Thursday 12 July 2018

ITAT : Protocol part & parcel of DTAA; Directs AO to examine MFN relief availability

Delhi ITAT sets aside AO’s order applying tax rate @20% u/s 115A on FTS received by Ericsson Telephone Corporation India (assessee, a Swedish company) during AY 2000-01 from its AEs in India for installation and maintenance of mobile network systems, remits matter back to AO to decide the issue afresh in light of the Protocol amending India-Sweden DTAA; Notes that AO had arrived at the taxability by simply following the AAR in assessee’s own case rendered in 1996 which was based on un-amended DTAA however, takes note of Protocol amending India-Sweden DTAA subsequently in 1997; Considering the revised DTAA, ITAT rules that AO should examine assessee’s argument that in view of the Most Favored Nation (‘MFN’) clause in the Protocol, a beneficial FTS article appearing in DTAA with a third country (i.e. Finland) should be read into the DTAA with Sweden; Rejects Revenue’s preliminary argument that Protocol will have no application as it can be resorted only if there is some dispute on the terms of the DTAA, remarks that, “A Protocol to the DTAA is …to be considered as its part and parcel. …If a particular benefit is being conferred, expanded or reduced by the Protocol, which is absent in the DTAA, then the provisions of the Protocol shall apply pro tanto.”; Thus, holds that a Protocol cannot be viewed as a document independent of the DTAA and has to be considered as its addendum.:ITAT 

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