DTAA cannot create any fresh tax liability which is not provided under Income Tax Act

In this case, M/s Prudential Assurance Co. Ltd , a tax resident of UK, was denied the benefit of setting off of the business loss from sale of shares against the income from other sources by the Assessing Officer (‘AO’) on the ground that the assessee had no Permanent Establishment  in India as per Article 5 of the India-UK Double Taxation Avoidance Agreement . The Honourable Mumbai Tribunal observed that the assessee chose to be ruled by the provisions of the Income Tax Act, 1961  and not DTAA. Thus, the AO was not justified in directing that the business loss should be considered as per provisions of DTAA and therefore taxing the income from other sources without allowing its set off against the business loss.

INCOME TAX APPELLATE TRIBUNAL

ITA No.7353/Mum/2011 : Asst. Year 2003-2004

The Prudential Assurance Co. Limited Vs. The Asstt. Director of Income-tax

Date of Pronouncement : 26.03.2012

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