The Royal Bank Of Scotland N.v v. Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT CALCUTTA SPECIAL JURISDICTION (INCOME TAX) ORIGINAL SIDE RESERVED ON: 18.04.2024 DELIVERED ON: 22.05.2024 PRESENT: THE HON’BLE MR. JUSTICE SURYA PRAKASH KESARWANI AND THE HON’BLE MR. JUSTICE RAJARSHI BHARADWAJ ITA/155/2005 WITH WPO/1585/2006 THE ROYAL BANK OF SCOTLAND N.V. VS COMMISSIONER OF INCOME TAX ITA/154/2005 THE ROYAL BANK OF SCOTLAND N. V. VS COMMISSIONER OF INCOME TAX ITA/19/2017 THE ROYAL BANK OF SCOTLAND N.V. @ ABN AMRO BANK N.V. VS DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION 2(1) KOLKATA ITA/20/2017 THE ROYAL BANK OF SCOTLAND N.V. @ ABN AMRO BANK N.V. VS DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION 1(1) KOLKATA ITA/21/2017 THE ROYAL BANK OF SCOTLAND N.V. @ ABN AMRO BANK N.V. VS DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION 2(1) KOLKATA ITA/22/2017 THE ROYAL BANK OF SCOTLAND N.V. @ ABN AMRO BANK N.V. VS DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION 2(1) KOLKATA Appearance: Sri Percy Pardiwalla, Sr. Adv. Sri Akhilesh Kumar Gupta, Adv. Sri Asit Kumar De, Adv. …..for the Appellant Smt. Smita Das De, Adv. Sri Smarajit Roy Chowdhury, Adv. …..for the Respondent JUDGMENT -Surya Prakash Kesarwani, J.: 1.Heard Sri Percy Pardiwala, learned senior advocate assisted by Sri Akhilesh Gupta, learned counsel for the appellant and Smt. Smita Das De and Sri Smarajit Roychowdhury, learned senior standing counsel for the respondent. Sri Akhilesh Gupta, learned counsel for the appellant and Smt. Smita Das De and Sri Smarajit Roychowdhury, learned senior standing counsel for the respondent. 2. Learned counsels for the parties jointly stated that similar facts and question are involved in all the above noted six appeals and accordingly requested to hear all the appeals together. Therefore, all the afore-noted six appeals have been heard at length on 16.04.2024 and 18.04.2024 and the judgement has been reserved on 18.04.2024. Although by order dated 17.05.2005 and question are involved in all the above noted six appeals and accordingly requested to hear all the appeals together. Therefore, all the afore-noted six appeals have been heard at length on 16.04.2024 and 18.04.2024 and the judgement has been reserved on 18.04.2024. Although by order dated 17.05.2005 the appeal was admitted on three substantial questions of law, but the learned counsel for the appellant has pressed and argued only on substantial question of law no. (a) which is reproduced below;- “(a) Whether on a true and proper interpretation of the provisions of sections 2(22A) and 90 of the Income Tax Act, 1961 read with CBDT circular No. 333 dated April 2, 1982 and CBDT letter dated November 21, 1994 and Article 24(2) of the Double Taxation Avoidance Agreement India and Netherlands, the Tribunal was justified in law in holding that the appellant was liable to income tax at the higher rate applicable to a foreign company and not at the rate of tax applicable to a domestic company;” sections 2(22A) and 90 of the Income Tax Act, 1961 read with CBDT circular No. 333 dated April 2, 1982 and CBDT letter dated November 21, 1994 and Article 24(2) of the Double Taxation Avoidance Agreement India and Netherlands, the Tribunal was justified in law in holding that the appellant was liable to income tax at the higher rate applicable to a foreign company and not at the rate of tax applicable to a domestic company;” Particular of Afore-Noted Appeals:- Particular of Afore-Noted Appeals:- 3.Afore-noted leading Income Tax Appeal No. 155 of 2005 arises from the impugned order of the Income Tax Appellate Tribunal, ‘E’ Bench, Kolkata (for short ITAT) dated ____ November, 2003 passed in (i) ITA No. 58 (Cal) of 2001 (Assessment year 1992-93), (ii) ITA No. 690 (Kol) of 2002 (Assessment year 1993 -94), (iii) ITA No. 106 (Kol) of 2001 (Assessment year 1994-95) and (iv) ITA No. 496 (Kol) of 1999 (Assessment year 1995-96). from the impugned order of the Income Tax Appellate Tribunal, ‘E’ Bench, Kolkata (for short ITAT) dated ____ November, 2003 passed in (i) ITA No. 58 (Cal) of 2001 (Assessment year 1992-93), (ii) ITA No. 690 (Kol) of 2002 (Assessment year 1993 -94), (iii) ITA No. 106 (Kol) of 2001 (Assessment year 1994-95) and (iv) ITA No. 496 (Kol) of 1999 (Assessment year 1995-96). 4.Above noted Income Tax Appeal No. 154 of 2005 arises from the impugned order in (i) ITA No. 694 (Kol) of 2002 (Assessment year 1997-98) and (ii) ITA No. 695 (Kol) of 2002 (Assessment year 1998-99). Income Tax Appeal No. 19 of 2017 arises from impugn order of the ITAT “C” Bench Kolkata dated 13.04.2016 the impugned order in (i) ITA No. 694 (Kol) of 2002 (Assessment year 1997-98) and (ii) ITA No. 695 (Kol) of 2002 (Assessment year 1998-99). Income Tax Appeal No. 19 of 2017 arises from impugn order of the ITAT “C” Bench Kolkata dated 13.04.2016 -Facts; 5. 