Interest on IT refund not taxable at concessional rate of 10% as per Treaty if NR has PE in India.

FORAMER SAS (2013) 40 taxmann.com 100 (Uttarakhand)]

Interest earned by a non-resident on
income-tax refund is not taxable
in India at concessional rate of 10% as per India-France treaty if such non-resident has a PE
in India.

In
the instant appeal, appellant had sought interpretation of Article 12 of
India-France treaty. It contented that
interest earned in India on
income-tax refund was taxable at 10%
as per Article 12(2) of
treaty.

The
High Court held as under:

1. Plain
   reading of Article 12 of treaty would make it
   absolutely clear that Paras 1 and 2 of Article 12 will
   apply, inter alia, when the recipient of interest does not have a permanent establishment in the
   country, where he has received interest;
2. There
   was no dispute that the respondent-assessee had a permanent place of business
   in India and it had paid tax in
   India on its income, except income from
   interest;
3. The
   interest earned in India on
   the refund of income-tax was, therefore, not covered by Paras 1 and 2 of
   Article 12 of the said Treaty. To that extent, the
   judgment of the Tribunal was to be set aside and, accordingly, the appeal was to
   be allowed – DIRECTOR
   OF INCOME-TAX V. PRIDE FORAMER SAS (2013) (Uttarakhand)