Held that interest income need not be necessarily business income for establishing effective connection with PE because that would render provision contained in paragraph 4 of article XI of Indo-US DTAA redundant and, thus, there may be cases where interest may be taxable under Act under residuary head and yet be effectively connected with PE. Accordingly interest on income tax refund is not effectively connected with PE either on basis of asset-test or activity-test and hence, it is taxable as per provisions in Para No. 2 of article XI of Indo-US DTAA. (AY. 2012-13, 2013-14)
Transocean Offshore International Ventures Ltd. v. DCIT (IT) (2022) 194 ITD 129 (Delhi)(Trib.)
S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Interest-Interest on income tax refund-Interest on income tax refund is not effectively connected with PE either on basis of asset-test or activity-test and, hence, it is taxable as per provisions in Para No. 2 of article XI of Indo-US DTAA-DTAA-India-USA [S. 9(1)(v), 90, Art. 11]