6. passed in (i) ITA 519/Kol/2011 (Assessment year 2007-08). Income Tax Appeal No. 20 of 2017 arises from the aforesaid common order of the ITAT dated 13.04.2016 passed in (i) ITA No. 1926/Kol/2010 (Assessment year 2006-07). Income Tax Appeal No. 21 of 2017 arises from the aforesaid impugned common order of the ITAT dated 13.04.2016 passed in (i) ITA No. 1738/Kol/2009 (Assessment year 2005-06). Income Tax Appeal No. 22 of 2017 arises from the aforesaid common impugned order of the ITAT dated 13.04.2016 passed in (i) ITA No. 1805/Kol/2012 (Assessment year 2008-09). Since common substantial question of law is involved in all the above noted Income Tax Appeals, therefore, with the consent of the learned counsel for the parties, the facts of leading Income Tax Appeal No. 155 of 2005 are being noted. Appellant is a branch of ABN Amro Bank NV (Now The Royal Bank of Scotland N.V.) incorporated in the Netherlands with limited liabilities having its original office at Singapore. In India, the appellant is registered as scheduled bank in terms of Schedule-II of the Reserve Bank of India (RBI) Act, 1934. The main activities of the appellant in India are accepting deposits, giving loans, discounting/collection of bills, issue of letters of credit/ guarantees, executing forward transaction of foreign currencies for importers/exporters, money market lending /borrowings, investment in societies, ect. In terms of the existing rules and regulations governing such transaction. There is an agreement between India and Netherlands for avoidance of double taxation and preventing of fiscal evasion (for short ‘DTAA’). Article 7 of the DTAA provides for taxation in India of a foreign enterprise in respect of profits attributable to its permanent establishment (hereinafter referred to as ‘PE’) in India. Since the appellant has a PE in India, therefore, they are liable to tax in respect of income attributable to the PE. By the impugned order the ITAT has held that the appellant/assesse is liable to Income Tax at the rate specified for company “other than domestic company”. Case set up by the appellant is that in terms of Article 24(2) of DTAA between India and the Netherlands, containing provision of non-discrimination, the appellant/assessee is liable to Income Tax at the rate applicable to a domestic company. The ITAT has held that the rate of Income Tax as provided in the Finance Act applicable to a domestic company shall not apply to the appellant/assessee and instead the appellant/assess is liable to tax at the rate prescribed by the Finance Act for a company other than domestic company. Aggrieved with the order of the ITAT the appellant has filed the present appeal raising the afore-quoted common substantial question of law. Relevant portions of the order of ITAT (subject matter of Income Tax Appeal No. 155 of 2005) dealing with the rate of tax applicable to the appellant/assessee are reproduced below;- “46. We have given our careful consideration to the rival contentions. The issue relating to the applicability of rate of tax in the case of the assessee had come up for consideration of the Tribunal in the assessee's own case for assessment year 1996-97 (supra). The Tribunal vide order dated 30.3.2001 in para-23 relating to applicability of Article 24(1) held - "We are of the opinion to discussed above) that the assessee company cannot be considered to be in the same circumstances as an Indian company in view of the fact that the scope of taxation of the Indian Company is wider enough than that of a non- resident company like the assessee." However, the contention on behalf of the assessee was accepted to be covered under Article 24(2) of DTAA Para 28 of the order of the Tribunal is quoted as under: 226. Taking into consideration the different aspects of the case. We are finally of the opinion that by virtue of Article 24(2) of the DTAA BETWEEN India and Nederland, the assessee company cannot be subjected to taxation in a less favourable manner than an Indian Banking Company. We have already noted above that atleast some of the private Indian Banks are subjected to the lower rate of tax @ 46%) applicable to the domestic companies. Furthermore, the assessee company itself is being subjected to this lower rate of tax by virtue of the non-discrimination provision in the DTAA right from the assessment year 1991-92 onwards. There is no plausible reason to depart from this accepted position when no new facts in this regard have been discovered. The AO himself allowed the lower rate in the assessment order. We feel that the CTT(A) did not have any occasion to disturb the same by directing to apply the higher rate and in disturbing the position accepted even by the CBDT in that way. Finally, therefore, we knock down the enhancement, as directed by the CIT(A) in this case and on the other hand, order that the rate of tax as considered in the assessment be adopted. 47. The decision of the Tribunal has been arrived at after consideration of the detailed arguments advanced on behalf of the assesee which have been reiterated before us. We would have no difficulty in following the elaborate decision of the coordinate Bench but the amendment in Section 90 of the I.T. Act, 1961 by the Finance Act, 2001 w.r.e.f. 1.4.1962. We, therefore, do not consider it necessary to deal with the contentions advanced on behalf of the assessee without taking into account the above amendment in Section 90. We consider it necessary to examine the effect of the amendment of Section 90 in regard to the application of rate of tax. 48. It will be useful to quote Section 90 as under :- "90.