DTAA taxing rights for Malaysian plantation income rest with Malaysia, barring Indian taxation under the immovable property rule.

Income from a rubber plantation situated in Malaysia was treated as taxable in Malaysia under the India-Malaysia DTAA because the income arose from immovable property in that State. The treaty provision on immovable property controlled the allocation of taxing rights, and the permanent establishment clause could not be used to tax that plantation income in India. The analysis followed the binding treaty framework and the earlier Supreme Court ruling, leading to the conclusion that such Malaysian plantation income is not assessable in India merely because the assessee's control or management is in India.

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Issues: Whether income from rubber plantation situated in Malaysia was taxable in India in view of the Double Taxation Avoidance Agreement between India and Malaysia.

Analysis: The plantation income arose from property situated in Malaysia. The agreement provided that income from immovable property may be taxed in the State where the property is situated, and the clause on permanent establishment could not be invoked to tax such income in India. The binding effect of the treaty and the earlier Supreme Court ruling supported the conclusion that the Malaysian plantation income was not assessable in India.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Ratio Decidendi: Where income is derived from immovable property or plantation situated in Malaysia, the DTAA allocates taxing to Malaysia and the income cannot be taxed in India merely because the assessee's control or management is in India.

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