Opinion Of Eminent Legal Luminaries On Controversial Issues

Whether For The Purpose Of DTAA Rate Of Tax Would Include Surcharge And Education Tax?

QUERY: While withholding tax as per the rate specified under DTAA, whether surcharge and education cess is applicable?
ANSWER: The Supreme Court in CIT v. K. Srinivasan [83 ITR 346] held that the expression “income tax” used in the Finance Act and the Income-tax Act includes surcharge whenever provided in the Act. The surcharge, the special surcharge and the additional surcharge form part of the income tax and super tax and not separate taxes by themselves.

The rates of tax, surcharge or additional surcharge (cess) as provided in the Finance Act are to be applied, if the DTAA does not prescribe. Since interest, dividend, royalties under DTAA are subject to the rate as provided therein, there is no question of referring to and applying the rate of the Finance Act.

As aforesaid, clause (2) of Article 11 provides ‘the tax so charged shall not exceed 10 per cent of the gross amount of the interest”. It would mean that the upper limit of the tax to be withheld is ten per cent. It cannot be more. Therefore, any addition by way of surcharge or cess or by whatever name levy is imposed, if it results in crossing the threshold of ten per cent is not permissible. This is absolute rate.
EXPERT:
SECTION(S):
GENRE:
CATCH WORDS:

Posted in Income-tax

Leave a Reply

Your email address will not be published. Required fields are marked *

*

Credit: Several of the queries and answers are reproduced with permission from the AIFTP Journal. We thank AIFTP for generously allowing us to host their research material.
Disclaimer: The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org