. DURING THE COURSE OF HEARING, ARGUMENTS WERE MADE B Y MRS. D.J. JARIWALA, AUTHORISED REPRESENTATIVE (AR) ON BEHALF DILIP DHARAMSEY KHATAU 3 OF THE ASSESSEE AND BY MRS. SURBHI SHARMA, DEPARTME NTAL REPRESENTATIVE (DR) ON BEHALF OF THE REVENUE. 3. THE SOLITARY ISSUE RAISED BY THE ASSESSEE BY WAY O F THIS APPEAL IS WITH REGARD TO DENIAL TO THE ASSESSEE, TH E BENEFIT OF PROVISIONS OF DOUBLE TAX AVOIDANCE AGREEMENT (DTAA) BETWEEN INDIA AND SINGAPORE. THE CASE OF THE ASSESS EE IS THAT BENEFITS OF PROVISIONS OF ARTICLE 11 AND ARTICLE 13 OF INDIA- SINGAPORE TREATY HAVE NOT BEEN GIVEN TO THE ASSESSE E DESPITE A SPECIFIC PETITION HAVING BEEN FILED IN THIS REGARD U/S 154 OF THE AO. ON THE OTHER HAND, THE CASE OF THE REVENUE IS T HAT THE CLAIM WITH REGARD TO THE PROVISIONS OF DTAA WAS NOT MADE BY THE ASSESSEE EITHER IN THE ORIGINAL RETURN OR IN TH E REVISED RETURN FILED BY IT, BUT THE SAME WAS CLAIMED BY WAY OF PETITION U/S 154, WHICH COULD NOT HAVE BEEN GRANTED AS IT RE QUIRED INVESTIGATION OF FACT TO EXAMINE WHETHER THE ASSESS EE CAN BE GRANTED THE BENEFIT OF PROVISIONS OF ARTICLE 11 & A RTICLE 13 OF THE DTAA. 3.1. WE HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHO RITIES AND HEARD BOTH THE PARTIES AT GREAT LENGTH. BOTH, T HE PARTIES HAVE MADE THE ARGUMENTS EXHAUSTIVELY, PUTTING IN AM PLE AMOUNT OF LABOUR TO BRING OUT CORRECT FACTS AND LEG AL POSITION OF LAW. 3.2. THE BRIEF BACKGROUND OF THE CASE IS THAT THE ASSES SEE FILED ITS ORIGINAL RETURN ON 29.07.2010 WHICH WAS SUBSEQU ENTLY REVISED BY HIM ON 13.09.2011. IN BOTH OF THESE RETU RNS, THE DILIP DHARAMSEY KHATAU 4 RESIDENTIAL STATUS OF THE ASSESSEE WAS SHOWN AS NON- RESIDENT . THE REVISED RETURN INCLUDED INTER ALIA THE INCOME ON ACCOUNT OF INTEREST FROM BANK/FINANCIAL INSTITUTION S AGGREGATING TO RS.2,17,22,013/- AND INCOME FROM SHO RT TERM CAPITAL GAIN FROM SALE OF SECURITIES AGGREGATING TO RS.12,84,598/-. SUBSEQUENTLY, THE ASSESSEE FILED A PETITION U/S 154 TO THE AO CLAIMING THAT SINCE THE ASSESSEE WAS RESIDENT OF SINGAPORE DURING THE YEAR UNDER CONCERN , THEREFORE IN VIEW OF DTAA BETWEEN INDIA AND SINGAPORE INTERES T INCOME WAS LIABLE TO BE TAXED @ 15% AND SHORT TERM CAPITAL GAIN ON SALE OF SECURITIES WAS EXEMPT FROM TAX, WHEREAS IN THE REVISED RETURN FILED BY THE ASSESSEE, THE ASSESSEE INADVERT ENTLY PAID TAX ON THE INTEREST INCOME AT MAXIMUM MARGINAL RATE AND INCLUDED THE IMPUGNED AMOUNT OF CAPITAL GAIN FROM S ALE OF SHARES AS PART OF TAXABLE INCOME. THUS, ASSESSEE CL AIMED IN THE PETITION THAT IT WAS MISTAKE APPARENT FROM RECO RD SINCE INCOME NOT LIABLE TO TAX WAS MADE TAXABLE ON THE PA RT OF MISTAKE COMMITTED BY THE ASSESSEE WHICH WAS PERPETU ATED BY THE AO. IN SUPPORT OF ITS CLAIM, THE