TII Instant Update, Tuesday, Dec 12, 2017

2017-TII-69-HC-KAR-INTL

APOLLO TYRES LTD Vs CIT: KARNATAKA HIGH COURT (Dated: November 28, 2017)

Income Tax - Writ - Section 264 - India-Finland & India-Netherlands DTAAs.

Keywords: Beneficial clause - Protocol.

Whether when the Protocol to the treaty itself provides for automatic application of the amended provisions of the treaty, even then the Revenue can insist on separate notification to be issued by the Central Govt about the beneficial provisions of the treaty - NO: HC

The assessee, Apollo Tyres Ltd, is aggrieved by the CIT order holding that without a separate notification issued by Central Government for enforcing the subsequent Treaty (DTAA) between India–Finland in the present case, where the assessee Company was governed by a former India–Netherlands Double Taxation Avoidance Agreements (DTAA), the Protocol thereto itself provided that any subsequent Treaty of India with another OECD (Organisation for Economic Co-operation and Development) Country, if such subsequent Treaty provided for a more beneficial Clause, then, by virtue of Clause-12.4.2 of the Protocol, such subsequent Treaty will automatically apply to the present India-Netherlands DTAA also. The CIT had upheld the AO's order.

Arguing before the High Court the counsel for the assessee submitted that the AAR decision in the case of Steria India Ltd, relied upon by the CIT, had since been set aside by the Division Bench of Delhi High Court.

Having heard the parties, the HC held that,

+ this Court is of the view that the order passed by the CIT (IT) under Section 264 of the Act on 30.3.2016 cannot hold the field and the same deserves to be set aside;

+ as far as the issue of there being a requirement of issuing a separate Notification for enforcing the later Treaty with another OECD country, viz., Finland, in the present case is concerned, this Court does not find any justification in the contentions raised on behalf of the Revenue, that such a Notification was required to be issued by the Government of India to enforce such later Treaty between India-Finland in the present case. The Protocol clause in the India-Netherlands DTAA itself provide for such automatic application of subsequent Treaty, to the India–Netherlands Treaty in hand and therefore, no such separate Notification was envisaged to be issued for enforcing such subsequent Treaty with another OECD country, viz., Finland, to be made applicable to the facts of the present case;

+ as far as the decision of AAR is concerned, in the case of Steria (India) Ltd., that the decision having been set aside by the Division Bench of Delhi High Court, at a later point of time and after the said CIT (IT) passed the order under Section 264 of the Act, dated 30.3.2016, even that reliance placed by CIT (IT) cannot now be sustained;

+ the two reasons assigned by CIT (IT) in the order, are no longer sustainable and therefore, the order cannot be sustained in the eye of law. However, since the factual aspects of the matter about the payment of fees for technical services for rendering such services and payments made therefor are the questions of facts, which in the order, this Court does not find any detailed discussion on the said issues. Therefore, that aspect of the matter may be required to be looked into by the CIT (IT) again, who would re-decide the said Revision Petition filed by the petitioner-assessee under Section 264 of the Act de novo. Therefore, this Court need not give its own findings on these aspects of the matter.

Assessee's writ allowed