TaxTMI 
TaxTMI 
2006 (3) TMI 67
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....questions, the appeals have been admitted on the following questions of law: " 1. Whether the Income-tax Appellate Tribunal was justified in holding that dividend income earned by the assessee amounting to Rs. 21,35,766 from a company called Pan Century Edible Oils SDN, BHD, Malaysia is not liable to be taxed in the hands of assessee in India under any of the provisions of Income-tax Act? 2. In view of section S(1)(c) of the Income-tax Act, whether the finding recorded by the Income-tax Appellate Tribunal that income earned out of dividend from the company outside the country is not liable to be taxed under the Act? 3. Whether the Income-tax Appellate Tribunal was justified in law in recording a finding on an issue which was not raised by the assessee either before the Assessing Officer or before the Commissioner of Income-tax (Appeals) but was raised for the first time before the Tribunal and that too in an appeal filed by the Department? 4. Having dismissed the cross-objection filed by the assessee, whether the Tribunal was justified in the proceeding to decide the issue raised by the assessee on the merits in their favour ?" 3. The facts lie in a na....
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.... of learned counsel that law is well-settled that the income accrued or arising outside India is part of the total income of the resident assessee. 6. It takes us to the core question with regard to the taxability of the dividend income in Malaysia of the assessee-company in the light of the Agreement for avoidance of double taxation of income and prevention of fiscal evasion of tax between the Government of India and the Government of Malaysia. Though learned counsel has submitted that no question has been formulated with regard to the effect and applicability of the said notification vis-a-vis the provisions of the Act, even otherwise, the said notification having already been construed by the Madras High Court in CIT v. Vr. S. R. M. Firm [1994] 208 ITR 400, and the decision having already been affirmed by the apex court in CIT v. P. V. A. L. Kulandagan Chettiar [ 2004]267 ITR 654, the question does not survive for consideration. Though the Department has not raised any question with regard to the construction, applicability and effect of the said notification in relation to the dividend income accruing in Malaysia to which the notification applies and its effect when the ....
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....dia and Malaysia that tax payable in Malaysia shall be allowed as credit against the tax payable in respect of such income. 9. It was observed by their Lordships that article XI of the agreement provided that dividends paid by the company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in the first mentioned Contracting State. Considering the submission of counsel, it was observed that section 90 enables the Government of India to enter into an agreement with the Government of any country outside India for the granting of relief in respect of income on which income-tax has been paid under the Indian Act and the other country outside India and for the avoidance of double taxation of income under the Act, and under the corresponding law in force in the other country. Tax treaties are for that matter considered to be mini legislations containing themselves all the relevant aspects or features which are at variance with the general taxation laws of the respective countries. Such variations are -in some cases in addition to the existing local tax laws and in other cases in lieu thereof. That being the legal position, the exposi....
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....nd 9 of the Income-tax Act, 1961, deal with the same. But at the same time, article XI of the a provides that dividends paid by a company Which is a resident of a Contracting State may be taxed in the first mentioned contracting state. In this view of the matter, their Lordships answered the question of law in the affirmative and held that the dividend income in Malaysia cannot be subjected to tax in India in view of the said agreement. 11. The Department had filed these appeals contending that SLP against the said decision was pending before the apex court. Learned counsel for the asessee has invited our attention to the decision of the Supreme Court in CIT v. P. V. A. L. Kulandagan Chettiar [2004] 267 ITR 654 in which while considering the effect of the a between India and Malaysia the decision in CIT v. Vr. S. R. M. Firm [1994] 208 ITR 400 (Mad) was cited with approval 12. In the above case, the assessee carried on the business of rubber plantation in Malaysia and it was held that he did not have a permanent establishment in India. The tax officer held that the income derived by the assessee was assessable in India and brought the same to tax against which an appea....
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.... No. 112 of 2003 in which reference has been made to the decision of the hon'ble Madras High Court in CIT v. Vr. S. R. M. Firm [1994]208 ITR 400, but he has erroneously stated that it was held in the said decision that the said dividend is taxable in India under sections 8 and 9 of the Income-tax Act, 1961, though the decision holds to the contrary. Learned counsel, therefore, contends that the fact that the said decision was cited bears testimony to the fact that contention was raised with regard to the non-taxability of the dividend earned in Malaysia in India under the agreement in question. Learned Counsel has further submitted that in the appeals filed by the respondents, they have clearly raised the questions that the Tribunal was not justified in dismissing the cross-objection filed by the assessee on the ground of limitation specially when it took the view that the dividend income was not taxable in India. Attention has also been invited to rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963. The said rule reads as under "27. Respondent may support order on grounds decided against him.- The respondent, though he may not have appealed, may support the order appealed ....