TaxTMI 
TaxTMI 
2023 (11) TMI 504
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....al. 3. Necessary cost be awarded to the assessee." 3. Succinctly, the fact as culled out from the records is that the Assessee is a resident of India deriving foreign income from two sources i.e. interest from deposit in bank account at Australia and rental income from two properties situated at 26, Shirley St, Australia and 9, Blenheim Avenue Australia respectively. She filed her return of income on 24.08.2018 (PB 2-4) declaring total income of Rs. 6,57,090/- which includes interest income from bank deposit in Australia of Rs. 7,37,194/-. The rental income from Australian property was not included in the Indian income tax return in view of Article 6 of DTAA and in respect of the rental income, tax of 4698.16 Australian dollars was paid in the income tax return filed in Australia (PB 5- 14). 3.1 In the assessment proceeding AO observed that assessee in her return of income has not shown Income from two house properties situated at Australia considering Article 6 of DTAA with Australia. However, Article 6 only states that the income of the real estate "may" be taxed in the contracting state in which that property is situated and it does not preclude the taxation of th....
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....as aforesaid, the profits of the enterprise may be taxed in the other State but only so much of them as is attributable to that permanent establishment. Article 8- Ships and Aircraft (PB 20) 1. Profits from the operation of ships or aircraft, including interest on funds connected with that operation, derived by a resident of one of the Contracting States shall be taxable only in that State. 2. Notwithstanding the provisions of paragraph (1), such profits may be taxed in the other Contracting State where they are profits from the operations of ships or aircraft confined solely to places in that other State. Article 10- Dividends (PB 21) 1. Dividends paid by a company which is a resident of one of the Contracting States for the purposes of its tax, being dividends to which a resident of the other Contracting State is beneficially entitled, may be taxed in that other State. 2. Such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident for the purposes of its tax, and according to the law of that State, but the tax so charged shall not exceed 15 per cent of the gross amount of t....
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....ited Kingdom. The AO has brought the amount of the rental income to tax notwithstanding the fact that the assessee has declared rental income from properties situated in England and Australia. 7. While making the addition, the AO relied on the Article 6(1) of DTAA with UK which reads "income from immovable property may be taxed in contracting state in which such property situated". The AO referred to the Notification No . 91/2008 dated 28.08.2008 and construed the words "may be taxed" as "shall be taxed" 8. We have gone through the provisions of Section 90(1) and Section 90(3), and the notification of the CBDT and impact of MLIs. ......... 9. Thus, we find that in the absence of an express provision, the right of the resident country to tax its residents cannot be taken away under the DTAA. Therefore, the expression "may be taxed" cannot be construed to mean "shall be taxable only in the resident state" , unless it is expressly stated . Provisions of Section 90(1)(a)(i) is clearly applicable to the facts of the case . 10. In the result, both the appeals of the assessee are allowed." In the above decision, one of the properties i....
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.... other Contracting State), art. 17 (director's fees), art. 18 (income of artistes and athletes), art. 20 (Government service) which provide that such income may be taxed in the other Contracting State, i.e., State of income source. The third category includes art. 11 (dividends), art. 12 (interest), art. 13 (royalty and fee for technical services), art. 14 (capital gains on other properties) and art. 22 (other income) which provide that such income may be taxed in both the Contracting States. Intention of parties to the DTAA is very clear. Wherever the parties intended that income is to be taxed in both the countries, they have specifically provided in clear terms. Consequently, it cannot be said that the expression "may be taxed" used by the contracting parties gave option to the other Contracting States to tax such income. The contextual meaning has to be given to such expression. If the contention of the Revenue is to be accepted then the specific provisions permitting both the Contracting States to levy the tax would become meaningless. The conjoint reading of all the provisions of articles in Chapter III of Indo-Canada treaty leads to only one conclusion that by using the expr....
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....ided in Article 8, 10 & 12. Thus the rental income can be taxed only in the contracting state in which that property is situated and the same cannot be taxed in the contracting state of which the person is resident. In this connection reliance is placed on the decision of Hon'ble ITAT Delhi Bench in case of Natasha Chopra Vs. DCIT (2022) 196 ITD 185 and Hon'ble ITAT, Mumbai Bench in case of Ms. Pooja Bhatt Vs. DCIT (2009) 22 DTR 458. 6.1 In this appeal the ld. AR of the assessee submitted a detailed paper book and the same is extracted here in below : S. No. Particulars Pg No. Filed before AO/CIT(A) 1 Copy of Index of Paper Book filed before ld. CIT(A) 1 CIT(A) 2 Copy of return filed in India 2-4 Both 3 Copy of Form No. 67 filed in Australia 5-14 Both 4 Copy of Form No. 67 filed in India 15-16 Both 5 Copy of Article 6,7,8 & 10 of DTAA between India and Australia 17-21 Both 6 Copy of decision of Hon'ble ITAT Delhi Bench in case of Natasha Chopra vs. DCIT(2022) 196 ITD 185 22-25 Both 7 Copy of decision of Hon'ble ITAT Bench in case of Ms Pooja Bhatt vs. DCIT (2009) 22 DTR-458 26-31 Both....
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....proceeding ld. AO observed that assessee in her return of income has not shown Income from two house properties situated at Australia considering Article 6 of DTAA with Australia. Thus, the assessee was confronted on the issue, the assessee vide reply dated 25.12.2020 submitted that as per section 9 of the Act income arising from any property situated in India shall be deemed to income accrue or arise in India. She further submitted that as Article-6 of DTAA with Australia specifically provides the income from real estate property may be taxed in the contracting state in which property is situated. Thus, property which is located outside India and let outside India is not liable for tax in India. Thereby the assessee has paid tax on rental income in Australia itself and not in India. 8.3 The ld. AO did not accept the contention of the assessee stated in the order that Article 6 of DTAA only states that the income from real estate property may be taxed in the contracting state and it does not preclude the taxation of the same in the other contracting state in respect of which the assessee is a resident with relevant credit for tax paid in the contracting state where the property ....
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....een brought to tax in the statute from the assessment year 2004-05 there is a clear departure from the earlier position wherein the courts have interpreted the expression "may be taxed" in as much as now the central government which is one of the contracting state has been empowered to assign meaning to the various terms and expressions and used in the agreement. The relevant part of the detailed discussion relied upon by the ld. DR in the case of Bank of India Vs. ACIT [ 122 taxmann.com 247 ] is reiterated here in below : 2. These appeals raise two interesting issues, with wider ramifications, for our adjudication- first, whether or not the income of the assessee bank from its foreign branches, amounting to Rs. 1,408.32 crores, is required to be excluded from its income taxable in India; and, second, whether or not the assessee bank is liable to subjected to Minimum Alternate Tax under section 115 JB, and, if so, whether the income of the foreign branches, amounting to Rs. 1,408.32 crores, and, provision for bad doubtful debts amounting to Rs. 5,359.64 crores in required to be excluded from the computation of book profits computed under section 11JB of the Act. Let us tak....
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....idance Agreements with all these countries, the right to tax the profits of these foreign branches exclusively vests with the respective tax jurisdictions and these profits cannot be taxed in India. This plea was negated by the Assessing Officer on the ground that, under the scheme of the law as it prevails- particularly in the light of the provisions of section 90(3) read with notification no SO 2123(E) dated 28th August 2008, entire global income of an Indian resident assessee is to be taxed in India and that where a DTAA provides that "any income of a resident of India 'may be taxed' in the other country, such income shall be included in his total income chargeable to tax in India, in accordance with the provisions of the Income-tax Act, 1961, and relief shall be granted in accordance with the method of elimination or avoidance of double taxation provided in such agreement". Aggrieved, assessee carried the matter in appeal before the CIT(A) but without any success. The assessee is not satisfied and is in further appeal before us. 5. Learned counsel's contention, as articulated in the written note filed before us, is that the issue in appeal is covered, in fa....
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....this issue was decided in favour of the assessee by the coordinate benches, this issue is now covered against the assessee, by a rather recent coordinate bench decision in the case of Technimont (P.) Ltd. v. Asstt. CIT [2020] 116 taxmann.com 996/184 ITD 474 . Learned counsel frankly submits that the reasoning adopted by those coordinate benches, in the light of this recent decision, does not hold good, and he has nothing to say on the same on the same-except for one new reason which we will take up a little later. In the case of Technimont (P.) Ltd. (supra), the coordinate bench, speaking through one of us (i.e. the Vice President), has, inter alia, observed, and we are in considered agreement with these observations, as follows: "4. To adjudicate on the issue on merits, only a few undisputed material facts need to be taken note of. The assessee before us is an Indian company with branch offices in UAE and Qatar. The assessee has earned profits aggregating to Rs. 11,91,18,391 in these branches, which, for the purposes of the provisions of the respective tax treaties, constitute permanent establishments. The claim of the assessee, as noted by the DRP at page 10, is that "th....
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..... Dy. CIT, and vice versa [IT Appeal Nos. 5977 and 6016 (Mum.) of 2011, order dated 26-7-2017] wherein it has been held that the income of the foreign branches, covered by tax treaties with respective jurisdictions, is to be excluded from total income of the assessee and is to be held as not taxable in India. It is submitted that this decision is a binding judicial precedent and it is not open to us to deviate from the stand so taken by the coordinate bench. When learned counsel's attention was invited to the provisions of Section 90(3) read with notification no. 91/2008 dated 28th August 2008, and impact of this legal position on the claim of the assessee, he submits that section 90 was re-enacted with effect from 1st October 2009, and the notifications issued prior to re-enacted section 90 will not hold good in law. In support of this proposition, our attention is invited to a coordinate bench decision in the case of Essar Oil Ltd. v. Addl.CIT [2014] 42 taxmann.com 21 wherein it is said to have been held, in paragraph no. 76, that notifications issued under earlier section 90 shall hold good till 1st October 2009. As a corollary to this observation, according to the learned c....
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....r the terms of the agreement. The AO is directed to verify the total income of the UAE branch and reduce the same from assessee's total income. The ground of objection is, accordingly, accepted. 9.2 Similar views have been taken in the assessee's case by the DRP during the assessment year 2012-13. 7. Undoubtedly, as a result of Hon'ble Supreme Court's judgment in the case of PAVL Kulandagan Chetttiar's case (supra), the legal position was that once an income is held to be taxable in a tax jurisdiction under a double taxation avoidance agreement, and unless there is a specific mention that it can also be taxed in the other tax jurisdiction, the other tax jurisdiction was denuded of its powers to tax the same. To that extent, the worldwide basis of taxation in the scheme of the Indian Income-tax Act was no longer applicable in a situation provisions of a double taxation avoidance agreement entered into under section 90 apply. That was the scheme of law, as evident from the following observations, as settled by Hon'ble Supreme Court: 13. We need not to enter into an exercise in semantics as to whether the expression "may be" will mean....
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....n a situation provisions of a double taxation avoidance agreement entered into under section 90 apply. The law laid down by the Hon'ble Supreme Court in binding on us under Article 141 of the Constitution of India. The prevailing legal position, therefore, is that once an income is held to be taxable in a tax jurisdiction under a double taxation avoidance agreement, and unless there is a specific mention that it can also be taxed in the other tax jurisdiction, the other tax jurisdiction is denuded of its powers to tax the same. To that extent, the worldwide basis of taxation in the scheme of the Indian Income-tax Act is no longer applicable in a situation provisions of a double taxation avoidance agreement entered into under section 90 apply. 9. The development of law, however, did not stop at that. 10. It may be recalled that, with effect from 1st April 2004, a new sub-section 3 was inserted in Section 90, and this new sub-section provided that "(a)ny term used but not defined in this Act or in the agreement referred to in sub-section (1) shall, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the agreement, ha....
