TaxTMI 
TaxTMI 
2016 (3) TMI 371
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...."(i) The impugned order passed u/s 263 of the I.T. Act is bad in law, being without jurisdiction for the following reasons:- (a) While the show cause notice referred to only one issue, the final order passed by the learned PCIT is on three issues and thus the appellantsociety was denied opportunity which is against the well established principles of natural justice and which vitiates the entire proceedings u/s 263. (b) At the time of original assessment, there was full application of mind on the part of the Assessing on the same issue with regard to which the show cause notice was issued by the learned PCIT. (c) After full app1ication of mind and after considering the material on record and the replies filed by the appellant-society, the Assessing Officer has taken a view at the time of original assessment which is a plausible view and under section 263 the learned PCIT cannot substitute his view for the view adopted by the Assessing Officer. (d) The order passed by the learned PCIT is violative of the well established principles of consistency of approach. (ii) On merits also the directions issued by the learned PCIT arc totally unjusti....
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....nts made in the Omani Tax Laws with effect from the year 2000. However, by virtue of the provisions of Article - 25 of DTAA referred to above, the Assessing Officer allowed credit for the aforesaid tax which would have been payable in Oman but for the exemption granted. 3.3 After the completion of the assessment, the Ld. Principal Commissioner of Income Tax (hereinafter referred as "Ld. PCIT"), issued a Show Cause Notice dated 28.09.2015 under Section 263 of the I.T. Act, 1961. The ground on the basis of which the said notice was issued is reproduced below for ready reference from the notice itself: "A perusal of the records indicates that in the computation of income filed by the Assessee, dividend income received from OMIFCO, Oman, of Rs. 143,83,99,800 was included in the total income of the Assessee. Thereafter, tax credit of Rs. 41,44,23,149 was claimed as relief u/s 90 of the Income Tax Act, 1961 read with Article 11, 7 and 25 of the India-Oman DTAA. This claim of tax credit was allowed by the Assessing Officer during the Assessment Proceedings. Dividend income received in Oman is exempt from taxation in as per Article 8 (bis) of the Oman Company Income Ta....
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....ssessee under Section 90 of the IT Act. The Assessment Order passed, accepting the contentions of the Assessee and allowing tax credit is erroneous as well as prejudicial to the interest of the Revenue. You are, therefore, in terms of provisions of sub-section (1) of Section 263 hereby given an opportunity to furnish justification as to why the tax credit of Rs. 41,44,23,149 should not be withdrawn for A.Y. 2010-11." 4. In response to the aforesaid Show Cause Notice, the Assessee has filed a detailed reply dated 13.10.2015 by raising the following contentions:- (i) Issue of notice under Section 263 is illegal and ab initio void for the reason that on the very specific issue relating to allowing tax credit for the deemed tax paid on dividend income in Oman, was allowed at the time of original assessment. after raising detailed enquiries and after considering the detailed reply filed before the Assessing Officer. It was pointed out that in the query letter issued under Section 142(1) of the I.T. Act, 1961 during the course of Assessment Proceedings, specific query was raised calling upon the Assessee to give a detailed note on the tax credit claimed by the Society in resp....
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....at the Ld. PCIT has no jurisdiction under Section 263 of the I.T. Act, 1961, the Ld. PCIT has observed as under in his order passed under Section 263: "The main point made by the Assessee with regard to non maintainability of notice under Section 263 of the Income Tax Act revolves around the argument that the Assessing Officer has granted relief under Section 90 of the Income Tax Act after considering the provisions of the Act, the treaty and since the order has been passed after making enquiries the order cannot be turned as erroneous. The Assessee has also made reference to the decision of Hon'ble Supreme Court in the case of Malabar Industrial Company Ltd., vis err [2000] 243 ITR 83 (SC) to support its claim. He has also made reference to certain other decisions. The claim of the Assessee that the Assessing Officer has not allowed deduction of tax credit after due application of mind and, therefore, jurisdiction under Section 263 will not lie without merit. The Assessee has erroneously tried to mix up the provisions of Section 147 and Section 263 of the Income Tax Act. Provisions of Section 147 which are initiated by the AO himself do restrict reopening of assessmen....