(1) The Central Government may enter into an agreement with the Government of any country outside India – (a) for the granting of relief in respect of income on which have been paid both income-tax under this Act and income-tax in that country, or (b) for the avoidance of double taxation of incomeunder this Act and under the corresponding law in force in that country, or (c) for exchange of information for the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corresponding law in force in that country, or investigation of cases of such evasion of avoidance, or (d) for recovery of income tax under this Act and under the corresponding law in force in that country, and may by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement. (a) for the granting of relief in respect of income on which have been paid both income-tax under this Act and income-tax in that country, or (b) for the avoidance of double taxation of incomeunder this Act and under the corresponding law in force in that country, or (c) for exchange of information for the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corresponding law in force in that country, or investigation of cases of such evasion of avoidance, or (d) for recovery of income tax under this Act and under the corresponding law in force in that country, and may by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement. 2. Where the Central Government has entered into an agreement with the Government of any country outside India under sub-section (1) for granting relief of tax, on as the case may be avoidable of double taxation, then in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee." The following explanation was inserted by the Finance Act, 2001 w.r.e.f. 1.4.1962 :- "Explanation - For the removal of doubts, it is hereby declare that the change of tax in respect of a foreign company at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such foreign company, where such foreign company has not made the prescribed arrangement for declaration and payment within India of the dividends (including dividends on preference shares) payable out of first come in India." 49. Before considering the claim of the assessee in the light of the amendment of Section 90 w.r.e.f. 1.4.1962, we consider it useful to keep in mind the applicability of the Indian Tax Laws vis-a-vis DTAA with the foreign country. In this connection reference to the decision of the Hon'ble Supreme Court in the case of Gramophone Co. of India Ltd. -Vs- Birendra Bahadur Pandey & Ors. [AIR 1984 (SC) 6671] is relevant. In this case their Lordships of the Supreme Court held that in the event of conflict between international law, the Court must follow Municipal Law. The relevant para-5 is quoted hereunder for the sake of reference :- “5 There can be no question that nations must march with any international community and the Municipal Law must respect rules of International Law each as nations respect international opinion. The comity of Nations requires the Rules of International law may be accommodated in the Municipal Law even without express Legislative sanction provided they do not run into conflict with Acts of Parliament. But when they do run into such conflict, the sovereignty and the integrity of the Republic and the supremacy of the constituted Legislature in making the laws may not be subjected to external rules except to the extent legitimacy accepted by the constituted legislatures themselves. The doctrine of incorporation also cognizes the position that the rules of international law are incorporated into national law are incorporated into national law and considered to be part of the national law, unless they are in conflict with an Act of Parliament. Comity of nations or no.Municipal Law must prevail in case of conflict. National Courts cannot say "yes" if Parliament has said no to a principle of international law. National Courts will endorse international law but not if it conflicts with national law. National courts being organs of the National State and not organs of international law must perforce apply national law if international law conflicts with it. But the Courts are under an obligation within legitimate limits, to so interpret the Municipal Statute as to avoid confrontation with the comity of Nations or the well established principles of International law. But if conflict is inevitable, the latter must yield." Courts cannot say "yes" if Parliament has said no to a principle of international law. National Courts will endorse international law but not if it conflicts with national law. National courts being organs of the National State and not organs of international law must perforce apply national law if international law conflicts with it. But the Courts are under an obligation within legitimate limits, to so interpret the Municipal Statute as to avoid confrontation with the comity of Nations or the well established principles of International law. But if conflict is inevitable, the latter must yield." 50. Section 90 of the Income Tax Act empowers the Central Government to enter into an agreement with the Government of any country outside India for granting of relief or for avoidance of double taxation of income, etc. Thus the source of double taxation avoidance agreement with Nederland is Section 90 of the Income Tax Act, 1961. Section 90 has been quoted in para 48 above. 51. It is note worthy that Sub-Section (2) of Section 90 provides for application of beneficial provisions of the agreement in contrast to the contrary provisions of the Income Tax Act, 1961. It has, however, to be borne in mind that in the event of there being no conflict between the provisions of the DTAA and the Income Tax Act, 1961, the effect shall have to be given to the provisions of the Income Tax Act, 1961. It is only when there is a conflict between the provisions of the agreements in contrast with the provisions of the Income Tax Act, 1961 that the beneficial treatment is to be given as per Section 90(2) of the Income Tax Act, 1961. In this connection circular of the CBDT being No. 333 dated 02.04.1982 also clarifies the position of law, which is quoted hereunder :- "Subject: Conflict between the provisions of the Income Tax Act, 1961 and the provisions of the Double Taxation Avoidance Agreement - Clarification. It has come to the notice of the Board that sometimes effect to the provisions of double taxation avoidance agreement is not given by the assessing officers when they find that the portions of the agreement are not in conformity with the provisions of the Income Tax Act, 1961. 