BAKER HUGHES SINGAPORE PTE,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, DEHRADUN

ITA No.195/DDN/2025 BAKER HUGHES SINGAPORE PTE.

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “DB” NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI SANJAY AWASTHI, ACCOUNTANT MEMBER ITA No.195/DDN/2025 Assessment Year: 2020-21 BAKER HUGHES SINGAPORE PTE., Vs. DEPUTY COMMISSIONER OF Unit No.203, 2nd Floor, INCOME TAX, Reliable Tech Park, Airoli TTC Circle 1, International Taxation, Industrial Area, Thane, Navi Income Tax Office, Mumbai, MUMBAI, Subhash Road, Dehradun, Maharashtra 400061. Uttarakhand 248001. PAN No. AAACB8516F Appellant Respondent

Assessee by Shri Amit Arora, CA & Shri Vishal Mishra, CA Revenue by Shri Mohan Lal Joshi, Sr. DR

Date of hearing: 15.01.2026 Pronouncement on 08.07.2026 O R D E R PER SANJAY AWASTHI, ACCOUNTANT MEMBER: 1. This appeal arises from order dated 18.08.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A), Noida-2. In this case, the assessee is aggrieved with the action of the authorities below in terms of taxing receipts amounting to Rs.49,38,839/- on account of interest of Income Tax refund, taxed at maximum marginal rate of 40%, as opposed to the claim of the assessee

ITA No.195/DDN/2025 BAKER HUGHES SINGAPORE PTE. that the same should be taxable at @15% in terms of Article 11 of India Singapore Double Taxation Avoidance Agreement (DTAA).

“2. Coming to the sole substantive issue which reads that both the learned lower authorities have erred in law and on facts in holding its interest on income tax refund as assessable to tax under the maximum marginal rate of 40% than that @ 15% as per Article 11 of India Singapore Double Taxation Avoidance Agreement "DTAA" in issue, our attention is further invited to the learned CIT(A)'s detailed discussion upholding the assessment findings to this effect, reading as under: ……………….. 3. It is thus very much clear with the able assistance coming from both the parties that the learned CIT(A) has placed reliance on the Hon'ble jurisdictional High Court's decision in M/s. B.J Services (supra) whereas the assessee quotes the tribunal's order in its favour. There is no categorical denial coming from the assessee side that the earlier learned coordinate bench hadn't considered Hon'ble jurisdictional high court's decision whilst accepting its corresponding substantive grounds in the preceding assessment year. We thus follow the judicial discipline in light to follow higher wisdom to uphold both the learned lower authorities' respective impugned findings in very terms. The assessee's instant sole substantive grievance is rejected therefore. 4. This assessee's appeal is dismissed.” For the sake of record the relevant findings of the Ld. CIT(A) for this year may be extracted as under: - 2

ITA No.195/DDN/2025 BAKER HUGHES SINGAPORE PTE. “5.5.3 I have carefully considered the issue at hand and submission of the appellant as reproduced above. The appellant in its ITR has claimed interest on income-tax refund of Rs. 49,38,839/- to be chargeable to tax @ 15% under Article 11 of the India-Singapore DTAA. The appellant has pleaded that the Hon’ble Tribunal has in appellant’s own case for AY 2015-16 has held that “interest on income tax refund is not effectively connected with the PE either on the basis of asset test or activity test. Hence, it is taxable as per the provisions in the Para No. 2 of Article 11 of Indo-US DTAA”. The appellant has placed reliance on other case laws also as reproduced in its reply above. 5.5.4 It is an undisputed fact that the appellant has PE in India in the present year and also in the year to which refund of income- tax and interest arising thereon pertains. In this context, it is important to take note of the decision of the Hon’ble Jurisdictional High Court of Uttarakhand wherein the Hon’ble HC while dwelling on the said issue in the case of M/s B.J Services vide order dated 19.05.2015 reported at 60 taxmann.com 246 (Uttarakhand) has held that interest on income tax refund u/s 244A of the Act is business income as this indebtedness on which interest income is earned is effectively connected with the Permanent Establishment (PE) of the appellant in India. The relevant extract of the observation of the hon’ble HC is reproduced hereunder for ready reference: ..6. The agreement is one for avoidance of double taxation and prevention of fiscal evasion between United Kingdom of Great Britain and Northern Ireland. Since we are concerned with only Article 12 of the Treaty which deals with interest, we refer to the relevant portions which are Clause 1, 2 & 6 of Article 12 of the Treaty. ‘1. Interest arising in a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State. 2. However, such interest may also be taxed in the Contracting State in which it arises and accordingly to the law of that State, provided that where the resident of the other Contracting State is the beneficial owner of the interest the tax so charged shall not exceed 15 per cent of the gross amount of this interest. 6. The provisions of paragraphs 1, 2 and 3(a) of this Article shall not apply if the beneficial owner of the interest, being a resident of a Contracting State, carries on business in the other Contracting State in which the interest arises through a permanent establishment situated therein, or performs in that other State independent personal services from a fixed base situated therein, and the debt- claim in respect of which the interest is paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 (Business profits) or Article 15 (Independent personal services) of this Convention, as the case may be shall apply."