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.... a view that even if the Assessing Officer, during the course of the original scrutiny assessment proceedings, has fully applied his mind to a particular issue and has made the assessment. Accordingly, the Ld. PCIT would have jurisdiction u/s. 263 of the I.T. Act, if he feels that the view adopted by the Assessing Officer is legally untenable. The Ld. PCIT has, accordingly, made the following observations in his impugned order passed u/s. 263 of the I.T. Act. "This from the plain and simple reading of both the Oman Tax Law as applicable from 01-01-2010 (Royal Decree No. 28/2009) or the earlier law (Royal Decree 68/2000) effective from the tax year 2000, there is no tax payable on dividend in Oman and accordingly, no tax has been paid. Further, the exemption is not available because of any economic incentive for economic development as the case of the Assessee is not covered under the exemption. The Royal Decree 28/2009, which came into force w.e.f. 01-01-2010 makes the position very clear and reiterates the position of exemption of dividend income provided for in the Article 8 of old Royal Decree 68/2000. The Royal Decree of 2009 also provides for incentive only for a peri....
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....le to Assessee in terms of either para (1) or para (4) of the Article 25 of the Indo-Oman DTAA. 2. The share of profit of its investment in Oman (to the extent it is not declared as dividend) is to be included in the global income of the resident tax payer India as per Section 4 & 5 of the I.T. Act. This part of income would be eligible for allowance of tax credit as per para (4) of Article 25 of the Indo-Oman DTAA to the extent of taxes which would have been payable but for the incentive provided by the Royal Decree No. 28/2009 w.e.f. 01-01-2010 on any other notification,. The Assessee shall provide it to the A. O. if there is any such notification prior to this Royal Decree 28/2009 and still applicable for the current year. The income shall be computed in terms of notes to account of the financial statement of the branch office of the Assessee is Oman. the tax credit would be available for income earned after this date and tax credit shall be computed accordingly. However, the A.O. shall ensure that the Assessee has been granted exemption by the Oman Tax Authority as provided in Article 118 of Royal Decree No. 28/2009.] It is also seen that the Assessee has not ....
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....lete details or furnishing inaccurate particulars by the Assessee. On these two issues, there was complete denial of natural justice on the part of the Ld. PCIT for the reason that Assessee Society was not allowed any opportunity whatsoever to present its case on these Issues. In these circumstances, the entire order passed by the Ld. PCIT under Section 263 is vitiated and rendered bad in law. It is an established legal position that there must be complete nexus between the reasons or grounds indicated in the Show Cause Notice issued under Section 263 and the final order passed under Section 263. Kind reference is invited to the Hon'ble Delhi High Court judgment in the case of CIT Vs. Ashish Rajpal 320 ITR 674. For ready reference the relevant part of the head note of this case is reproduced below: "Held, dismissing the appeal, that there was nothing on record which would show that the Assessee was given an opportunity to respond to the discrepancies which formed part of the order in revision but were not part of notice dated 11.5.2016. Even though the notice issued by the Commissioner before commencing the proceedings under Section 263 referred to four issues, the fin....
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....r Industries of India Limited 40 taxmann. Com 298 (P&H) (b)Synergy Entrepreneur Solutions (P) Ltd vs. CIT 11 taxmann.com 385 (Mum.ITAT) In the backdrop of the factual and the legal position explained above, it is respectfully submitted that there is an inherent and fatal defect in the order passed by the Ld. PCIT under Section 263 for the reason that on some of the issues covered in the order, the Assessee Society was not given any opportunity. Therefore, on this ground alone the order passed by the Ld. PCIT under Section 263 deserves to be quashed. (ii) The Assessee Society also challenges the legality of the order passed under Section 263 on the ground that the Ld. PCIT has completely ignored the past history of the case and has tried to substitute his arbitrary and unreasonable view in place of the view adopted by thc Department itself consistently for the past several years. The Ld. PCIT has discarded the view adopted by the Department in the past in spite of the fact that the factual and legal position continues to be the same. It is submitted that this very same issue was thoroughly examined in the case of the Assessee Society in the scrutiny assess....
