BJ SERVICES COMPANY MIDDLE EAST LTD Vs. ASSISTANT COMMISSIONER OF INCOME TAX
INCOME TAX APPELLATE TRIBUNAL
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Deepak R. Shah, A.M. -
(1.) THIS appeal by the assessee is directed against the order of the learned CIT(A)-I, Dehradun, dated 27-2-2007.
(2.) The only dispute raised in this appeal is against taxing interest income of Rs. 18,94,274 at the rate of 48 per cent (as applicable to a non-resident) as against 15 per cent as provided in para 2 of article 12 of DTAA between India and United Kingdom (UK).
The assessee, a non-resident company, is a tax resident of UK. The assessee offered interest income being interest received on the refund of income-tax of Rs. 18,94,274. The same was offered for taxation to be taxed at the rate of 15 per cent under para 2 of article 12 of Indo-UK DTAA. The Assessing Officer held that in view of para 6 of article 12, para 2 of article 12 cannot be applied as the assessee who is a non-resident has earned the interest income in India through a permanent establishment (PE) situated in India. Therefore, in terms of para 6 of article 12, the same is to be assessed under article 7 (business profits). Accordingly the tax rate as applicable to other business income was applied.
(3.) BEFORE the learned CIT(A), it was contended that para 2 of article 12 shall apply and not para 6 of article 12. The learned CIT(A) held that the appellant has earned interest through PE situated in India. The appellant is also carrying on business through the PE. Therefore, the interest income is chargeable as business income and hence appropriate rate of tax shall apply. The assessee is now in further appeal before us.;
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