ASSESSEE ENCLO SED TAX RESIDENCY CERTIFICATE OF SINGAPORE. IT WAS FURTHER SUBMITTED BY THE ASSESSEE THAT AT THE TIME OF PROCESSING OF T HE REVISED RETURN, THE ASSESSMENT PROCEEDINGS OF IMMEDIATELY P RECEDING YEAR I.E. A.Y. 2009-10 WERE ALSO GOING ON BEFORE TH E AO AND ALL THESE FACTS WITH REGARD TO RESIDENCY OF THE ASSESSE E IN SINGAPORE AS WELL AS TAX RESIDENCY CERTIFICATE WAS AVAILABLE BEFORE THE AO AND THEREFORE, THE AO WAS BOUND TO CO NSIDER THE SAME UNDER THE LAW AS TO ASSESS INCOME OF ASSESSEE IN ACCORDANCE WITH LAW. SHE RELIED UPON THE JUDGMENT O F HONBLE DILIP DHARAMSEY KHATAU 5 KERALA HIGH COURT IN THE CASE OF UPASANA HOSPITAL & NURSING HOME VS. COMMISSIONER OF INCOME TAX-(2002) 253 ITR 507 (KER) FOR THE PROPOSITION THAT AN ERROR APPARENT ON THE FACE OF THE RECORD CANNOT BE SAID TO BE ONLY FROM THE RE CORD OF ONE PARTICULAR ASSESSMENT, BUT FROM THE ENTIRE RECORD OF THE ASSESSEE RELATING TO ALL THE ASSESSMENT YEARS. ON T HE BASIS OF THIS JUDGMENT, IT WAS REQUESTED BY THE LD. COUNSEL THAT REQUISITE FACTS WERE AVAILABLE IN THE FILE OF THE A O WHICH SHOULD NOT BE IGNORED IN THE INTEREST OF JUSTICE AND FAIR PLAY. SHE DREW OUR ATTENTION TO ARTICLE 265 OF CONSTITUTION OF IND IA TO ARGUE THAT NO TAX SHOULD BE COLLECTED EXCEPT BY AUTHORITY OF LAW. IN SUPPORT OF HER CLAIM, SHE RELIED UPON FOLLOWING JUD GMENTS AND CIRCULARS:- I. CIRCULAR NO. 14(XL-35) DATED 11/04/1955 ISSUED B Y CENTRAL BOARD OF REVENUE( NOW CENTRAL BOARD OF DIRECT TAXES ) II. CHICAGO PNEUMATIC INDIA LTD. VS. DY. CIT- (2007 ) 15 SOT 252(MUM.) III. CIT VS. M/S. PRUTHVI BROKERS & SHAREHOLDERS PV T. LTD. 349 ITR 336 IV. HATHWAY RAJESH MULTI CHANNEL VS. DEPARTMENT OF INCOME TAX IN ITA NO. 6345/M/2013 V. SANCHIT SOFTWARE AND SOLUTION (P.) LTD. V. CIT- 349 ITR 404 (BOM) VI. S.R. KOSHTI VS. CIT- 276 ITR 165(GUJ) 3.3. BEFORE CONCLUDING HER ARGUMENTS, LD. COUNSEL OF TH E ASSESSEE ALSO SUBMITTED THAT IN ALL SUBSEQUENT YEAR S THE ASSESSEE HAD CLAIMED THE RELIEF AS PER DTAA AND WHI CH HAS BEEN ALLOWED CONSISTENTLY FOR ALL OF THE ASSESSMENT YEARS VIZ. DILIP DHARAMSEY KHATAU 6 A.YS. 2011-12 TO 2015-16. OUT OF THESE 5 ASSESSMENT YEARS, RETURNS OF FIRST 3 ASSESSMENT YEARS HAVE ALREADY BE EN PROCESSED WHEREIN CLAIM OF THE ASSESSEE HAS BEEN AC CEPTED, AND THEREFORE, THERE SHOULD BE NO REASONS TO DENY T HE CLAIM IN THIS YEAR MERELY ON SOME TECHNICAL GROUNDS WHEN IN SUBSTANCE THE ASSESSEE IS ELIGIBLE FOR THIS RELIEF. 