2. The correct legal position is that where a specific provision is made in the double taxation avoidance agreement, that provision will prevail over the general provisions contained in the Income Tax Act, 1961. In fact the Double Taxation Avoidance Agreements which have been entered into by the Central Government under Section 90 of the Income-tax Act, 1961, also provide that the laws in force in either country will continue to govern the assessment and taxation of income in the respective country except where provisions to the contrary have been made in the Agreement. 3. Thus, where a Double Taxation Avoidance Agreement provides for a particular mode of computation of income, the same should be followed, irrespective of the provisions in the Income Tax Act. Where there is no specific provision in the agreement, it is the basic law, i.e. the Income Tax Act, that will govern the taxation of income." 3. Thus, where a Double Taxation Avoidance Agreement provides for a particular mode of computation of income, the same should be followed, irrespective of the provisions in the Income Tax Act. Where there is no specific provision in the agreement, it is the basic law, i.e. the Income Tax Act, that will govern the taxation of income." 52. As ____ pointed out an agreement for avoidance of double taxation and prevention of fiscal evasion with Nederland was executed between the Republic of India and the Kingdom of Nederland which was notified vide Notification No. 382(E) dated 27.3.1989and amended by Notification No. SO-693(E) dated 30.8.1999. This agreement is available in I.T.R. (St.) 72. The Notification gives the source of the agreement, i.e. Section 90 of the I.T. Act, 1961 and similar provision under the Companies Profits (Sur-tax) Act and Wealth-tax Act. Thus, it is evident that the DTAA derives its source from the Income-tax Act, 1961 itself, overrides the provisions of the Income-Tax Act, 1961 within the limits provided under the said Act. The limit provided under the Act, as pointed out earlier, is that in the event of conflict between the provisions of the DTAA and the provision of the Income Tax Act, the beneficiary provision of the Act shall prevail in regard to the taxation of the subjects. It thus become abundantly clear that when there is no conflict between DTAA and the Income Tax Act, 1961 in regard to any aspect of the matter, the provisions of the Income Tax Act, 1961 shall have to be implemented with full force. Section 90 was amended as pointed out earlier, by the Finance Act, 2001 w.r.e.f. 1.4.1962 incorporation the Explanation which has been quoted in para 48 above. At this stage it will be relevant to refer to Article 24 of the DTAA, which reads as under :- "ARTICLE 24 - Non-discrimination 1. Nationals of one of the states shall not be subjected the other State to any taxation or any requirement connected therewith, which is other or more burden some than the taxation and connected requirements to which nationals of that other State the same circumstances are or may be subjected. These provisions shall notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the States. 2. Except where the provisions of paragraph 3 of Article 7 apply, the taxation on a permanent establishment which an enterprise of one of the States has in the other State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities. 3. The provisions of paragraph 2 shall not be construed as obliging one of the States to grant residents of the other State any personal allowances, reliefs and reductions for taxation purposes account of civil status or family responsibilities which it grants to its own residents. 4. Except where the provisions of paragraph 1 of Article 9 paragraph 9 of Article 11 paragraph 9 of Article 12 apply, interest, royalties and other disbursements paid by an enterprise one of the States to a resident of the other State shall for the purpose of determining the marginal profits of such enterprise, be deductible under the same conditions as if they had been paid to resident of the first mentioned State. Similarly, any debts of an enterprise of one of the States resident of the other State shall, for the purpose of determining the taxable capital of such enterprise, be deductible under the same conditions as if they had been contracted to a resident the first mentioned State. 5. Enterprises of one of the States, the capital of which is wholly or partly owned or controlled directly or indirectly, by one or more residents of the other State shall not be subjected in the first mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprise of the first mentioned State are or may be subjected." 5. Enterprises of one of the States, the capital of which is wholly or partly owned or controlled directly or indirectly, by one or more residents of the other State shall not be subjected in the first mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprise of the first mentioned State are or may be subjected." 