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The Tax Publishers Taxability of Interest on income tax refund -- Indo Japan DTAA Article 11(2) *Facts:* Assessee a Japanese bank offered their interest on refund of income tax under Article 11(2) of the Indo-Japan DTAA as against the AO alleging it as business income and taxing it @ 43.26%. On appeal the DRP held in favour (basing ITAT/Bombay HC decisions) instructing AO to tax it at 10% as per DTAA. Despite this AO still chose to tax it at 43.26%. On higher appeal to ITAT by the assessee - Held in favour of the assessee that they were at liberty to file a rectification before the AO to rectify the rate of 43.26% to 10% consequential to the already issued DRP instructions. If a rectification request was already done, then AO needs to accede the rate as 10% and pass correct orders accordingly. *Applied:*Clough Engineering Ltd. v. ACIT, (2011) 130 ITD 137 (Del.) (SB) : 2011 TaxPub(DT) 1015 (Del-Trib), DIT v. Credit Agricole Indosuez, (2015) 377 ITR 102 (Bom-HC) : 2015 TaxPub(DT) 3813 (Bom-HC) *Ed. Note:* The Interest definition is extended in the DTAA to cover specifically Banks etc. in the Indo-Japan DTAA is to be noted. AO's not following DRP's instructions is against Section 144C(10). *Refer:* Oxbow Energy Solutions LLC, USA v. DCIT [ITA No. 574/Del/2021, A.Y. 2012-13, dt. 31-1-2023]: 2023 TaxPub(DT) 776 (Delhi-Trib) where strictures were passed by ITAT on the AO for not following DRP's orders. *Case:*MUFG Bank Ltd. v. ACIT 2023 TaxPub(DT) 777 (Delhi-Trib)

The Tax Publishers

Taxability of Interest on income tax refund -- Indo Japan DTAA Article 11(2)

Facts: Assessee a Japanese bank offered their interest on refund of income tax under Article 11(2) of the Indo-Japan DTAA as against the AO alleging it as business income and taxing it @ 43.26%. On appeal the DRP held in favour (basing ITAT/Bombay HC decisions) instructing AO to tax it at 10% as per DTAA. Despite this AO still chose to tax it at 43.26%. On higher appeal to ITAT by the assessee -

Held in favour of the assessee that they were at liberty to file a rectification before the AO to rectify the rate of 43.26% to 10% consequential to the already issued DRP instructions. If a rectification request was already done, then AO needs to accede the rate as 10% and pass correct orders accordingly.

Applied:Clough Engineering Ltd. v. ACIT, (2011) 130 ITD 137 (Del.) (SB) : 2011 TaxPub(DT) 1015 (Del-Trib), DIT v. Credit Agricole Indosuez, (2015) 377 ITR 102 (Bom-HC) : 2015 TaxPub(DT) 3813 (Bom-HC)

Ed. Note: The Interest definition is extended in the DTAA to cover specifically Banks etc. in the Indo-Japan DTAA is to be noted. AO's not following DRP's instructions is against Section 144C(10).

Refer: Oxbow Energy Solutions LLC, USA v. DCIT [ITA No. 574/Del/2021, A.Y. 2012-13, dt. 31-1-2023]: 2023 TaxPub(DT) 776 (Delhi-Trib) where strictures were passed by ITAT on the AO for not following DRP's orders.

Case:MUFG Bank Ltd. v. ACIT 2023 TaxPub(DT) 777 (Delhi-Trib)