3.4. PER CONTRA, LD. DR OPPOSED THE SUBMISSIONS OF THE ASSESSEE IN DETAIL. IT WAS ARGUED THAT THE ASSESSEE DID NOT MAKE ITS IMPUGNED CLAIM IN THE RETURN. THE ASSESSEE HAD MISSED THE BUS AND THE SAME COULD NOT HAVE BEEN ALL OWED TO THE ASSESSEE BY WAY OF RECTIFICATION PROCEEDINGS U/ S 154. SHE RELIED UPON THE JUDGMENT OF HONBLE BOMBAY HIGH COU RT IN THE CASE OF GAMMON INDIA LTD. VS CIT 214 ITR 50 FOR THE PROPOSITION THAT RELIEF U/S 91(1) COULD NOT HAVE BE EN ALLOWED TO THE ASSESSEE IN THE PROCEEDINGS U/S 154, WHEN REQUI SITE FACTS AND DOCUMENTS TO JUSTIFY ASSESSEES CLAIM WERE NOT PART OF RECORDS OF THE AO OF THE CONCERNED YEAR. IT WAS ALS O SUBMITTED BY HER THAT REQUISITE FACTS WITH REGARD TO STAY OF ASSESSEE IN INDIA AND SINGAPORE AT DIFFERENT POINTS OF TIME NEE DS TO EXAMINED TO FIND OUT THE CORRECT POSITION OF THE AS SESSEE. UNDER THESE FACTS, IT WAS REQUESTED BY HER THAT ASS ESSEES CLAIM IS NOT POSSIBLE TO BE ALLOWED AS PER LAW AND THE SAME HAS BEEN RIGHTLY DENIED BY THE LOWER AUTHORITIES. 3.5. WE HAVE CAREFULLY GONE THROUGH THE ARGUMENTS MADE BY BOTH THE PARTIES BEFORE US. THOUGH, IT IS TRUE AND WE AGREE WITH THE LD. DR ON THIS POINT THAT THE CLAIM OF THE ASSESSEE DILIP DHARAMSEY KHATAU 7 CAN BE AND SHOULD BE ALLOWED IN ACCORDANCE WITH PRO VISIONS OF LAW ONLY, BUT IT IS ALSO TRUE THAT THE TAX CAN BE C OLLECTED FROM THE ASSESSEE STRICTLY WITHIN THE FOUR CORNERS OF LA W ONLY. IF THE ASSESSEE IS ABLE TO SHOW IN A BONA FIDE MANNER AT ANY STAGE THAT A PARTICULAR ITEM OF RECEIPTS IS NOT LIABLE TO BE TAXED AS INCOME IN ITS HANDS, THEN, AN EFFORT SHOULD BE MADE IN ALL FAIRNESS THAT TAX UPON THE SAME IS NOT RECOVERED FR OM THE ASSESSEE, SO LONG AS NOTHING IN-GENUINE OR MALA FIDE IS FOUND ON THE PART OF THE ASSESSEE AND SO LONG AS THE COND UCT OF THE ASSESSEE IS FOUND TO BE REASONABLE AND FAIR. ON THE BASIS OF FACTS BROUGHT BEFORE US, IT CAN BE NOTED THAT DURIN G THE PAST FEW YEARS, THE ASSESSEE HAD BEEN RESIDING ABROAD I. E. IN SINGAPORE. UNDER THESE CIRCUMSTANCES, IT IS QUITE N ATURAL THAT ASSESSEE WOULD HAVE BEEN DEPENDENT UPON ITS TAX CON SULTANT HERE IN INDIA. THE INCOME TAX LAW, ESPECIALLY IN OU R COUNTRY, HAS BEEN CONSTANTLY EVOLVING RESULTING INTO NUMEROU S AMENDMENTS TIME TO TIME. THE COMPLEXITIES IN THE BU SINESS ENVIRONMENT AS WELL AS IN THE REAL LIFE SITUATIONS HAVE MADE THE TAX LAWS ALSO EQUALLY COMPLEX AND CUMBERSOME TO UNDERSTAND NOT ONLY BY LAYMAN BUT ALSO BY THE TAX S PECIALISTS. UNDER THESE CIRCUMSTANCES, WE SHOULD EXAMINE THE RE TURN OF THE ASSESSEE AND ITS CLAIM ON THE TOUCH STONE OF GR OUND REALITIES AND CIRCUMSTANCES AND FACTS OF THE CASE. WE CANNOT CLOSE OUR EYES TOWARDS PRAYER OF THE TAXPAYERS EVEN FOR THEIR GENUINE CLAIMS MERELY BECAUSE THERE WAS AN OMISSION ON THE PART OF THE TAX PAYERS IN MAKING THE SAME IN THE MO ST APPROPRIATE MANNER. ON THE ONE HAND, THE REVENUE DEPARTMENT IS DUTY BOUND TO AUGMENT COLLECTION OF T AX AS WELL DILIP DHARAMSEY KHATAU 8 AS TO TACKLE PROBLEM OF TAX EVASION, BUT ON THE OTH ER