NRI Assessee is Eligible for Beneficial Rate of Tax on Interest Income during Calculation of Tax Amount under India-USA Tax Treaty: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that the non-resident Indian assessee was eligible for a beneficial rate of tax at 15% on interest income during the calculation of tax amount under the India-USA Tax Treaty. 

Parag Bhikhubhai Patel, the appellant assessee was a U.S. citizen and a Non-Resident Indian (NRI) and e-filed the return of income(ROI). The ROI was processed by the centralized processing center and levied the tax at a “normal rate” on interest income and did not apply the rate prescribed under the India – USA Tax Treaty. 

The assessee appealed against the order passed by the Commissioner of Income Tax (Appeals) for upholding the calculation of tax by the Centralised processing center by applying the maximum marginal rate instead of the applicable rate under the treaty. 

Hem Chhajed, the counsel for the assessee contended that the assessee was an NRI and was eligible for a beneficial rate of tax on interest income under the India – USA Tax Treaty. 

It was also submitted that the calculation of tax amount for the non-resident Indian was as the amount of tax at the special rate of 15% under the India – USA Tax Treaty. 

Aashish Rajesh Revar, the counsel for the revenue contended that the assessee had not been able to establish that he was a tax resident of the USA. Despite being provided several opportunities, the assessee had not been able to produce the Tax Residency Certificate (TRC) to substantiate that he was a tax resident of the USA. 

The bench observed that in the instant case, even as of the date of this hearing, a copy of Tax Residency Certificate was not available with the assessee, to be able to validate that the assessee was a tax resident of the USA. The copy of the US Passport containing details of travel into India and departure from India by itself is not enough to confirm or demonstrate that the assessee was a tax resident of the USA.  The two-member bench comprising Anil Chaturvedi (Accountant) and Siddhartha Nautiyal (Judicial) restored the file to the Commissioner of Income Tax (Appeals) to allow the assessee to provide supporting documents to validate that the assessee was a tax resident of the USA for the beneficial rate of tax calculation under India-USA treaty while allowing the appeal filed by the assessee. 

To Read the full text of the Order CLICK HERE

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