Educational Cess is Additional Surcharge, must be deleted as per India-UAE DTAA: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) Hyderabad, on March 29^th earlier this year passed an order to delete Educational Cess from assessment as it is an additional Surcharge as per the INDIA-UAE Double Taxation Avoidance Agreement (DTAA).

The Appellant R.A.K. Ceramics, UAE, filed a rectification petition under section 154 in respect of levy of surcharge and cess on the tax rates prescribed under the tax treaties. The stand of the assessee was that such a levy is a mistake apparent on the record. The Assessing Officer (AO) rejected the said petition and held that there is no mistake apparent on the record. Aggrieved, assessee carried the matter in appeal before the CIT(A) who declined relief to the assessee on the ground that it is a debatable issue and thus outside the scope of the inherently limited scope of Section 154. This order was passed by the CIT(A), and served on the assessee on  It was within 29 days of receiving this order that the assessee filed the appeal before the CIT(A). The CIT(A) declined to condone this delay on the ground that the assessee had best possible professional advice, that ignorance of law is not an excuse, that the delay can be condoned only when it was beyond the control of the assessee to file the appeal that it was a conscious decision of the assessee to seek remedy by way of rectification petition and that the assessee can be allowed to abandon his earlier stand and follow an altogether different course. The appeal was thus summarily dismissed. Aggrieved, inter alia, by this action of the CIT(A), the assessee came up with an appeal by way of the stay petition, and seek a stay on collection/ recovery of the tax and interest demanded.

Vice President Pramod Kumar and Judicial Member P Madhavi Devi while dismissing the appeal in favour of the assessee held, “The provisions of the India UAE Double Taxation Avoidance Agreement are in pari materia with the provisions of India Singapore DTAA which was the subject matter of consideration in DIC Asia Pacific’s case (supra). We, therefore, have no reasons to take any other view of the matter than the view so taken by the coordinate benches. Respectfully following the same, we uphold the plea of the assessee and direct the Assessing Officer to delete the levy of surcharge and education cess on the facts of this case. Once this relief is allowed, the taxes payable by the assessee are the same as taxes deducted at source and no other grievances survive. As the appeal itself is allowed, the stay petition before us is rendered infructuous, and is dismissed as such.”