53. The Tribunal in the assessee's own case the assessment year 1996-97 (supra) has held that Article 24, para-1 is not applicable in any case of the appellant. However, the Tribunal has expressed the view that Article 24 applied in the case of the appellant. However Explanation to Section 90 specifically provides that the charge of tax in respect of the foreign company at the rate higher than the rate at which a domestic company is chargeable shall not be regarded as less favourable charge. In the DTAA, there is no (illegible) of "less favourable charge". Therefore, the Explanation to Section 90 cannot be said to be in conflict with the provisions of the DTAA. On the facts and in the circumstances of this case, there is no escape from the conclusion that there is no conflict between the provisions of the DTAA and the Income Tax Act, 1961 in regard to the non-discrimination. 54. As has been pointed out earlier, the provisions of DTAA incorporation specific provisions contrary to the provisions of the Income Tax Act, 1961 are to prevail in so far as such incorporation is authorised under the Income Tax Act, 1961 itself. However, in regard to the subsequent amendments, the only requirement is to notify the amendments to the respective countries and in the event of there being no conflict, the amended provisions shall have to be given effect to. In this connection, it will be relevant to refer to Article 2, para-4 of the DTAA which reads as under: "4. The Convention shall apply also to any identical or substantially similar taxes which are imposed after the date of signature of the Convention in addition to or in place of, the existing taxes. The competent authorities of the States shall notify to each other any substantial changes which have been made in their respective taxation laws."[Emphasis supplied]. 55. It is thus evident that even the DTAA recognizes the fact that the amendments effected by the respective Legislatures after the execution of the DTAA are not affected in so far as they are not repugnant to the specific provisions of the DTAA. In this view of the matter, the amendment in Section 90 is applicable in this case with retrospective effect in so far as it is not in conflict with the provisions of DTAA. 56. The contention advanced on behalf of the assessee that the said Explanation to Section 90 is unimplementable because of inappropriate language, does not appeal to us. The Explanation in our view provides for two eventualities. One is the charge of tax in respect of a foreign company vis-a-vis an Indian Company (i.e. a Domestic Company). the second category as per Explanation is the foreign Company vis-a-vis the domestic company other than Indian company. It is non note worthy that the Domestic Company is defined under the Finance Act. For the sake of reference we may quote the definition of the domestic company as per the Finance (No. 2) Act, 1996. "domestic company" means an Indian Company, or any other company which in respect of its income liable to income-tax under the Income-tax Act for the assessment year commencing on the 1st day of April, 1996, has made the prescribed arrangements for the declaration and payment within India of the dividends (including dividends on preference shares) payable out of such income in accordance with the provisions of Section 194 of the Act." [Emphasis supplied]. "domestic company" means an Indian Company, or any other company which in respect of its income liable to income-tax under the Income-tax Act for the assessment year commencing on the 1st day of April, 1996, has made the prescribed arrangements for the declaration and payment within India of the dividends (including dividends on preference shares) payable out of such income in accordance with the provisions of Section 194 of the Act." [Emphasis supplied]. This even under the Finance Act the domestic company is recognized as Indian company and any other company having made arrangement for declaration of dividends payable on such income. We, therefore, do not find the language of the Explanation to Section 90 as inappropriate. Moreover, in so far as there is no doubt about the category of the Foreign company vis-a-vis the Indian company having been specified in the explanation, one need not ascertain as to whether in any case the second category of the companies would at all exist. We, therefore, do not find merit in the contentions advanced on behalf of the assesse in this regard. 59. It is evident from the letter dated 24.11.1994 that the CBDT was of the view that the tax rate applicable in the case of the appellants would be the same as applicable to India companies. However, this opinion was changed before the law was amended vide letter dated 24.3.2000 referred to above. We have referred to the contentions advanced on behalf of the assessee in regard to these two letters issued by the CBDT. It is evident from the content the letters that the opinion of the Board is expressed in the aforementioned letters. If the how were not amended, perhaps we would have no difficulty in holding that the A.O. could not have overlooked the opinion of the Board in regard to the taxation of the appellants. So, however, the law has been amended retrospectively. Therefore, the only issue that requires to be considered is as to whether the circular of the CBDT prevails over the statutory law passed by the supreme legislature. The CBDT is the creation of Statute. The instructions issued u/s. 119 of the I.T. Act, 1961 is under the delegated power by the Parliament. Therefore, it isfutile to suggest that the CBDT circulars would prevail over the conscious amendment of the law by the legislature which overrides the law prevalent before the amendment including the CBDT circulars. Their Lordships of the Supreme Court in the case of State Bank of Travancore -Vs- CIT (1986) 158 ITR 102 (SC) held that the circulars issued by the Board would be binding on all officers and persons employed in the execution of the Act, but no instructions or circular can go against the provisions of the Act. In the case of State of Madhya Pradesh -Vs- G.S. Dall & Flour Mills [(1991) 187 I.T.R. 478, 499 (SC), their Lordships of the Supreme Court held that executive instructions can supplement a statute or cover area to which the statute does not extend. But they cannot run contrary to the statutory provisions or while down their effect. In the case of Kerala Financial Corpn. -Vs- CIT [(1994) 210 I.T.R. 129 at page 135 (SC)], their Lordships of the Supreme Court held that the circular offshore Board issued u/s. 119 cannot override or be detracted from the Act, inasmuch as what Section 119 has empowered is to issue orders, instructions or directions for the proper administration of the Act or for such other purposes specified in sub-section (2) of that section. (Illegible) Order, instruction or direction cannot override the provision of the Act, that would be destructive of all the known principles of law as the same would really amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament. This principle has been further reiterated in the case of Shanmuga Traders - would be destructive of all the known principles of law as the same would really amount to giving power to a delegated authority to even amend the provision of law enacted by Parliament. This principle has been further reiterated in the case of Shanmuga Traders - Vs- State of Tamil Nadu [(1998) 5 SCC 349 at page 354]. In the case of Union of India -Vs- M. Bhaskar, JT [1996 (5) SC 500 at page 503], their Lordships held that there is no dispute in law that statutory provision cannot be changed by administrative instructions. 60. Thus, from the decisions of the Supreme Court referred to above, it becomes abundantly clear that when the law is amended, any circular issued earlier automatically gets superseded. Since in this case the law was amended retrospectively, the letters issued by the Board, even assuming that they have the effect of circular issued u/s. 419 of the I.T. Act, 1961, are ineffective and they have to give way to the law passed by the supreme legislature. It may be pertinent to mention that their Lordships of the Delhi High Court in the case of National Thermal Power Corpn. of India Ltd. -Vs- Union of India [192 I.T.R. 187 at page 189] held that the opinion of the Board expressed in its administrative capacity can under no circumstances be binding on the appellate authorities or the High Courts on a reference. 61. In the case of C.I.T. -Vs- Swedish Enst. Asia Co. Ltd. [(1981) 127 1.T.R. 148, at page 165], their Lordships of the Calcutta High Court held that when the section is clear, one cannot take aid of the circulars to interpret the law. This view is in consonance with the view expressed by their Lordships ofthe Supreme Court in the case of State Bank of Travancore (Supra). 62. We may further refer to the observations of Sri K. Srinivasan, author of the book on Double Taxation Avoidance Agreements conained in para 7.2 of the book as under :- "7.2. While a treaty may supersede the existing law in so far as its specific terms are concerned, its scope cannot be obviously be widened by provisions covering future enactments, for no sovereign Legislature will ever agree to be eternally bound by such executive stipulations. There is nothing in law preventing the Legislature from revising its own views and amending the existing enactments. A treaty cannot afford protection against such subsequent charges in law. However, all that is required for revision of a treaty is the prescribed notice. Whenever the law undergoes any modification that may affect the terms of a treaty. The administration may have to give due notice to the concerned countries immediately to avoid giving any cause for a grievance. Courts have held in the UK that any unilateral legislation enacted after a treaty has come into force will override the treaty, whereas if it had been enacted earlier, its effect would have been limited by the treaty provisions - CIR -Vs- Collco Dealings Ltd. [1960] 39 TC 509, concerning, UK anti-avoidance legislation conflicting with the earlier lish double tax avoidance agreement and Woodend Rubber Co. -Vs- CIR [1970] 2 WIR 10, concerning discriminatory legislation in Ceylon (Sri Lanka) conflicting with the earlier UK - Ceylon treaty." 63. In the light of the above position of law, we are of the view that the Explanation to Section 90 is attracted in this case and the letters issued by the CBDT have been superseded by the said Explanation w.e.f. 1.4.1962. We, accordingly, uphold the decision of the C.I.T. (A) in regard to the applicability of the rate of tax as applicable in the case of foreign companies in the case of the appellant. Before parting with this issue we would like to point out that Article 25 of the DDTA is not attracted in this. The said Article is reproduced hereunder :- 63. In the light of the above position of law, we are of the view that the Explanation to Section 90 is attracted in this case and the letters issued by the CBDT have been superseded by the said Explanation w.e.f. 1.4.1962. We, accordingly, uphold the decision of the C.I.T. (A) in regard to the applicability of the rate of tax as applicable in the case of foreign companies in the case of the appellant. Before parting with this issue we would like to point out that Article 25 of the DDTA is not attracted in this. The said Article is reproduced hereunder :- "ARTICLE 25 - Mutual agreement procedure-1. Where a person considers that the actions of one or both of the States result or will result for him in taxation not in accordance with the provisions of this Convention, he may, irrespective of the remedies provided by the domestic law of those states present his case to the competent authority of the State of which he is a resident or, if his Case comes under paragraph 1 of Article 24 to that of the State of which he is a national. The case must be presented within three years from the first notification of the action resulting in taxation not in accordance with the provisions of the Convention. 2. The competent authority shall endeavour, if the objection appears to it to be justified and if it is in itself able to arrive at a satisfactory solution, to resolve the case by mutual agreement with the competent authority of the other State, with a view to the avoidance of taxation which is not in accordance with the Convention. Any agreement reached shall be implemented notwithstanding any time limits in the context of Law of the States. 3. The competent authority of the States shall endeavour to resolve by mutual agreement any difficulties or doubts arising as to the interpretation or application of the Convention. They may also consult together for the elimination of double taxation in cases and provided for in that Convention. 4. The competent authorities of the States may communicate with each other directly for the purpose of reaching an agreement in the sense of the preceeding paragraphs. When it seems advisable in order to reach agreement to have an oral exchange of opinions, such exchange may take place through a Commission consisting of representatives of the competent authorities of the two States." We admit our failure to appreciate as to how a letter written to the CBDT seeking opinion about the rate of tax chargeable in the case of the appellant fits in within the framework of reference under Article 25 of the DTAA. We find no merit in the contention in this regard advanced on behalf of the appellants. the CBDT seeking opinion about the rate of tax chargeable in the case of the appellant fits in within the framework of reference under Article 25 of the DTAA. We find no merit in the contention in this regard advanced on behalf of the appellants. 65. Our decision is regard to the issue of rate of tax for assessment years 1992-93 and 1994-95 shall apply to assessment years 1997-98 mutatis inulandis. Assessment year 1994-95:” Submissions:- 8.During the course of hearing learned counsel for the appellant has filed a written argument dated 18.04.2024 stating that “therefore what survives for adjudication is the first issue viz., at what rate should be Appellant be assessed on the profits attributable to the permanent establishments it had has filed a written argument dated 18.04.2024 stating that “therefore what survives for adjudication is the first issue viz., at what rate should be Appellant be assessed on the profits attributable to the permanent establishments it had in India.” In oral submissions also learned counsel for the Appellant argued only on the question of rate of Tax. The arguments contained in the written argumentdated 18.04.2024 submitted by learned counsel for the appellant, are reproduced below;- 8.During the course of hearing learned counsel for the appellant has filed a written argument dated 18.04.2024 stating that “therefore what survives for adjudication is the first issue viz., at what rate should be Appellant be assessed on the profits attributable to the permanent establishments it had has filed a written argument dated 18.04.2024 stating that “therefore what survives for adjudication is the first issue viz., at what rate should be Appellant be assessed on the profits attributable to the permanent establishments it had in India.” In oral submissions also learned counsel for the Appellant argued only on the question of rate of Tax. The arguments contained in the written argumentdated 18.04.2024 submitted by learned counsel for the appellant, are reproduced below;- “1. In terms of section 4 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), tax has to be levied on the total income of an assessee in accordance with the rates provided for in the annual Finance Act. The Finance Act of each year in Part A of the First Schedule provides for the rates at which different categories of persons are liable to pay tax. There is a separate rate provided for individuals, Hindu Undivided Families, association of persons, body of individuals and artificial juridical persons in Para A. Para B deals with rates applicable to cooperative societies and provides for a slab rate taxation. Para C provides for rates applicable to firms and para D for local authorities. Finally para E. provides for rates at which domestic companies and companies other than domestic companies are taxable. Section 5 of the Act delineates the scope of total income. However, both section 4 and section 5 of the Act have been made subject to the other provisions of the Act, which would also include section 90 of the Act. Reliance in this behalf is placed on the following judgment- a.Union of India & Anr. v. Azadi Bachao Andolan & Anr. reported in (2003) 263 ITR 706 (Supreme Court) at Pgs. 724-725 of the Report. 