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....the subject matter of the present appeal, the Assessing Officer has adopted the same view in consonance with the view adopted in the past and further after full application of mind and after raising detailed queries and after considering the detailed replies filed by the Assessee Society vis-a-vis the provisions of Law and DTAA. Therefore, the view taken by the Ld. PCIT is totally outside the ambit and purview of Section 263 of the I.T. Act, 1961. The Assessee Society strongly relies on the following decision: (i) Honble Delhi High Court judgment in the case of CIT Vs. Escorts Limited 338 ITR 435, the relevant part of which reads as under: "Where a fundamental aspect of a transaction is found to have been permeated through different assessment years and this fundamental aspect has stood uncontested then the Revenue cannot be allowed to change its view it is able to demonstrate a change in circumstances in the subsequent assessment year. Held, that the Commissioner's order did not contain a finding to the effect that the stand taken by the Assessee that the units purchased from the Unit Trust of India had actually been physically delivered along with e....
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....will not depart from previous decisions at their sweet will in the absence of material circumstances or reasons for such departure:" (iii] The desirability of following the principle of consistency again came up for consideration before the Hon'ble Delhi High Court in the case of Director of Income-tax (Exemptions) vs. Escorts Cardiac Diseases Hospital Society [2008] 300 ITR 75. In this case exemption ujs.l0(22A) was granted from assessment years 1988-89 to 1994-95. There was no change in facts. The Hon'ble High Court held that on the principle of consistency, exemption cannot be denied for the subsequent assessment years. It is further stated that in recent decision Hon'ble Apex court in case of CIT Vs. J .K. Charitable Trust in Civil appeal No. 1698,1699/2008 vide order date 7/11/2008 has also held on similar line as stated herein above on principle of consistency. (iv) Similar view has been adopted by the Hon'ble Delhi High Court in the case of CIT vs. Dalmia Promoters Developers P. Ltd., [2006] 281 ITR 346. For ready reference, the relevant part of the Heads note is reproduced below: "......For rejecting the view taken for the earlier ....
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.... received by him on birthdays and other occasions were not taxable. Where a fundamental aspect permeating through different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it w01:lld not be appropriate to allow the position to be changed in subsequent years. Since there was no change in the facts and law the amounts were not taxable. [The Supreme Court has dismissed the special leave petition filed by the Department against this judgment see [2011] 336 ITR (St.) 15-Ed. (emphasis supplied) 11.6 The rule of consistency has also been approved by various High Courts in the following cases: (i) CIT vs. Haryana Tourism Corporation Ltd., [2010] 327 ITR 26 (P&H) (ii) CIT vs. Haryana State Industrial Development Corporation Ltd., [2010] 326 ITR 640 (P&H) (iii) CIT vs. Siva Springs, [2008] 304 ITR 24 (Mad.) (iv) CIT vs. Goel Builders, [2011] 331 ITR 344 (All.) (v) CIT' Vs. Hitech Arai Limited 368 ITR 577 (Mad) The relevant part of this judgment is reproduced below from page 587 of the Report: "We find no ju....
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....ement and also give reason for claiming relief u/s 90 of the Income Tax Act, 1961. Query No. (xxix): Please give detailed note on tax credit claimed by the Society in respect of dividend income received from OMIFCO. Query No. (xxx): Explain as to the condition of carrying on business in Oman through PE and the holding in respect of which the dividends are paid is effectively connected with such permanent establishments; and Article 11 (4) of the DT AA is applicable in your case. Please refer Note No. 2 of the notes forming part of computation of taxable income annexed to original return of income of the Society at page 40, wherein the details of claim of deemed tax credit on dividend income received from Oman is elaborated. A copy of the notes forming part of computation is herein again enclosed as Annexure 02 to this letter for ready reference. The Society by virtue of it being a joint venture partner in Oman in Oman India Fertilizer Company SAOC (hereinafter referred as OMIFCO) has received during the year, dividend US$30.2325 equivalent to Indian Rupees of Rs. 143,83,99,800. The dividend was received by the Permanent Establishment (PE....
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....erprise of a Contracting State carries on business in the other Contracting State through a permanent establishment situated therein profits attributed to that permanent establishment to the extent they are attributable directly or indirectly to that permanent establishment may be taxed In the other Contracting State. (e) The Assessee Society has duly filed the Return of Income under the Omani's Income Tax Law by including the said dividend income as part of its total income, copy of the Income Tax Return filed for the year ended March 31, 2010 under the Omani's Income Tax Law along with a copy of the annual accounts of the Branch (PE) and that of OMIFCO, Oman, are enclosed as Annexure 06. (f) The dividend received in Oman by the permanent establishment in Oman of the Assessee Society, therefore, can be taxed only by the Omani Tax Law. However, Royal Decree 68/2000 (copy enclosed as Annexure 07) issued by the Omani Authorities, provides that no tax is leviable on dividends, which a company earns from its ownership of shares in the capital of any other ...................... (not legible) in accordance with the exigencies of public good. This tax exemption is, ....
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....is Rs. 41,44,23,149 (Rs.403025288 plus Rs. 11397861). This may kindly be allowed to the Assessee against the total tax. Further, we wish to inform you that the Omani Tax Authorities have done the Tax assessment vide their order dated 14-12-2008 of the Permanent Establishment of KRIBHCO at Muscat. The Omani Tax Assessment Order indicates that the ".....Dividend income is exempt from tax in accordance with Article 8 (bis)(1) of the Company Tax Law. The tax exemption on dividend is granted with the objective of promoting economic development within Oman by attracting investments." A copy of the Assessment Order of the Omani Tax Authorities as received by us for the Tax Years 2002 to 2006 is enclosed for your kind perusal. Copy of the Assessment Order for year 2007-08 is also enclosed for your kind reference. (Annexure 10) The assessment of the Society for the Assessment Year 2006- 07 was completed u/s 143(3) by order dated 31-12-2008 and by a speaking order, the Assessing Officer has accepted the contention of the Society and has granted credit for the tax that is deemed to have been paid in Oman and the same position has been followed in the Assessment Year 2007- 08, 2008-09....
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....ever, the Ld. PCIT has tried to justify the assumption of jurisdiction under Section 263 of the I.T. Act, 1961 by observing that even if there is application of mind by the Assessing Officer, the PCIT has power under Section 263 to set aside his order for the reason that the powers vested under Section 263 cannot be equated with the requirements of Section 147 of the I.T. Act, 1961. This observation by the Ld. PCIT is devoid of any merit and defies the settled legal position which emerges from a chain of Supreme Court and High Court decisions to which a reference is made infra. The Ld. PCIT has also observed in his order that as per the provisions of para 4 of Article 25 of the DTAA read with Omani Tax Laws, the exemption in respect of dividend is available only for a period of five years which is long over. Obviously, the Ld. PCIT has misinterpreted the relevant provisions as also the letters and clarifications and Royal Decrees issued by Omani Authorities. The exemption in respect of dividend income under the Omani Tax Laws continues even in the Income Tax Law by the Royal Decree No. 28 of 2009. In any case, this is a totally irrelevant point raised by the Ld. PCIT. The disputed ....
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.... committed by the Assessing Officer. It is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer and every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. When an Assessing Officer adopts one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order rejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. The assessee- firm had filed its return of income disclosing a net loss of Rs. 2,777 in the business of purchase and sale of ornaments and jewellery. The Income-tax Officer issued notices under sections 143(2) and 142(1) of the Income-tax Act along with the requirement le....
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....ed queries and the assessee has reiled written submissions / explanation, merely because there is no discussion in the Assessing Officer's order on the relevant issue, it cannot be said that such order becomes erroneous. Similar view has been taken by the Rajasthan High Court in the case of CIT v. Ganpat Ram Bishnoi 296 ITR 292." 13. In the written submissions the assessee-society has also relied on the following cases:- (i) CIT vs. Ashish Rajpal, 320 ITR 674 (Del.) (ii) CIT vs. Hindustan Coco Cola Beverages P. Ltd. 331 ITR 192 (Del.). (iii) CIT vs. Anil Kumar Sharma, 335 ITR 83 (Del.). (iv) CIT vs. R.K. Construction Co. 313 ITR 65 (Guj.). (v) CIT vs. DLF Ltd., 350 ITR 555 (Del.). (vi) CIT vs. Greenworld Corporation, 314 ITR 81 (SC). (vii) CIT vs. Munjal Castings, 303 ITR 23 (P&H.) (viii) Spectra Shares and Scrips Pvt. Ltd. Vs. CIT, 354 ITR 35 (AP). (ix) Cadila Healthcare Ltd. vs. CIT, 51 taxmann.com 255 (Ahmedabad Trib.). (x) CIT vs. P.D. Abraham, 53 taxmann.com 217 (SC). (xi) Sterling Construction & Investments vs. ACIT 374 ITR 474 (Born) (xii) CIT V/s Fine Jewellery (India) Ltd....
