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Income from Malaysia not taxable in India per tribunal & High Court decision The Income Tax Appellate Tribunal, following the decision in the SRM firm case, held that income derived from Malaysia cannot be taxed in India. The ...
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Income from Malaysia not taxable in India per tribunal & High Court decision
The Income Tax Appellate Tribunal, following the decision in the SRM firm case, held that income derived from Malaysia cannot be taxed in India. The Tribunal dismissed the revenue's appeal, citing the Double Taxation Avoidance Agreement between India and Malaysia, which prevails over local enactments. The High Court upheld this interpretation, finding no error in the Tribunal's order, and concluded that no substantial question of law arose. Consequently, the appeal was dismissed without costs.
Issues: 1. Whether the income derived by the assessee from Malaysia can be included in the total income and taxed in IndiaRs.
Analysis: The appellant, a company deriving income from a plantation in Malaysia, claimed the income from Malaysia as exempt based on the double taxation agreement between India and Malaysia. The assessing officer, however, treated the income earned in Malaysia as taxable for the assessment year in question. The Commissioner of Income Tax (Appeals) ruled in favor of the assessee, citing a decision of the Madras High Court. Subsequently, the Income Tax Appellate Tribunal, following the decision in the SRM firm case, held that the income from Malaysia cannot be taxed in India and dismissed the appeal by the revenue.
In a similar context, the Apex Court in Commissioner of Income Tax vs. P.V.A.L.Kulandagan Chettiar case emphasized that the provisions of an agreement between the Central Government and a foreign country for the avoidance of double taxation can modify the taxation of global income of an assessee. The agreement prevails over the local enactment in case of any conflict, as per Section 90(2) of the Income Tax Act. Therefore, the Double Taxation Avoidance Agreement between India and Malaysia prevails over Sections 4 and 5 of the Act, allowing for the interpretation that income derived from Malaysia should not be taxed in India.
The Division Bench of the High Court also followed this interpretation in a subsequent case. Consequently, the High Court found no error or infirmity in the Tribunal's order and concluded that no substantial question of law arose for consideration. As a result, the appeal was dismissed, and no costs were imposed.
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