Interest on tax refund not covered by definition of interest under India-Italy DTAA and liable to TDS at 40%
INTEREST ON TAX REFUND NOT COVERED BY DEFINITION OF INTEREST UNDER INDIA-ITALY DTAA AND LIABLE TO TDS AT 40%
Ansaldo Energia SPA v. DDIT [ITAT Chennai], ITA No. 1496 to 1498 of 2014, dated: July 17, 2015
Facts of the case
The assessee, an Italy based company, was engaged in the business of designing, building and supplying full range of plant solutions on different types of packages such as turnkey, engineering and individual components worldwide. The assessee and its subsidiary company Ansaldo Services Pvt. Limited (ASPL) entered into separate contracts with NLC and executed them during the assessment years under consideration. The assessee filed its return of income in India. During assessment proceedings, the assessee was found eligible for refund of tax. The Assessing Officer deducted tax at source under section 195(1) at the rate of 42.02 per cent on amount of refund including interest under section 244A. In appellate proceedings, the assessee raised a plea that in terms of article 12 of India-Italy DTAA, rate of tax deducted at source on interest on refund could not exceed 15 per cent.
Decision of the Tribunal
The Appellate Tribunal held that the interest on refund is not envisaged in the definition of interest under Article 12(4) under India- Italy DTAA. Being so, the lower authorities are justified in imposing TDS u/s. 244A of the Act, on the income tax refund and the case laws relied on by the Learned Authorized Representatives are not delivered with reference to DTAA between Government of India and Government of Italy. As such, those case laws relied on by the assessee have no relevance.
Revised timeline & Limits for Withholding Tax Refunds: CBDT Instruction
Hope the information will assist you in your Professional endeavors. For query or help, contact: singh@caindelhiindia.com or call at 9555 555 480