2. Undisputedly in accordance with the provisions of the Act the Appellant would be assessed at the rate provided for in paragraph E as applicable to a company other than a domestic company. However, in view of the undisputed fact that the Appellant is a resident of the Netherlands in terms of the Double Taxation Avoidance Agreement entered into between the Governments of India and the Netherlands it would be liable to tax at the rates applicable to either a domestic company or cooperative society as elaborated herein. Section 90 of the Act empowers the Central Government to enter into Double Taxation Avoidance Agreements (hereinafter referred to as "DTAA/DTAAS"). Sub-Section (2) to Section 90 lays down as under- "(2) Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-section (1) for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. [Emphasis added] It is well settled that the provisions in the DTAAs prevail over the provisions of the Act. This principle is recognised by the Central Board of Direct Taxes ("CBDT") as far back as in 1982 in Circular No. 333 dated April 2, 1982 (set out at Pgs. 90- 91 of the paper book) as well as by the following judgments- a.Bank of Tokyo Mitsubishi Ltd. v. Commissioner of Income Tax, reported in 108 taxmann.com 242 (Calcutta High Court) at Paragraphs 2-9. b.Union of India & Anr. v. Azadi Bachao Andolan & Anr. (supra) at Pgs. 720- 726 of the Report affirming the views taken earlier by the Andhra Pradesh, Calcutta, Madras and Gujarat High Courts. c.It is further well settled that a unilateral amendment to the domestic law cannot override the provisions of the DTAA unless the DTAA is amended by way of a bilateral negotiation. In this regard see:- a.Bank of Tokyo Mitsubishi Ltd. v. Commissioner of Income Tax, reported in 108 taxmann.com 242 (Calcutta High Court) at Paragraphs 2-9. b.Union of India & Anr. v. Azadi Bachao Andolan & Anr. (supra) at Pgs. 720- 726 of the Report affirming the views taken earlier by the Andhra Pradesh, Calcutta, Madras and Gujarat High Courts. c.It is further well settled that a unilateral amendment to the domestic law cannot override the provisions of the DTAA unless the DTAA is amended by way of a bilateral negotiation. In this regard see:- d.Director of Income Tax v. New Skies Satellite BV, reported in [2016] 382 ITR 114 (Delhi High Court) at Para 40 Pg. 139 to Para 47 Pg. 142, Para 51 Pg. 144 to Para 53 Pg. 146 and Para 59 Pg. 151 of the Reports. e.Engineering Analysis Centre of Excellence (P) Ltd. v. Commissioner of Income Tax, reported in [2021] 125 taxmann.com 42 (Supreme Court) from Para 145 Pg. 101 onwards at Para 155 Pg. 110 to Para 165 Pg. 113. (This case is also reported in [2021] 432 ITR 471 (SC)). f.Sanofi Pasteur Holding SA v. Department of Revenue & Ors., reported in (2013) 354 ITR 316 (Andhra Pradesh High Court) at Para 34 Pg. 354, Para 96 Pg. 420 @ Para 103 Pg. 424 to Para 107 Pg. 428, Para 119 Pg. 432 to Para 121 Pg. 433 of the Reports. 3.The Vienna Convention on the Law of Treaties, 1969 encapsulates the customary rules for interpretation of treaties. Article 31 thereof lays down that a treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose. Article 39 postulates that a multi-lateral treaty cannot be amended unilaterally. Thus, unilaterally overriding a DTAA by merely amending the domestic law without a corresponding amendment in the DTAA would be a direct violation of the said customary principle. 4.By virtue of Article 24(2) of the DTAA between India and Netherlands (Pg. 495 of the Paper Book), it is clear that if a permanent establishment of a Netherlands' entity is subjected to a tax treatment that is less favourable enterprise that is carrying on similar activities, the same would than an Indian tantamount to prohibited. The levy discrimination of the Netherlands' entity, an action which is prohibited of tax on the profits of the Appellant's banking activities at a rate higher than the rate applicable to domestic companies is, thus, impermissible. Reliance in this behalf is placed on the following- i.Circular of the Central Board of Direct Taxes dated November 21, 1994 (Pg. 222/509A of the Paper Book). November 21, 1994 (Pg. 222/509A of the Paper Book). ii.Decision of the Income Tax Appellate Tribunal, Kolkata (hereinafter referred to as "the Tribunal") dated March 30, 2001 in the appellant's own case for the assessment year 1996-97 (Pg. 397 @ Pgs. 426 to 441 of the Paper Book). The said order has become final since the appeal of the Department against the said order, being ITA 217 of 2001, has been dismissed on June 2, 2014 as would appear from the case status records on the website of the Calcutta High Court. (hereinafter referred to as "the Tribunal") dated March 30, 2001 in the appellant's own case for the assessment year 1996-97 (Pg. 397 @ Pgs. 426 to 441 of the Paper Book). The said order has become final since the appeal of the Department against the said order, being ITA 217 of 2001, has been dismissed on June 2, 2014 as would appear from the case status records on the website of the Calcutta High Court. iii. Bank of Tokyo Mitsubishi vs. CIT (supra). iv.The Tribunal in para 47 of the impugned order at page 87 notes that it would normally have followed the earlier order for the assessment year 1996/97 but for the amendment to the notes that it would normally have followed the earlier order for the asse