TaxTMI 
TaxTMI 
2009 (1) TMI 311
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....ent order passed in assessee's own case for asst. yr. 1997-98 wherein a similar income earned by the assessee from the foreign operation was held to be chargeable to tax in India in its hands, the amount of Rs. 20,14,06,921 was added by the AO to the income returned by the assessee in an assessment completed under s. 143(3) vide an order dt. 28th March, 2001. 3. The addition made by the AO on account of income earned from foreign operation was challenged by the assessee in an appeal filed before the learned CIT(A) and after considering the submissions made on its behalf before him as well as the material on record, it was noted by the learned CIT(A) that similar addition made in assessee's own case for asst. yrs. 1991-92, 1992-93 and 1993-94 had already been deleted by the Tribunal vide its order dt. 12th June, 1998 for the following reasons given in para No. 7 of the said order: "7. The assessee in this case is a company resident in India. It is an admitted fact that the assessee has a branch in Germany as well as in Russia. The definition of 'PE' under both the agreements includes a place of management, a branch, an office and a factory etc. Therefore, the assessee is havin....
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....cable only from asst. yr. 2000-01. He contended that the decision rendered by the Tribunal in assessee's own case for asst. yrs. 1991-92, 1992-93 and 1993-94 thus was based on interpretation of the treaty which was not applicable and the same being per incuriam, the learned CIT(A) was not justified in following the said decision while giving relief to the assessee on this issue. He contended that prior to asst. yr. 2000-01, the treaty entered into with the Union of Soviet Socialistic Republic vide Notification No. GSR 812(E), dt. 4th Sept., 1989 was applicable. He filed the copy of the said treaty stated to be applicable in the case of the assessee for the year under consideration as well as for the earlier years and invited our attention to art. 7 thereof which provides that the profits of a resident of a Contracting State shall be taxable only in that State unless the resident carries on business in another Contracting State through a PE situated therein. It is further provided that if the resident carries on business as aforesaid, the profits of the resident may be taxed in the other State but only so much of them as is directly or indirectly attributable to that PE. He also inv....
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.... Supreme Court as well as the Special Bench of Tribunal in that case have dealt with the issue of income from "immovable property" which is covered under art. 6 of the DTAA whereas in the present case, the issue is relating to the business income which is covered under art. 7 of the DTAA. He contended that the ratio of the decision of Special Bench of Tribunal in the case of P.V.A.L. Kulandagan Chettiar as affirmed by the Hon'ble Supreme Court thus has no application in the present case. He also contended that although the final operative decision of Special Bench of Tribunal in the case of P.V.A.L. Kulandagan Chettiar has been held to be correct by the Hon'ble Supreme Court, the reasoning given by the Hon'ble Supreme Court while affirming the said decision is entirely different from the reasoning given by the Special Bench of the Tribunal. In this regard, he pointed out from the judgment of Hon'ble Supreme Court that it was a case of dual residence of the taxpayer and since the taxpayer, as held by the Hon'ble Supreme Court, was deemed to be a resident of a Contracting State where his personal and economic relations were found to be closer, his residence in India was, held to be i....
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....he reasons given by the Special Bench of Tribunal were held to be improper or incorrect by the Hon'ble apex Court. He contended that the decision of Special Bench of Tribunal in the case of P.V.A.L. Kulandagan Chettiar thus still holds the field and the same having been affirmed by the Hon'ble Supreme Court although for different reasons, it is a binding precedent. He contended that the Tribunal, therefore, was fully justified in following the said decision of the Special Bench of Tribunal to decide a similar issue in favour of the assessee for asst. yrs. 1991-92, 1992-93 and 1993-94. He pointed out that even the AO himself has accepted the stand of the assessee on this issue in the assessments completed for asst. yrs. 1994-95 and 1995-96 under s. 143(3). He contended that the issue involved in the present case thus is squarely covered by the decision of Special Bench of Tribunal in the case of P.V.A.L. Kulandagan Chettiar which has been affirmed by the Hon'ble Supreme Court in principle and this Division Bench is bound to follow the said decision being a binding precedent. 9. We have considered the rival submissions and also perused the relevant material on record. It is observ....
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....his regard inasmuch as the profit derived from the business carried on through a PE in a Contracting State by a resident or an enterprise of the other Contracting State is liable to be taxed in the first-mentioned State to the extent the same is directly or indirectly attributable to the PE and the same thus shall not be taxable in other Contracting State. In the present case, the profit in question was earned by the assessee company in USSR through its PE in that country and since it is not the case of the Revenue that the assessee company had no PE in USSR or that any portion of the profit earned by it in USSR was not attributable to that PE, it follows that the entire income earned by the assessee company in USSR through its PE was chargeable to tax in that country as per art. 7(1) of the DTAA between India and USSR. 12. It is interesting to note that in the case of P.V.A.L. Kulandagan Chettiar, the Special Bench of the Tribunal while deciding a similar issue had also relied on art. 7 of the DTAA between India and Malaysia, the provisions of which read as under: "7(1) The income, or profits of an enterprise of one of the Contracting States shall be taxable only in that Con....
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....gests deals with elimination of double taxation. It is thus applicable only where despite all the provisions contained in the relevant DTAA to avoid the double taxation, there is still a case of taxation of the income twice i.e., in two countries. The OECD Commentary in fact enumerates such instances of the so-called juridical double taxation where the same income or capital is taxable in the hands of the same person by more than one State and further states that this article applies to such situations. It is also stated in the said commentary that where such situations arise, the two countries agree upon a credit to be given for the tax paid in one country against the tax levied by another country. It is thus a method for elimination of double taxation by giving credit for tax paid on income in one country against the tax leviable on the same income in another country and the occasion to invoke this method provided in art. 22 arises only when double taxation of the same income in two countries cannot be avoided. However, where there are specific provisions already contained in the relevant DTAA to avoid the double taxation, the occasion to refer to or rely on art. 22 to claim the ....