The Delhi Bench of the Income Tax Appellate Tribunal has ruled that a foreign company is not required to file an income tax return in India when its interest income is fully subjected to tax deduction at source under the Income Tax Act and the applicable tax treaty. The Bench of Yogesh Kumar U.S. (Judicial Member) and S. Rifaur Rahman (Accountant Member) set aside a reassessment order issued under Section 147 against Kisan International Trading FZE, a UAE-based company, holding that the reopening was initiated solely due to non-filing of return without considering the statutory protection under Section 115A(5).
The company had earned interest income of USD 748,401.66 (about ₹4.24 crore) from Indian Farmers Fertilizer Cooperative Limited (IFFCO), on which tax of ₹53,09,375 was deducted at source at a concessional 12.5 percent under Article 11 of the India-UAE DTAA. The Tribunal noted that the assessee had no other taxable income in India and had complied with all requirements for treaty-based TDS, including furnishing a Tax Residency Certificate.
The reopening was generated through the Non-Filers Monitoring System treating non-filing as income escaping assessment. The Assessing Officer went on to compute taxable income at ₹8.49 crore, double the actual amount shown in Form 26AS, without supporting evidence. The Tribunal observed that despite production of Form 26AS and related documents, the Assessing Officer failed to justify the inflated figure and repeated it mechanically in the reassessment order.
The Bench stressed that Section 115A(5) exempts a foreign company from filing returns if its only income is interest or dividend and tax has been properly deducted at source. Both these conditions were met, and therefore non-filing could not be a reason to reopen the assessment. The Tribunal added that the recorded reasons lacked any tangible material and were based on a factual error.
Holding the reassessment as legally unsustainable and initiated merely on suspicion, the Tribunal quashed the proceedings and set aside the order dated December 23, 2019. The appeal was allowed.
Appearance
- For the Appellant: Tarandeep Singh
- For the Respondent: Vikram Singh Sharma, Sr. DR
Cause Title: Kisan International Trading FZE v. ACIT
Case No: ITA No. 6152/Del/2024
Coram: Yogesh Kumar U.S., S. Rifaur Rahman