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....the income which may be taxed in the Sultanate of Oman. (3) Where a resident of the Sultanate of Oman derives income which, in accordance with the provisions of this Agreement, may be taxed in India, the Sultanate of Oman shall allow as a deduction from the tax on the Income of the resident an amount equal to the income-tax paid in India, whether directly or by deduction. Such deduction shall not, however, exceed that part of the income-tax (as computed before the deduction is given) which IS attributable to the income which may be taxed in India. (4) The tax payable in a Contracting State mentioned in paragraph 2 and paragraph 3 of this Article shall be deemed to include the tax which would have been payable but for the tax incentive granted under the laws of the Contracting State and which are designed to promote economic development. (5) Income which, in accordance with the provisions of this Agreement, is not to be subjected to tax in a Contracting State, may be taken into account for calculating the rate of tax to be imposed In that Contracting State. (emphasis supplied) 15.2 Para - 4 of Article - 25 lays down that the tax payable s....
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....the above subject. Under Article 8 of the Company Income Tax Law of Oman, dividend forms part of the gross income chargeable to tax. The tax law of Oman provides income tax exemption to companies undertaking certain identified economic activities considered essential for the country's economic development with a view to encouraging investments in such sectors. Before the recent amendments to the Profit Tax Law on Commercial and Industrial Establishments, Article 5 of this law provided for exemption of dividend income in the hands of the recipients if such dividends were received out of the profits on which Omani income tax was paid by distributing companies. It meant that Omani income tax was payable by the recipients on any dividend income received out of the exempt profits from tax exempt companies. As a result, investors in tax exempt companies that undertake those activities considered essential for the country's economic development suffered a tax cost on their return on investments. the tax treatment under the above mentioned Article 5 had the negative impact on investments in tax exempt project. The Company Income Tax Law of 1981 was, therefore, rec....
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....nce: "3 - Any form or notification of document issued or published or delivered by the Secretary General in accordance with this Law shall be considered an official document if it carries the name or description of the Secretary General or the responsible officer who is designated by virtue of Paragraph (2) of Article (3) and this shall be whether the name or description is printed, stamped or written." From the above it is clear that any notification/ document issued by the Secretary General has the force of official document. The position clarified in the Omani letter dated 11th December, 2000 is further authenticated by the assessments made in respect of the Permanent Establishment of the Assessee Society under the Omani Tax Laws. In respect of the tax years 2002 to 2006, a common order has been passed under Article 26 (2) (b) of the Income Tax Law of Oman. The opening para of this order reads as under: "We refer to the returns of income and determine the taxable income as under: Kribhco Muscat is a permanent establishment supported by M/s. Krishak Bharati Cooperative Limited, a multi- state cooperative society registered in India. As per the ....
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....sing balance 130,853,189 16. With regard to this new issue, on behalf of the appellant-society it has been strongly contended before us that any directions issued by the learned PCIT on this issue are bad in law and ab initio void for the reason that there is no mention of this issue in the show cause notice and, therefore, there is complete denial of opportunity to the appellant-society, which renders the entire proceedings u/s. 263 as bad in law. It is further contended that even on merits no such addition as directed by the learned PCIT can be made to the total income of the appellant-society to be computed under the provisions of the Income-tax Act. With regard to the merits of this issue the following submissions have been made on behalf of the appellant-society:- "It may kindly be appreciated that the annual accounts of the PE are prepared in accordance with the International Financial Reporting Standards (IFRS). As per the IFRS - 28, the share f PE in the profit/loss in OMIFCO at 25 has to be accounted as income in the Profit & Loss Account of the PE even though such income is neither accrued nor received. The actual income received is only to ....
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....above it is humbly submitted that the directions issued by the Ld. PCIT for bringing to charge of tax the undistributed profit from OMIFCO is not only bad in law but also not warranted even on merits. These directions deserve to be quashed." 11. Ld. Counsel for the Assessee further stated that Ld. PCIT In his order u/s.263, has also directed the Assessing Officer to frame a view with regard to the default of non-furnishing complete and true income or particulars of income on the part of the assessee. Admittedly, this issue does not find any place in the show cause notice issued by the learned PCIT. With regard to this issue the following submissions have been made on behalf of the assessee:- "18. Lastly, the Ld. PCIT has directed the Assessing Officer to frame a view regarding non-furnishing on the part of the Assessee complete and true income or particulars of Income. It is respectfully submitted that such directions are totally illegal and invalid. Firstly, there is no mention in the Show Cause Notice regarding this issue, and secondly, initiation of any Penalty Proceedings under Section 271 of the Income Tax Act, 1961 depends upon the satisfaction of the Assessing Of....