ITA No.195/DDN/2025 BAKER HUGHES SINGAPORE PTE. 7. We will consider whether there is any merit in the contention of the appellant that the appellant should have been taxed at the rate of 15 per cent on the gross amount of the interest under Clause 2 of Article 12. Under Clause 1 of Article 12, interest arising in a Contracting State and paid to the resident of the other Contracting State may be taxed in the other State. In the facts of this case, interest which was received in India can be taxed in England. However, Clause 2 provides that the said interest can also be taxed in the Contracting State in which it arises (which in this case is India) as tax was paid by the Government of India in the Income Tax Department on the excess tax paid on behalf of the assessee/appellant's employees. It is to be taxed according to the law in India, namely, the Income Tax Act, 1961, as it stands. The limitation which is cast is that when the beneficial owner of the interest so charged is a resident of the other State which means that since the appellant is resident of England, the tax so charged should not exceed 15 per cent of the gross amount of the interest. Therefore, the appellant would contend that the tax should have been charged at 15 per cent of the interest received which the appellant became entitled to on the basis of excess tax paid. 8. As matters stood there if there was no other provision to consider, the appellant would indeed be justified in offering 15 per cent to taxation. But if we come to Clause 6, we notice that Clause 6 expressly provides that provisions of paragraph 1, inter alia, will not apply, if the beneficial owner of interest (the appellant in this case) is the resident of the Contracting State carries on business in the other Contracting State (in India) in which the interest arises through a permanent establishment situated therein. There is not much dispute raised before us that the appellant was indeed carrying on business through a permanent establishment in India. Since the word 'or' figures immediately thereafter, we need not be concerned with the further provisions as the requirement of the Clause that interest arises through a permanent establishment situated therein as fulfilled in this case. To continue with the requirement of Clause 6 of Article 12, it contemplates that the debt claim in respect of which interest paid is effectively connected with such permanent establishment on fixed rates. In this case, appellant paid excess tax on behalf of its employees. The Income Tax Officer, after assessment, apparently has ordered refund. There was the delay and interest was paid under the Act at the statutory rate fixed. So there arises a debt claim and the interest is effectively connected with the permanent establishment on fixed rates. In such an eventuality, Clause 6 of Article 12 provides that the provisions of Article 7, which relate to Business profits, or Article 15 (Independent personal services) of this Convention, as the case may be, shall apply. This will be assessed as business profits and in regard to business profits, the rate of tax is 48 per cent. It is on the said basis that, in fact, the Assessing Officer in the first assessment and also in the further assessment after proceedings under Sec. 147 of the Act had assessed the appellant. This assessment has been upheld by the First Appellate Authority as also by the Tribunal. 9. We would think that in this analysis of the provisions of the Clauses of the Treaty, there is no error as such committed by the 4

ITA No.195/DDN/2025 BAKER HUGHES SINGAPORE PTE. Assessing Officer as confirmed by the First Appellate Authority and the Tribunal and, therefore, the questions of law as framed must necessary be answered against the appellant in all the cases and we do so.’ 5.5.5 Vide the above order, the Hon’ble HC has held that the interest paid to the assessee on its refund is a business income and therefore it is taxable at the rate applicable to business profits (which was 48% then) instead of 15%. However, the appellant has emphasized in its reply that in its own case the Hon’ble Tribunal vide order dated 08.02.2022 has adjudicated that interest on income-tax refund in case of appellant should be taxed at beneficial rate of 15% provided in DTAA. On going through the order of the Hon’ble Tribunal it is noted that the Tribunal has not discussed the order of the Hon’ble Uttarakhand HC in its order dated 08.02.2022. Hence, the Hon’ble Tribunal has failed to take cognizance of the order of the jurisdictional HC. It is further noted that aforesaid order of the jurisdictional Uttarakhand HC has not been reviewed or reversed till date. 5.5.6 It is a settled position that the decision of the jurisdictional High Court is binding on all subordinate authorities and Tribunals within its territorial jurisdiction, including the Income Tax Appellate Tribunal (ITAT). Therefore, where a legal issue has been decided by the jurisdictional High Court, that decision must be followed in all subsequent and similar cases, even if ITAT has taken a contrary view in another assessment year or in respect of another assessee. Under the principle of judicial discipline, lower judicial and quasi-judicial authorities are bound by the decisions of higher courts within the same jurisdiction. The jurisdictional High Court decision overrides any conflicting ITAT decision. There has to be consistency in application of law. If High Court has decided an issue, the same principle must be consistently applied to all assessees within the jurisdiction, unless and until the decision is overruled by Supreme Court or reversed in appeal. Failure to follow this principle would result in arbitrary and unequal application of law. In the case of Bhopal Sugar Industries Ltd vs ITO Bhopal and subsequently in the case of CIT v. Ralson Industries Ltd. (2007) 288 ITR 322 (SC), the apex court has held that discipline demands that the lower authorities are bound to follow the order of Higher authorities. Hence in order to ensure consistency, fairness, and judicial discipline, if a question of law has been decided by the jurisdictional HC, the lower authorities in similar circumstances are bound to follow the same. Since the issue in the case of the appellant in the instant year is squarely covered by the decision of the Hon’ble jurisdictional HC as reproduced supra, the decision of the AO is held to be correct and appeal on this ground is dismissed.”

ITA No.195/DDN/2025 BAKER HUGHES SINGAPORE PTE. 4. In the result, respectfully following the ITAT’s order, we dismiss the appeal of the assessee.

Order pronounced in the open court on 08.07.2026

Sd/- Sd/- (ANUBHAV SHARMA) (SANJAY AWASTHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 08.07.2026 *Kavita Arora, Sr. P.S. Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI