TaxTMI 
TaxTMI 
TaxTMI 
2008 (10) TMI 251
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....held by him that her entire global income was taxable under the provisions of the IT Act, 1961 ('the Act'). It was further observed by him that the assessee was entitled to relief under art. 23(3)(a) of the said treaty. However, the AO allowed deduction under s. 80RR of the Act. On appeal, the CIT(A) confirmed the order of the AO. Aggrieved by the same, the assessee is in appeal before the Tribunal. 3. The learned counsel for the assessee has assailed the order of the CIT(A) by contending that by virtue of the provisions of art. 18 of the Indo-Canada treaty, the income derived by an artiste or an athlete by performing their shows/activities in Canada cannot be taxed in India since art. 18 permits only the other Contracting State, i.e., the source country to tax such income. In support of this proposition, he relied on the decision of the Hon'ble Supreme Court in the case of CIT vs. P.V.A.L. Kulandagan Chettiar (Dead) Through LRs (2004) 189 CTR (SC) 193 : (2004) 267 ITR 654 (SC) as well as the recent unreported decision in the case of Dy. CIT vs. Torqouise Investment & Finance Ltd. [since reported at (2008) 215 CTR (SC) 209-Ed.] copy of which is placed on record. He has also relied....
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.... tax could be levied by both countries. Regarding the judgment of the Supreme Court, it was submitted by her that Indo-Malaysian treaty considered by the apex Court came into effect from 1st April, 1973 when OECD Commentary was not in existence and, therefore, the Court refused to look into the said commentary. However, in the present case, the OECD Commentary is very much in existence at the time of agreement between the two countries and, therefore, the provisions of treaty should be understood as per the OECD Commentary. 5. Rival submissions have been considered carefully. Admitted facts are that-(i) the assessee is a resident of India, (ii) she is an artiste who performed the entertainment show in Canada in the year under consideration for which she was paid US $ 6,000 equivalent to Indian Rs. 1,86,000, (iii) tax of 900 US Dollars was deducted at source in Canada. There is also no dispute that as per the domestic law, the assessee is liable to pay tax on its entire global income. In view of the above facts, the question arises whether liability to pay tax under the domestic law can be avoided in view of the provisions of the art. 18 of the Indo-Canada treaty which reads as und....
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....orqouise Investment & Finance Ltd. 7. After giving our due consideration to the above rival contentions, we are of the humble view that income derived by the assessee from the exercise of her activity in Canada is taxable only in source country, i.e., Canada for the reasons given hereafter. The scheme of taxation of income is contained in Chapter III of DTAA/Indo-Canada treaty. On an analysis of various articles contained in Chapter III, we find that the scheme of taxation is divided in three categories. The first category includes art. 7 (business profits without PE in the other State), art. 8 (air transport), art. 9 (shipping), art. 14 (capital gains on alienation of ships or aircrafts operated in international traffic), art. 15 (professional services), art. 19 (pensions) which provide that income shall be taxed only in the State of residence. The second category includes art. 6 (income from immovable property), art. 7 (business profits where PE is established in other Contracting State), art. 15 (income from professional services under certain circumstances), art. 16 (income from dependent personal services where employment is exercised in other Contracting State), art. 17 (dir....
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....i.e., the cases where the income may be taxed in both the countries. Hence, the cases falling under the first or second categories would be outside the scope of art. 23 since income is to be taxed only in one State. 9. Reliance has also been placed by the Revenue on the Commentary by Klause Vogel at p. 971. It is now the settled legal position that commentaries can be looked into as a guiding factor only where the language of the treaty is ambiguous. Reference can be made to the decision of the Supreme Court in the case of P.V.A.L. Kulandagan Chettiar (Dead) Through LRs. In the present case, we have found, that intention of the contracting parties is very much clear from the treaty itself. Further, the commentaries are not binding on Courts since the same are of persuasive value or indicative of contemporaneous thinking. The parties to the agreement are always at liberty to deviate from the same. Even assuming that the commentary supports the stand of the Revenue, the same cannot be accepted since parties to the agreement had deviated. from the same clearly indicating their intention in the treaty itself. 10. The view taken by us also stands fortified by the decision of Madras Hi....
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....again reached the Supreme Court and the apex Court has affirmed the view of the Hon'ble Madhya Pradesh High Court following its earlier decision in P.V.A.L. Kulandagan Chettiar (Dead) Through LRs. Therefore, in our view, the decision of the Supreme Court cannot be distinguished for the reasons given by the AAR in the case of S. Mohan, In re. 11. Similar issue also arose before the Hon'ble Karnataka High Court in the case of CIT vs. R.M. Muthaiah (1993) 110 CTR (Kar) 153 : (1993) 202 ITR 508 (Kar). In that case also the assessee who was resident in India had earned income in Malaysia and claimed the same as exempt from tax in India in view of DTAA between India and Malaysia. The claim of the assessee was rejected by the ITO but was accepted by the Tribunal. Before the High Court. the counsel for the Revenue submitted that by virtue of cl. (1) of art. 6 of the DTAA r/w s. 5 of the IT Act, 1961, it was clear that both the Government of India as well as the Government of Malaysia could levy the tax on such income and if so, cl. (2)(a) of art. 22 would govern the assessee's case for allowing the credit of tax paid in Malaysia. Such contention of the Revenue was rejected by the High Cou....