HAND, THE REVENUE IS ALSO EXPECTED TO MAINTAIN FAIRNESS AND TRANSPARENCY IN ITS WORK SO AS TO BUILD FAITH OF TH E TAX PAYERS ON THE MECHANISM AND WORKING OF THE INCOME TAX DEPA RTMENT. WITH THIS BACKGROUND, WE HAVE ANALYSED THE FACTS OF THIS CASE, EVIDENCES/OTHER MATERIAL AVAILABLE BEFORE THE AO, T HE CLAIM MADE BY THE ASSESSEE AND THE LEGAL POSITION BROUGHT BEFORE US. IT IS NOTED THAT IN THE RETURN FILED BEFORE THE AO, THE ASSESSEE HAD UNDOUBTEDLY CLAIMED ITS STATUS AS THAT OF NON- RESIDENT. ITEM WISE DETAILS OF INCOME EARNED FROM ALL THE SOU RCES WERE GIVEN IN THE COMPUTATION SHEET FILED ALONG WITH RET URN OF INCOME (I.E. ORIGINAL AS WELL AS REVISED). IT IS AL SO UNDISPUTED FACT THAT COPY OF ASSESSEES TRC OF SINGAPORE AS WE LL AS DTAA BETWEEN INDIA AND SINGAPORE WAS AVAILABLE BEFORE TH E AO IN THE ASSESSMENT PROCEEDINGS OF A.Y. 2009-10. IT IS N OTED THAT HONBLE KERALA HIGH COURT IN THE CASE OF UPASANA HOSPITAL AND NURSING HOME V. CIT HELD AS UNDER: WE FEEL THAT THE POWER OF RECTIFICATION UNDER SECT ION 154 IS TO BE EXERCISED WITH REFERENCE TO THE RECORDS OF TH E ASSESSEE AVAILABLE WITH THE ASSESSING OFFICER, AND NOT WITH PARTICULAR REFERENCE TO THE ASSESSMENT ALONE. THE ERROR APPARENT ON THE FACE OF THE RECORD CANNOT BE SAID TO BE THE RECORD OF ONE PARTICULAR ASSESSMENT, BUT THE ENTIRE RECORD OF THE ASSESSEE RELATING TO ALL THE ASSESSME NT YEARS. THE SAME IS THE VIEW TAKEN BY THE SUPREME CO URT AND OTHER HIGH COURTS IN THE DECISIONS REFERRED TO ABOVE. DILIP DHARAMSEY KHATAU 9 3.6. THUS, AS PER LAW, IT WAS PERMISSIBLE FOR THE AO TO REFER TO THE RECORDS AVAILABLE FOR OTHER ASSESSMENT YEARS IF THESE WERE SOMEHOW RELEVANT FOR DETERMINING THE CORRECT TAX LI ABILITY OF THE IMPUGNED ASSESSMENT YEAR. 3.7. ON THE OTHER HAND, ADMITTEDLY, THERE WAS AN OMISSI ON ON THE PART OF THE ASSESSEE IN MAKING CLAIM IN THE RET URN OF INCOME WITH REGARD TO BENEFITS ACCRUED TO THE ASSES SEE ON THE BASIS OF DTAA BETWEEN INDIA-SINGAPORE. LD. COUNSEL HAS DREW OUR ATTENTION UPON THE PROVISIONS OF ARTICLE 265 OF THE CONSTITUTION OF INDIA PROVIDING THAT NO TAX SHALL B E LEVIED OR COLLECTED EXCEPT BY AUTHORITY OF LAW. SIMILARLY, RE LIANCE HAS BEEN PLACED ON CIRCULAR NO.14 DATED 11.04.1955 ISSU ED BY THE CENTRAL BOARD OF REVENUE (NOW CENTRAL BOARD OF DIRE CT TAXES) CLARIFYING AS UNDER: 3. OFFICERS OF THE DEPARTMENT MUST NOT TAKE ADVANT AGE OF THE IGNORANCE OF AN ASSESSEE AS TO HIS RIGHTS. IT I S ONE OF THEIR DUTIES TO ASSIST A TAXPAYER IN EVERY REASONAB LE WAY, PARTICULARLY IN THE MATTER OF CLAIMING AND SECURING RELIEF AND IN THIS REGARD THE OFFICERS SHOULD TAKE THE INI TIATIVE IN GUIDING A TAXPAYER WHERE PROCEEDINGS OR OTHER PARTI CULARS BEFORE THEM INDICATE THAT SOME REFUND OR RELIEF IS DUE TO HIM. THIS ATTITUDE WOULD, IN THE LONG RUN, BENEFIT THE DEPARTMENT, FOR, IT WOULD INSPIRE CONFIDENCE IN HIM THAT HE MAY BE SURE OF GETTING A SQUARE DEAL FROM THE DEPAR TMENT. ALTHOUGH, THEREFORE, THE RESPONSIBILITY FOR CLAIMIN G REFUNDS AND RELIEF REST WITH THE ASSESSEES ON WHOM IT IS IM POSED BY LAW, OFFICERS SHOULD: (A) DRAW THEIR ATTENTION TO ANY REFUNDS OR RELIEF T O WHICH THEY APPEAR TO BE CLEARLY ENTITLED BUT WHICH THEY H AVE OMITTED TO CLAIM FOR SOME REASON OR OTHER; DILIP DHARAMSEY KHATAU 10 (B) FREELY ADVISE THEM WHEN APPROACHED BY THEM AS T O THEIR RIGHTS AND LIABILITIES AND AS TO THE PROCEDUR E TO BE ADOPTED FOR CLAIMING REFUNDS AND RELIEFS. 3.8. SIMILARLY, IN THE CASE OF SANCHIT SOFTWARE AND SOL UTION (P.) LTD. (SUPRA), THE FACTS WERE LIKE THAT CLAIM W AS MADE BY THE ASSESSEE FOR EXEMPTION IN RESPECT OF DIVIDEND I NCOME AND LONG TERM CAPITAL GAINS ON WHICH SECURITIES TRANSAC TION TAX WAS PAID BY FILING AN APPLICATION FOR RECTIFICATION IN TERMS OF SECTION 154 OF THE ACT AS WELL AS BY FILING A REVISION PETITION UNDER SEC. 264 OF THE ACT, AND NOT BY FILING A REVISED RETURN OF INCOME. THE COMMISSIONER REJECTED THE REV ISION PETITION FILED BY THE ASSESSEE UNDER SECTION 264 OF THE ACT, AGAINST WHICH, THE ASSESSEE HAD FILED A WRIT PETITI ON IN THE HIGH COURT OF BOMBAY. THE BOMBAY HIGH COURT WHILE D ECIDING THE WRIT PETITION MADE THE FOLLOWING OBSERVATIONS: IN ANY CIVILIZED SYSTEM, THE ASSESSEE IS BOUND TO PAY THE TAX WHICH HE IS LIABLE UNDER THE LAW TO THE GOVERNM ENT. THE GOVERNMENT ON THE OTHER HAND IS OBLIGED TO COLL ECT ONLY THAT AMOUNT OF TAX WHICH IS LEGALLY PAYABLE BY AN ASSESSEE. THE ENTIRE OBJECT OF ADMINISTRATION OF TA X IS TO SECURE THE REVENUE FOR THE DEVELOPMENT OF THE COUNT RY AND NOT TO CHARGE ASSESSEE MORE TAX THAN THAT WHICH IS DUE AND PAYABLE BY THE ASSESSEE. IT IS IN AFORESAID CIRCUMSTANCES THAT AS FAR BACK AS IN 11/04/1955 THE CENTRAL BOARD OF DIRECT TAX HAD ISSUED A CIRCULAR D IRECTING ASSESSING OFFICER NOT TO TAKE ADVANTAGE OF ASSESSEE 'S IGNORANCE AND/OR MISTAKE. THE COURT THEN STATED THAT 'THE ABOVE CIRCULAR SHOU LD ALWAYS BE BORNE IN MIND BY THE OFFICERS OF THE RESP ONDENT REVENUE WHILE ADMINISTRATING THE SAID ACT. ULTIMATE LY, THE COURT NOT ONLY ALLOWED THE WRIT PETITION FILED BY T HE DILIP DHARAMSEY KHATAU 11 ASSESSEE AND SET ASIDE THE ORDER PASSED BY THE COMMISSIONER WHEREBY THE COMMISSIONER HAD REJECTED THE REVISION PETITION FILED BY THE ASSESSEE UNDER SECTI ON 264 OF THE ACT FOR CLAIMING EXEMPTION IN RESPECT OF DIVIDEND I NCOME AND LONG TERM CAPITAL GAINS ON WHICH SECURITIES TRANSAC TION TAX WAS PAID, BUT ALSO DIRECTED THE AO TO DISPOSE O F THE RECTIFICATION APPLICATION FILED BY THE ASSESSEE AT THE EARLIEST, PREFERABLY WITHIN SIX WEEKS FROM THE RECEIPT OF THE IR ORDER. 