INCOME TAX ACT, 1961

Section 90

Double taxation relief - Agreement between India and Japan - Interest on income tax refund - Rate of interest

Assessee had filed its return of income declaring income of Rs.1110,37,09,068. In return of income so filed, assessee offered to tax interest on Income Tax refund amounting to Rs.6,83,72,179 at the rate of 10% under Article 11(2) of India Japan Double Taxation Avoidance Agreement (DTAA). While framing final assessment order in pursuance to directions of DRP, AO taxed interest on Income Tax refund by applying rate of 43.26%, treating it as business income. Assessee contested aforesaid decision of AO by filing appeal before Tribunal who restored issue to AO to decide rate of tax on interest Income Tax refund. However, AO again taxed interest income by applying rate of 43.26 %. While deciding objections of assessee, DRP directed AO to follow decision of ITAT, unless, department had filed appeal on same issue in higher court and matter had not attained finality. In pursuance to aforesaid direction of DRP, AO passed final assessment order. Due to computational error, AO applied rate of 40%. Hence this appeal. Held: AO, in fact, followed directions of Tribunal as well as DRP and charged tax on interest income on Income Tax refund at 10% by applying provisions of Article 11 of India -- Japan Tax Treaty. In case, AO had made any computational error while computing tax rate, that could be a subject matter of rectification, and not an issue to be decided by Tribunal in present appeal.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2015-16

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