17 December 2008
CBDT had clarified through circular 333 dated 2.4.1982 that where a specific provision is made in the DTAA, the provisions of the DTAA will prevail over the general provisions contained in the Income-tax Act and where there is no specific provision in the DTAA, it is the basic law; i.e., the Income-tax Act that will govern the taxation of income. This position has been judicially held also in following cases
ITO vs. Degremont International (1985) 11 ITD 564 (Jp – Trib) CIT vs. Davy Ashmore Ltd. (1991) 190 ITR 626 (Cal) CIT vs. VR S.R.M. Firm (1994) 208 ITR 400 (Mad) Banque National De Paris vs. IAC (1991) 94 CTR (Bom) 57 CIT vs. R.M. Muthiah (1993) 202 ITR 508 (Kar)
Education Cess or Surcharge are prescribed under I .T Act and not DTAA. Therefore , in case any payment has to suffer withholding tax and it is being paid to a person resident of another country with which there is Double Taxation Avoidance Agreement with India , tax rate applicable will be strictly according to the rate prescribed in DTAA which obviously does not prescribe for education cess or surcharge.
CAclubindia
