The petitioner earned service fees for providing management related services to a foreign company EIPL and submitted that income being in the nature of Fees For Technical Services (FTS) was taxable at rate of 20 per cent under article 13 of the DTAA between India and Spain. The Assessing Officer by an intimation under section 143(1) processed the return of income. Thereafter, the assessee it realised that while referring to article 13 of the DTAA it had failed to refer to clause 7 of the Protocol appended to the DTAA in terms of which if a further concessional rate of tax was charged in terms of the agreement between India and another member of the OECD, by India after 1-1-1990, wherein India limits its taxation at source on FTS to a rate lower than that provided in article 13 of the DTAA, then the said rate shall apply under the DTAA to the petitioner as well.Consequently, the petitioner filed the revision petition under section 264 before the Commissioner seeking to revise the order under section 143(1) claiming it to be prejudicial to the petitioner’s interest.The Commissioner (IT ) held  that no amount was payable by the assessee in terms of the intimation under section 143(1) and, therefore, no prejudice was caused to the assessee in terms thereof and that if the assessee was of the view that its income was chargeable to tax at 10 per cent ‘it should have mentioned the same in its return of income or should have subsequently filed revised return’. It was held that section 264 cannot be invoked to rectify the assessee’s mistake, if any.

It was contended that for the purposes of section 264, a revision petition seeking rectification of the return accepted by the department in respect of which intimation is sent under section 143(1) is  maintainable.  Court held that  the intimation under section 143(1) was prejudicial to the interest of the assessee. It must be noted here that although the tax calculated as payable in the return filed and accepted by the department by sending intimation under section 143(1) is nil, it cannot be said that no prejudice is caused to the assessee. The assessee has voluntarily paid tax at the rate of 10 per cent in terms of the Indo-Spain DTAA as tax on FTS and, therefore, there was no further tax to be paid at the time of filing of the return. However, it is not even denied by the department that the assessee committed a mistake and should have paid tax at 10 per cent, even though, this extra 10 per cent paid by the assessee was of its own volition, it was indeed prejudicial to the assessee. Consequently, all the ingredients of section 264 stand attracted. Accordingly, a revision petition under section 264 by the assessee before the Commissioner against the intimation under section 143(1) is  maintainable. (AY. 2014 -15)