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....ndagan Chettiar (supra) still holds good in law. In support of this proposition, learned counsel for the assessee relies upon an observation by the coordinate bench, in the case of Essar Oil Ltd. (supra) to the effect that "We are, therefore, of the considered view that the substitution of Section 90, which has come into effect from 1st April 2004, and notification issued therein shall continue to hold at least upto 1st October 2009". By implication, therefore, according to the learned counsel, the notification issued under old section 90(3) will not hold good in law after 1st October 2009, unless such notification is reissued on or after 1st October 2009. 13. The argument of the learned counsel is only fit to be noted and rejected. It is only elementary that merely because a section is amended or even substituted, whether by repeal of the legislation itself or by amendment in the legislation, the notifications, circulars and instructions issued therein do not cease to hold good. Section 297(2)(k) of the Income-tax Act, 1961, specifically provides that notwithstanding the repeal of Income-tax Act, 1922, "any agreement entered into, appointment made, approval given, recogni....
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....that profit from the business of livestock and poultry which enjoyed total exemption under section 10(27) of the Act from Assessment Years 1964-65 to 1975-76 became partially exempt by way of deduction on fulfilment of certain conditions." (At para 12) 35. For all the aforesaid reasons, we are therefore of the view that on omission of section 280ZA and its re-enactment with modification in section 54G, section 24 of the General Clauses Act would apply, and the notification of 1967, declaring Thane to be an urban area, would be continued under and for the purposes of section 54A. 14. When such are the views of Hon'ble Supreme Court in respect of validity of notifications in respect of amendment in law by re-enactment of the statutory provisions under the Income-tax Act, in which these provisions are of similar nature though by way of different provisions, it is futile to argue that when reenactment of law has exactly the same provisions, so far as the related notification is concerned, the mere fact of re-enactment of law will be fatal to the notification. As regards learned counsel's reliance on observations made by a coordinate bench, in the case of Essar....
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....dent. As a matter of fact, when subsequent assessment years of this very assessee came up for consideration of another bench, the said precedent was not followed and, vide order dated 30th November 2018, it was observed that "the decision of the Hon'ble High Court in assessee's own case pertained to the assessment years 2001-01 and 2003-04 and the Hon'ble High Court never had any occasion to examine the taxability of income of foreign branches in India keeping in view provisions of section 90(3) read with the Government notification dated 28th August 2008" and that " we are unable to accept the submission of the learned authorised representative that the issue is covered earlier decisions of the Tribunal". The assessee, therefore, does not derive any benefit from this legal precedent relied upon. All other judicial precedents hold good in respect of the pre-amendment law, but then the legal position, as analysed above, has changed, and, under the changed legal position, these judicial precedents do not hold good. As regards the DRP decisions for the immediately two preceding assessment years, we have noted that the post amendment legal position was not even brought to t....
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....fficer indicates or explains anything, it explains the anxiety of the assessee to go back to the assessment stage on this issue. We are, however, not inclined to follow the plan so laid out. 18. In the light of the above discussions, as also bearing in mind entirety of the case, ; we reject the claim of the assessee on merits. No matter how tempting is it to get a quick disposal by remitting the matter to the assessment stage, as the matter was not adjudicated on merits at that stage, when, in our considered view, quite clearly it is a patently inadmissible claim, we have to hold so and thus decline to remit it to the assessment stage." 7. Learned counsel has shown, in accepting the fact that even though the issue is covered in favour of the assessee by earlier decisions of the coordinate benches, these coordinate bench decisions cease to be binding judicial precedents inasmuch as reasoning adopted therein does not hold good any longer in the light of the decision in the case of Technimont (P.) Ltd. (supra), admirable grace. It is not clear to us whether this approach is to preempt a detailed discussion on merits of the matter, or whether this approach is indeed b....