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....earned in Oman. (ii) At the time of original assessment proceedings detailed inquiry letter was issued by the Assessing Officer with regard to tax credit of deemed dividend tax which would have been payable in Oman but for the exemption granted. The assessee had filed detailed replies which were duly considered by the Assessing Officer before allowing tax credit. (iii) Such tax credit was also allowed by the Department in respect of the assessment year 2006- 07 as per the assessment order wherein, a detailed discussion on this point has been made which shows that after proper application of mind the tax credit was allowed in the assessment year 2006-07. Further, such tax credit has been consistently allowed in scrutiny assessments made by the Department right up to the assessment year 2009- 10. Thus, in respect of the assessment years 2010- 11 and 2011-12 the Assessing Officer has only followed the view adopted by the Department in the preceding several assessment years. 14. Keeping in view of the facts and circumstances of the case and the precedents relied upon, the validity of the order passed u/s.263 needs to be considered. As per the admitted position, show cause n....
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....appeal is in consonance with the consistent view adopted by the Department itself in the preceding assessment years. Further, the Assessing Officer has not blindly followed the view adopted in the preceding assessment years but has also independently examined this issue by raising detailed inquiries and after considering the replies filed by the assessee-society. Thus, the view adopted by the Assessing Officer is a possible and plausible view and the Assessing Officer has adopted this view having regard to the well established principles of consistency of approach and also after considering the merits of the claim. In view of the legal position which emerges from the various cases cited above, it is an undisputed legal position that the learned PCIT cannot substitute his view for the view of the Assessing Officer by invoking jurisdiction u/s.263 of the I.T. Act. Therefore, for these reasons also the order passed by the learned PCIT u/s. 263 totally fails to meet the jurisdictional requirements of section 263 of the I.T. Act. Therefore, we have no hesitation in holding that the order passed by the learned PCIT u/s.263 is bad in law for the following reasons:- (i) No opportu....
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....ced (supra). From this letter, the following points emerge:- (a) Under Article-8 of the Omani Tax Laws, dividend forms part of gross income chargeable to tax. (b) As a result, investors in tax exempt companies that undertake activities considered essential for the country's economic development suffered a tax cost which had the negative impact. (c) The Company Income-tax Law of 1981 was therefore amended by Royal Decree No.68/2000 by insertion of a new Article 8 (bis). (d) Thereby the Government of Oman would achieve its main objective of promoting economic development by attracting investments. (e) Tax would be payable on dividend income if not for the tax exemption provided under Article 8(bis). (f) As the introduction of Article 8(bis) is to promote economic developments in Oman, the Indian investors should be able to obtain relief in India under Article 25(4) of the Agreement for Avoidance of Double Taxation. 19. From the above clarifications there remains no doubt regarding the purpose of granting exemption to dividend income. The interpretation of Omani Tax Laws can be clarified only by the highest tax authorities of Oman an....
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....ibuted to the shareholders. Therefore, even under the Omani Tax Laws, the PE offers for taxation only the dividend income actually received and not the total share of the PE in the profits of OMIFCO. On the other hand, books of account of the assessee in India are required to be prepared in consonance with the Indian Accounting Standards. Obviously, the undistributed share of profit reflected in the books of P.E. cannot be said to partake the character of income under the provisions of the Income-tax Act. It is settled position that accounting entries are not determinative of taxability under the Income-tax Act and further only the real income can be brought to the charge of tax. In the present case even the undistributed profits reflected in the books of the P.E. are not brought to the charge of tax under the Omani Tax Laws. In our view having regard to the above mentioned facts the said income by assuming undistributed profit cannot be taxed under the I.T. Act. Therefore, on merits also the directions issued by the learned PCIT on this issue are not justified and the same are hereby vacated. 21. In view of the above, we hold that the impugned order passed by the learned PCIT u....