DCIT Vs Thogarchedu Subha Sri (ITAT Hyderabad)
The Tribunal upheld CIT(A)’s relief allowing India–USA DTAA benefits despite Form 10F and Tax Residency Certificate being filed after the due date of return. CPC had denied treaty rates while processing u/s 143(1) solely due to non-filing of Form 10F along with the return.
ITAT held that sec.90(2) grants a substantive right to apply beneficial DTAA provisions, while Form 10F is only a procedural document facilitating verification. Since neither sec.90 nor Rule 21AB prescribes any specific time limit for filing Form 10F, delayed filing cannot defeat treaty entitlement once tax residency and eligibility are established. The Tribunal distinguished cases like Wipro Ltd. and Form-67 rulings where statutory time limits existed, and ruled that procedural lapses cannot override substantive treaty rights. Accordingly, Revenue’s appeal was dismissed and DTAA relief sustained.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by the Revenue feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), Hyderabad-10 (“Ld. CIT(A)”) dated 25.03.2025 for the Assessment Year (“A.Y.”) 2023-24.
2. The Revenue has raised the following Grounds of appeal:
“1. The CIT(Appeals) erred both in law and on facts of the case in granting relief to the assessee.
2. On the facts and in the circumstances of the case, and in law, whether the CIT(Appeals) is justified in holding that the assessee is eligible for computation of tax at special rates as per the Double Taxation Avoidance Agreement (DTAA) with USA without appreciating the fact that the assessee failed to submit/provide the requisite Tax Residency Certificate as provided u/s.90(4) and Form 10F as provided u/s.90(5) of the Income Tax Act, 1961 on or before the filing of return of income for A.Y.2023-24, wherein the relief under DTAA is claimed?
3. On the facts and in the circumstances of the case, and in law, whether the CIT(Appeals) is justified in granting relief to the assessee by considering the Tax Residency Certificate and Form 10F filed much later after filing the return of income, when Sec.90(4) of the Income Tax Act, 1961 clearly states that the assessee ‘shall not be entitled to claim any relief under such agreement’ unless the Tax Residency Certificate and Form 10F furnished?
4. Any other ground of appeal that may be raised with the prior approval of the Hon’ble ITAT during the appellate proceedings.”
3. The brief facts of the case are that the assessee is a non-resident individual, being a tax resident of the United States of America (“USA”), who filed her return of income for the Assessment Year 2023-24 on 31.07.2023, declaring a total income of Rs.9,88,95,660/-. The assessee computed tax on the said total income by applying the applicable rates in accordance with the provisions of the Income-tax Act, 1961 (“the Act”) read with the provisions of the India–USA Double Taxation Avoidance Agreement (“DTAA”). While computing the tax liability, the assessee applied the beneficial rates under the DTAA as under:
(a) Tax computed at Rs. 4,24,160/- on dividend income of Rs.21,20,798/- at the rate of 20% under section 115A(1)(a)(i) of the Act;
(b) Tax computed at Rs. 4,65,400/- on interest income from NRO bank accounts of Rs.31,02,665/- at the rate of 15% as per Article 11 of the India–USA DTAA;
(c) Tax computed at Rs. 1,40,50,830/- on interest income from loans of Rs.9,36,72,197/- at the rate of 15% as per Article 11 of the DTAA.
3.1 Accordingly, the assessee computed total tax liability at Rs.2,15,87,403/- including the amount of surcharge & education cess on the returned income and paid the entire tax before filing the return of income. The return of income of the assessee was subsequently processed by the Centralised Processing Centre (“CPC”) under section 143(1) of the Act vide intimation dated 05.07.2024. While processing the return, the CPC denied the benefit of DTAA rates and computed tax on the total income as per the normal provisions of the Act, on the ground that the assessee had not filed Form No.10F in accordance with section 90(5) of the Act. Consequently, a demand of Rs.2,46,05,910/- was raised on the assessee.
