Circular No. 7/2009 [F. No. 500/135/2007-FTD-I], dated 22-10-2009

The Central Board of Direct Taxes had issued Circular No. 23 (hereinafter called “the Circular”) on 23rd July 1969 regarding taxability of income accruing or arising through, or from, business connection in India to a non-resident, under section 9 of the Income-tax Act, 1961.

2. It is noticed that interpretation of the Circular by some of the taxpayers to claim relief is not in accordance with the provisions of section 9 of the Income-tax Act, 1961 or the intention behind the issuance of the Circular.

3. Accordingly, the Central Board of Direct Taxes withdraws Circular No 23 dated 23rd July, 1969 with immediate effect.

4. Even when the Circular was in force, the Income-tax Department has argued in appeals, references and petitions that-

(i) the Circular does not actually apply to a particular case, or

(ii) that the Circular can not be interpreted to allow relief to the taxpayer which is not in accordance with the provisions of section 9 of the Income-tax Act or with the intention behind the issue of the Circular.

It is clarified that {he withdrawal of the Circular will in no way prejudice the aforesaid arguments which the Income-tax Department has taken, or may take, in any appeal, reference or petition.

5. The Central Board of Direct Taxes also withdraws Circulars No. 163 dated 29th May, 1975 and No. 786 dated 7th February, 2000 which provided clarification in respect of certain provisions of Circular No 23 dated 23rd July, 1969.

Kamlesh C. Varshney,
Secretary,
Central Board of Direct Taxes

INCOME TAX APPELLATE TRIBUNAL, NEW DELHI

432-Jd (A.T.D.-CS)/2009

August 24, 2009

O R D E R

I have received several requests from different assesses for constituting a larger bench of five Members to review the decision in the case of Daga Management Pvt. Ltd. (ITA.No.8057/M/03 dated 20.10.2008).

I have also come across judicial order of ITAT Delhi Bench ‘F’ in the case of G.E. Capital Services India comprising of S/Shri G.E. Veerabhadrappa. Vice President and Shri George Mathan, Judicial Member on this very issue where the Bench, after considering all relevant facts and circumstances and after finding that similar issue has already been taken up as substantial question of law by the Hon’ble Bombay High Court, directing that hearing of the matter should be postponed by six months. This order has also been followed by some Benches at Bombay. Having in mind these judicial orders, I am of the view that hearing of all matters, in which Special Bench decision in the case of Daga Capital Management Pvt.Ltd. is sought to be reviewed by the assessee, should not be heard and blocked upto January, 2010 or till the disposal of the matter by the Bombay or any other High Court, whichever is earlier.

This order be conveyed to all Benches for compliance.

Sd/-

(Vimal Gandhi)

PRESIDENT