3.9. OUR ATTENTION WAS ALSO DRAWN ON THE JUDGMENT OF HO NBLE GUJARAT HIGH COURT IN THE CASE S.R. KOSHTI V. CIT ( SUPRA) WHEREIN THE FACTS WERE THAT THE SAID ASSESSEE HAD M ADE A CLAIM FOR EXEMPTION U/S. 10(10C) OF THE I.T. ACT BY FILING A REVISED RETURN OF INCOME, WHICH WAS ALLOWE D BY THE AO BY PASSING AN ORDER U/S 154 OF THE ACT, BUT SAID ORDER WAS NOT APPROVED BY THE ADDL. CIT AND THE CIT TOOK ACTION U/S. 263 TO REVISE THE ORDER PASSED BY THE AO U/S 1 54 OF THE ACT AND ALSO REJECTED THE APPLICATION FOR REVIS ION MADE BY THE ASSESSEE U/S 264 OF THE ACT. IN THIS CASE, THE HIGH COURT MADE THE FOLLOWING OBSERVATIONS: THE AUTHORITIES UNDER THE ACT ARE UNDER AN OBLIGAT ION TO ACT IN ACCORDANCE WITH LAW. TAX CAN BE COLLECTED ONLY AS PROVIDED UNDER THE ACT. IF AN ASSESSEE, UNDER A MISTAKE, MISCONCEPTION OR ON NOT BEING PROPERLY INSTRUCTED, IS OVER-ASSESSED, THE AUTHORITIES UNDER THE ACT ARE REQUIRED TO ASSIST HIM AND ENSURE THAT ONLY LEGITIMATE TAXES DUE ARE COLLECTED . THIS COURT, IN AN UNREPORTED DECISION IN CASE DILIP DHARAMSEY KHATAU 12 OF VINAY CHANDULAL SATIA V. SHRI N.O. PAREKH., THE COMMISSIONER OF INCOME TAX, SPECIAL CIVIL APPLICATI ON NO. 622/1981, RENDERED ON 20-81981, HAS LAID DOWN THE APPROACH THAT THE AUTHORITIES MUST ADOPT IN SUC H MATTERS IN THE FOLLOWING TERMS: 'THE SUPREME COURT HAS OBSERVED IN NUMEROUS DECISIO NS, INCLUDING RAMLAL AND ORS. V. REWA COALFIELDS LTD., AIR 1962 SC 361; THE STATE OF WEST BENGAL V. THE ADMINISTRATOR, HOWRAH MUNICIPALITY AND ORS.. AIR 1972 SC 749, AND BABUTMAL RAICHAND OSWAL V. LAXMIHAI R. TORTE, AIR? 1975 SC 1297, THAT THE STATE AUTHORITIES SHOULD NOT RAISE TECHNICAL PLEAS LITHE CITIZENS HAVE A LAWFUL RIGHT AND THE LAWFUL RIGHT IS BEING DENIED TO THEM MERELY ON TECHNICAL GROUNDS. T HE SLATE AUTHORITIES CANNOT ADOPT THE ATTITUDE WHICH P RIVATE LITIGANTS MIGHT ADOPT. 3.10. IT WAS SPECIFICALLY BROUGHT TO OUR ATTENTION THAT IN THE ABOVE-SAID CASE ALSO RETURN WAS PASSED U/S 143(1) A ND THERE WAS NO ASSESSMENT ORDER PASSED U/S 143(3) OF THE AC T. 3.11. THUS, IN VIEW OF THE ABOVE SAID LEGAL POSITION, WE FIND IT DIFFICULT TO SIMPLY IGNORE OR BRUSH ASIDE, A GENUIN E CLAIM MADE BY THE ASSESSEE ESPECIALLY WHEN IT HAS BEEN ALLOWED TO THE ASSESSEE IN ALL SUBSEQUENT YEARS. UNDER THESE CIRCU MSTANCES, WE HAVE ANALYSED THE PRIMA FACIE AUTHENTICITY IN THE CLAIM MADE BY THE ASSESSEE ON THE BASIS OF INDIA-SINGAPOR E DTAA IN THE LIGHT OF PRIMARY EVIDENCES BROUGHT BEFORE US AN D OUR DILIP DHARAMSEY KHATAU 13 OBSERVATIONS IN THIS REGARD ARE AS DISCUSSED IN SUB SEQUENT PARAGRAPHS. 4. AS PER ARTICLE 11 OF INDIA SINGAPORE DTAA DATED 24 TH JANUARY 1994 THE TREATMENT OF INTEREST SHALL BE AS UNDER: ARTICLE 11: INTEREST - 1. INTEREST ARISING IN A CONTRACTING STATE AND PAID TO A RESIDENT OF THE OTH ER 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 LAWS OF THAT STATE, BUT IF THE BENEFICIAL OWNER OF THE INTEREST IS A RESIDENT OF THE OTHER CONTRACTING STATE, THE T AX SO CHARGED SHALL NOT EXCEED: (A) 10 PER CENT OF THE GROSS AMOUNT OF THE INTERES T IF SUCH INTEREST IS PAID ON A LOAN GRANTED BY A BANK CARRYI NG ON A BONA FIDE BANKING BUSINESS OR BY A SIMILAR FINANCIA L INSTITUTION (INCLUDING AN INSURANCE COMPANY) (B) 15 PER CENT OF THE GROSS AMOUNT OF THE INTERES T IN ALL OTHER CASES. 4.1. FROM THE PERUSAL OF THE ABOVE SAID ARTICLE, IT IS CLEAR THAT AS PER PARA 2(B) OF ARTICLE 11, THE INCOME ON ACCOU NT OF INTEREST IS LIABLE TO TAX @ 15% IF THE ASSESSEE IS RESIDENT OF SINGAPORE IN THE PERIOD UNDER CONCERN. UNDER THESE CIRCUMSTANCES, WE FIND IT APPROPRIATE THAT REQUISIT E FACTS IN THIS REGARD SHOULD BE VERIFIED BY THE LOWER AUTHORI TIES IN THE INTEREST OF JUSTICE AND FAIR PLAY. SIMILARLY, WITH REGARD TO TAXATION OF CAPITAL GAIN IT WAS BROUGHT TO OUR NOTI CE BY THE LD. COUNSEL OF THE ASSESSEE THAT THERE WAS AN AMENDMENT IN THE DTAA AND A PROTOCOL AMENDING THE AGREEMENT WAS APPE NDED DILIP DHARAMSEY KHATAU 14 AS ANNEXURE B TO THE ORIGINAL AGREEMENT ON 29 TH JUNE 2005. BEFORE THE AMENDMENT OF DTAA, ARTICLE 13 READ AS UN DER: ARTICLE 13: CAPITAL GAINS - 1. GAINS DERIVED BY A RESIDENT OF A CONTRACTING STATE FROM THE ALIENATION OF IMMOVABLE PROPERTY, REFERRED TO IN ARTICLE 6, AND S ITUATED IN THE OTHER CONTRACTING STATE MAY BE TAXED IN THAT OTHER STATE. 2. GAINS FROM THE ALIENATION OF MOVABLE PROPERTY FO RMING PART OF THE BUSINESS PROPERTY OF A PERMANENT ESTABLISHMENT WHICH AN ENTERPRISE OF A CONTRACTING STATE HAS IN THE OTHER CONTRACTING STATE OR OF MOVABLE PR OPERTY PERTAINING TO A FIXED BASE AVAILABLE TO A RESIDENT OF A CONTRACTING STATE IN THE OTHER CONTRACTING STATE FO R THE PURPOSE OF PERFORMING INDEPENDENT PERSONAL SERVICES , INCLUDING SUCH GAINS FROM THE ALIENATION OF SUCH A PERMANENT ESTABLISHMENT (ALONE OR TOGETHER WITH THE WHOLE ENTERPRISE) OR OF SUCH FIXED BASE, MAY BE TAXED IN THAT OTHER STATE. 3. GAINS FROM THE ALIENATION OF SHIPS OR AIRCRAFT O PERATED IN INTERNATIONAL TRAFFIC OR MOVABLE PROPERTY PERTAININ G TO THE OPERATION OF SUCH SHIPS OR AIRCRAFT SHALL BE TAXABL E ONLY IN THE CONTRACTING STATE OF WHICH THE ALIENATOR IS A R ESIDENT. 4. GAINS DERIVED BY A RESIDENT OF A CONTRACTING STA TE FROM THE ALIENATION OF ANY PROPERTY OTHER THAN THOSE MEN TIONED IN PARAGRAPHS 1, 2 AND 3 OF THIS ARTICLE SHALL BE T AXABLE ONLY IN THAT STATE. 5. GAINS FROM THE ALIENATION OF SHARES OTHER THAN T HOSE MENTIONED IN PARAGRAPH 4 IN A COMPANY WHICH IS A RESIDENT OF A CONTRACTING STATE MAY BE TAXED IN THA T STATE. 6. GAINS FROM THE ALIENATION OF NAY PROPERTY OTHER THAN THAT MENTIONED IN PARAGRAPHS 1,2,3,4 & 5 OF THIS AR TICLE AND PARAGRAPH 3(B) OF THE ARTICLE 12 SHALL BE TAXAB LE ONLY IN THE CONTRACTING STATE OF WHICH THE ALIENATOR IS A RESIDENT. DILIP DHARAMSEY KHATAU 15 4.2. IN THE ANNEXURE B I.E. AMENDMENT DATED 29 TH JUNE 2005 TO ARTICLE 13 WITH REGARD TO CHARGING OF CAPITAL GA INS WAS AMENDED AS UNDER: ARTICLE 1 PARAGRAPHS 4,5 AND 6 OF ARTICLE 13 (CAPITAL GAINS) OF THE AGREEMENT SHALL BE DELETED AND REPLACED BY THE FOLL OWING: 4. GAINS DERIVED BY A RESIDENT OF A CONTRACTING ST ATE FROM THE ALIENATION OF ANY PROPERTY OTHER THAN THOSE MEN TIONED IN PARAGRAPHS 1,2 AND 3 OF THIS ARTICLE SHALL BE TA XABLE ONLY IN THAT STATE. 4.3. THUS, THE PRIMA FACIE PERUSAL OF ALL THESE ARTICLES SUGGEST THAT CAPITAL GAIN ARISING TO RESIDENT OF SINGAPORE MAY NOT BE TAXABLE IN INDIA. THE ASSESSEE HAS FURNISHED BEFORE US DETAILS OF THE CAPITAL GAIN SHOWING THAT THE ENTIRE AMOUNT OF CAPITAL GAIN HAS BEEN EARNED ON ACCOUNT OF SALE OF SECURITI ES OF MUTUAL FUNDS. UNDER THESE CIRCUMSTANCES, WE FIND IT APPROPRIATE TO SEND BOTH THE ISSUES BACK TO THE FIL E OF THE AO FOR THEIR EXAMINATION ON MERITS. THE AO SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE TO SUBMIT RE QUISITE DETAILS AND DOCUMENTARY EVIDENCES TO DEMONSTRATE TH AT ASSESSEE IS ELIGIBLE FOR THE BENEFIT OF ARTICLE 13 OF DTAA AS HAS BEEN CLAIMED BY HIM. OUR OBSERVATIONS ON MERITS, WI TH REGARD TO PRIMA FACIE APPLICABILITY OF THE PROVISIONS OF DTAA, WERE GIVEN JUST TO ENABLE US TO DISPOSE THIS APPEAL. BUT , AO IS NOT BOUND BY IT AND IT SHOULD NOT HAVE ANY BEARING ON T HE ULTIMATE DECISION TO BE TAKEN BY THE AO WITH REGARD TO APPLICABILITY OF THESE PROVISIONS UPON INCOME OF IN TEREST AND DILIP DHARAMSEY KHATAU 16 SHORT TERM CAPITAL GAINS. THE AO SHALL DECIDE THIS ISSUE ON MERITS AFRESH AFTER TAKING INTO ACCOUNT ALL THE FAC TS AND EVIDENCES ON OBJECTIVE BASIS AND AFTER GIVING ADEQU ATE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSE E SHALL EXTEND REQUISITE COOPERATION TO THE AO BY SUBMITTIN G REQUISITE DETAILS AND DOCUMENTARY EVIDENCES AS PER LAW. 5. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2016. SD/- (JOGINDER SINGH) SD/- (ASHWANI TANEJA) '# / JUDICIAL MEMBER $# / ACCOUNTANT MEMBER # $ MUMBAI; ( DATED: 29/06/2016 CTX? P.S/. . . %'&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. / / # 0 ( * ) / THE CIT, MUMBAI. 4. / / # 0 / CIT(A)- , MUMBAI 5. 34 - , / *& 5 , # $ / DR, ITAT, MUMBAI 6. 6! 7$ / GUARD FILE. / BY ORDER, .3* - //TRUE COPY// / (DY./ASSTT. REGISTRAR) , # $ / ITAT, MUMBAI