Case Law Details
R.A.K. Ceramics, UAE Vs DCIT (ITAT Hyderabad)
Article 2(1) of the India-UAE DTAA provides that the taxes covered shall include tax and surcharge thereon. Education cess is nothing but an additional surcharge & is also covered by the definition of taxes.
Article 2(1) of the applicable tax treaty provides that the taxes covered shall include tax and surcharge thereon. Once we come to the conclusion that education cess is nothing but an additional surcharge, it is only corollary thereto that the education cess will also be covered by the scope of Article 2. Accordingly, the provisions of Articles 11 and 12 must find precedence over the provisions of the Income Tax Act and restrict the taxability, whether in respect of income tax or surcharge or additional surcharge – whatever name called, at the rates specified in the respective article. In any case, education cess was introduced by the Finance Act 2004, with effect from assessment year 2005-06 which was much after the signing of India Singapore tax treaty on 24th January 1994. In view of the specific provisions to the effect that the scope of Article 2 shall also cover “any 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”, and in view of the fact that education cess is essentially of the same nature as surcharge, being an additional surcharge, the scope of article 2 also extends to the education cess.
Power conferred upon the CIT(A) to condone the delay in filing of appeal is to alleviate genuine suffering of taxpayers.
The powers conferred upon the CIT(A) under section 249(3), for condoning the delay in filing of appeal if he is satisfied that the appellant had sufficient cause for not presenting it within that period, are statutory power to alleviate genuine suffering of taxpayers, so far as their grievance redressal by way of appeals are concerned, within framework of law. When a public authority has the powers to do something, he has a corresponding duty to exercise these powers when circumstances so warrant or justify—a legal position which has the approval of Hon’ble Supreme Court. The question then arises as to what should be the circumstances which ordinarily warrant or justify the relaxation of the rigour of limitation provisions. Let us in this light look at the facts of the present case, and examine as to what should have been right considerations for taking a call on whether or not delay in filing of appeal should be condoned. We find guidance about the considerations on which such powers are required to be exercised in the provisions of the Limitation Act, 1963 itself and unambiguous thrust of scheme of things therein. As we deal with this aspect of the matter, it is useful to take note of Section 14 of the Limitation Act which is titled “Exclusion of time of proceeding bona fide in court without jurisdiction” Section 14(1) of the Limitations Act provides that, “In computing the period of limitation …………. the time during which the plaintiff has been prosecuting with due diligence another civil proceeding, whether in a court of first instance or of appeal or revision, against the defendant shall be excluded, where the proceeding relates to the same matter in issue and is prosecuted in good faith in a court which, from defect of jurisdiction or other cause of a like nature, is unable to entertain it”. It is also only elementary that while interpreting a statutory provision one has to go from red to the black (a rubro ad nigrum) which essentially lays down the principle that the heading must hold key to the text. Translated literally, the latin maxim a rubro ad nigrum implies that one has to read from the red to the black; from the rubric or title of a statute, (which, in ancients times used to be written in red letters) to its body, which was in the ordinary black. The provisions of this exclusion clause are required to be interpreted in a liberal manner in consonance with the object indicated by the heading of the section. Essentially, therefore, when the delay in filing of an appeal is on account of the fact that the person filing the appeal was pursuing his case before the wrong forum, the scheme of law requires such a delay to be condoned. When we thus interpret the provisions of Section 14(1), there is no ambiguity about the scheme of things envisaged by this statutory provision. What essentially follows from this provision is that when someone is pursuing the matter in a forum, whether original or appellate, which, on account of “defect of jurisdiction or other cause of a like nature” is unable to entertain the grievance of the applicant, the time so spent by that person is to be excluded. The same logic, as set put in section 14(1) must, therefore, apply to the present proceedings as well. There is no dispute that the assessee was bonafide exploring the other legal option available to it, and, accepting the availability of that course of option to the assessee but rejecting it on a peculiar factual ground, that the Assessing Officer did not entertain the said challenge. In the proceedings before the CIT(A), it was reiterated that so far those proceedings are concerned, i.e. rectification of mistake under section 154, debatable issues cannot be rectified and the issues raised by the assessee were held to be debatable in nature. The relief was declined on the ground of, to borrow the words from Section 14(1), “defects of jurisdiction” or at best “other causes of similar nature”. When such is the scheme of things in the Limitations Act and the factual matrix of this case, it is futile to even plead that present case was not a fit case for the CIT(A) to condone the delay. The only question that we must carefully examine is whether such an action of the assessee appellant, in pursuing the matter before the wrong forum, was bonafide action or not. Given the nature of grievance of the assessee, it was reasonable to expect that the remedy will be available under section 154 as well. There are large number of decisions holding that cess and surcharge can be levied on tax charged at the rate prescribed in the tax treaties, and in our humble understanding, that is an open and shut issue in favour of the assessee. That was perhaps the reason that at the stage of hearing of appeal itself, though with the consent of the parties- which they extended graciously, this appeal was picked up for out of turn hearing here and now. In these circumstances, the approach of the assessee in filing a rectification petition against the levy of cess and surcharge, in addition to the tax rate prescribed under the India UAE Double Taxation Avoidance Agreement, in our humble understanding, cannot be said to be lacking bonafides. Viewed thus, the CIT(A) was clearly in error in not condoning the delay in filing of appeal which was, in our humble understanding, a result of a bonafide, even if overoptimistic and erroneous, assessment about efficacy of section 154 to seek redressal of his grievance in question. The assessee had followed an inappropriate course, and, with the benefit of hindsight, there is no dispute about this error. The delay in filing of appeal before the CIT(A), against the assessment under section 143(3), therefore, indeed deserves to be condoned. We reverse the stand of the CIT(A) on this point. The order of the CIT(A) thus stands vacated. In this view of the matter, it is not even necessary to examine whether the time spent by the appellant in pursuing the remedy under section 154 is required to be excluded, under section 14(1) of the Limitations Act, in computation of time limit, and
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