In a significant relief to Tata Teleservices Limited, the Income Tax Appellate Tribunal ( ITAT ), Delhi Bench, has ruled that the interest payment made by the company to China Development Bank ( CDB ) is exempt from taxation under the amended Article 11(3) of the India-China Double Taxation Avoidance Agreement ( DTAA ). The ruling comes in relation to the assessment year 2014-15, with the tribunal dismissing an appeal filed by the Income Tax Department challenging the order passed by the Commissioner of Income Tax (Appeals)-43.
The issue before the tribunal pondered whether the interest payments made by Tata Teleservices to China Development Bank were taxable in India. The Assessing Officer ( AO ) had earlier treated the interest payments as taxable, citing that CDB did not qualify for the exemption under the India-China DTAA. The AO, in their order passed under Sections 201(1) and 201(1A) of the Income Tax Act, 1961, had raised a demand on the grounds that the interest payment was not exempt.
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However, the Commissioner of Income Tax (Appeals) disagreed with the AO and ruled in favor of Tata Teleservices. The CIT(A) held that the interest payments were exempt from taxation, relying on the amended Article 11(3) of the India-China DTAA, which specifically includes CDB as a financial institution wholly owned by the Government of China, making such payments eligible for exemption.
The Revenue, dissatisfied with the CIT(A)’s decision, appealed before the ITAT. During the hearing, Tata Teleservices’ legal representative, Ms. Ananya Kapoor, argued that the issue had already been decided in the company’s favor in an earlier case for the assessment year 2016-17, where the tribunal had ruled that interest payments to CDB were indeed exempt under the DTAA. She highlighted that the facts and legal positions in the current case were identical to those in the 2016-17 assessment year.
The ITAT bench, comprising Dr. B.R.R. Kumar ( Accountant Member ) and Anubhav Sharma ( Judicial Member ), carefully reviewed the submissions and noted that the grounds raised in the present appeal were the same as those for the assessment year 2016-17. The tribunal further observed that the earlier decision had categorically held that CDB, being a government-owned financial institution in China, qualified for the exemption under the amended Article 11(3) of the DTAA. The Revenue’s representative, Shri Abhishek Sharma, could not present any new facts or legal distinctions to challenge the earlier ruling.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The tribunal concluded that the issue was squarely covered by the previous decision in Tata Teleservices’ own case and, therefore, found no merit in the Revenue’s appeal. As a result, the ITAT upheld the CIT(A)’s decision and dismissed the Revenue’s appeal, providing substantial relief to Tata Teleservices.
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