{"id":5095,"date":"2012-06-26T19:29:52","date_gmt":"2012-06-26T19:29:52","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=5095"},"modified":"2012-06-27T03:23:00","modified_gmt":"2012-06-27T03:23:00","slug":"dic-asia-pacific-pte-ltd-vs-adit-itat-kolkata-education-cess-is-additional-surcharge-is-included-in-tax-under-dtaa-if-dtaa-specifies-tax-rate-payable-cess-is-not-payable-by-foreign","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/dic-asia-pacific-pte-ltd-vs-adit-itat-kolkata-education-cess-is-additional-surcharge-is-included-in-tax-under-dtaa-if-dtaa-specifies-tax-rate-payable-cess-is-not-payable-by-foreign\/","title":{"rendered":"DIC Asia Pacific Pte Ltd vs. ADIT (ITAT Kolkata)"},"content":{"rendered":"\n\n
Click here to download the judgement (DIC_Asia_tax_surcharge_cess_DTAA.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\n“Education cess” is “additional surcharge” & is included in “tax” under DTAA. If DTAA caps the rate of “tax” payable, cess is not payable by foreign assessee<\/strong><\/p>\n

The assessee, a Singapore company, offered interest and royalty income to tax at the rate of 15% & 10% as specified in Articles 11 & 12 of the India-Singapore DTAA respectively. The AO held that the assessee was also liable to pay surcharge and education cess<\/em> in addition to the tax. The CIT (A) upheld the assessee’s claim that surcharge was not leviable though he rejected the claim with regard to cess<\/em>. On further appeal by the assessee, HELD allowing the appeal:<\/p>\n

Articles 11 & 12 of the DTAA provide that the “tax<\/em>” chargeable in India on interest and royalties cannot exceed 15% and 10% respectively. The expression \u2018tax<\/em>\u2019 is defined in Article 2(1) to include \u2018income tax<\/em>\u2019 and includes \u2018surcharge<\/em>\u2019 thereon. Article 2(2) extends the scope of the \u2018tax<\/em>\u2019 by laying down that it shall also cover \u201cany identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1<\/em>\u201d. “Cess<\/em>” was introduced by the Finance Act, 2004 and it is described in s. 2(11) of the Finance Act 2004 as “additional surcharge<\/strong> for purposes of the Union, to be called the \u201cEducation Cess on income-tax<\/strong>\u201d. Accordingly, the “education cess” is in the nature of an “additional surcharge” and is covered by Article 2<\/em><\/strong>. Accordingly, education cess cannot be levied<\/strong> in respect of the assessee’s tax liability. <\/p><\/blockquote>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Articles 11 & 12 of the DTAA provide that the “tax<\/em>” chargeable in India on interest and royalties cannot exceed 15% and 10% respectively. The expression \u2018tax<\/em>\u2019 is defined in Article 2(1) to include \u2018income tax<\/em>\u2019 and includes \u2018surcharge<\/em>\u2019 thereon. Article 2(2) extends the scope of the \u2018tax<\/em>\u2019 by laying down that it shall also cover \u201cany identical or substantially similar taxes which are imposed by either Contracting State after the date of signature of the present Agreement in addition to, or in place of, the taxes referred to in paragraph 1<\/em>\u201d. “Cess<\/em>” was introduced by the Finance Act, 2004 and it is described in s. 2(11) of the Finance Act 2004 as “additional surcharge<\/strong> for purposes of the Union, to be called the \u201cEducation Cess on income-tax<\/strong>\u201d. Accordingly, the “education cess” is in the nature of an “additional surcharge” and is covered by Article 2<\/em><\/strong>. Accordingly, education cess cannot be levied<\/strong> in respect of the assessee’s tax liability<\/p>\n

Read more ›<\/a><\/div>\n

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