IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED:13/02/2006
CORAM
THE HONOURABLE MR.JUSTICE P.D.DINAKARAN
AND
THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA
Tax Case (Appeal) No.228 of 2003
Commissioner of Income Tax
Tamil Nadu III, Madras .. Appellant
-Vs-
The Ayer Mani's Rubber Estate Ltd.,
Alagappa Road,
Chennai .. Respondent
Appeal under Section 260 A of the Income Tax Act, 1961 against the
order of the Income Tax Appellate Tribunal Madras Bench "A" dated 5.3 .2001 in
I.T.A.3236/MDS/1992. The assessment year involved is 1989-90 .
!For Appellant : Mrs.Pushya Sitaraman
^For Respondent : No appearance
:ORDER
(Order of the Court was made by P.D.DINAKARAN, J,.)
Heard. The appeal is directed against the order of the Income Tax
Appellate Tribunal Madras Bench “A” dated 05.03.2001 in I.T.A.No.3236
/Mds/1992.
2.1. The assessee, is a company deriving income from Plantation
situated in Malaysia. The assessee claimed the income from Malaysia as exempt
and filed income for the assessment year 1989-90 on 29.12.1989 , showing ‘Nil’
income. The assessee did not disclose the foreign income of Rs.34,51,204/- in
view of double taxation agreement between India and Malaysia. The assessing
officer, finding that the assessee’s last year income earned in Malaysia has
been treated as taxable, applied the same to the assessment year in question.
2.2. Aggrieved by the assessment order, the assessee filed an appeal
before the Commissioner of Income Tax (Appeals). The Commissioner of income
Tax (Appeals) allowed the issue in favour of the assessee by following the
decision of the Madras High Court reported in 208 ITR 400 (COMMISSIONER OF
INCOME TAX -vs- VR.S.R.M.FIRM AND OTHERS)
2.3. Aggrieved by the order of the Commissioner of Income Tax (
Appeals), the revenue filed further appeal before the Income Tax Appellate
Tribunal, and the Tribunal, following the decision of this Court in the case
of SRM firm (208 ITR 400), held that the income form Malaysia cannot be taxed
in India and dismissed the appeal. Hence, the present appeal by the Revenue.
4. The issue that arises for consideration in this appeal is whether
the income derived by the assessee from Malaysia can be included in the total
income and taxed in India?
5. In identical facts and circumstances, the Apex Court in
Commissioner of Income Tax (vs) P.V.A.L.Kulandagan Chettiar (267 ITR 654),
held as follows:-
” Where liability to tax arises under the local enactment, the
provisions of Sections 4 and 5 of the Income Tax Act, 1961, provide for
taxation of global income of an assessee chargeable to tax thereunder. But
this is subject to the provisions of an agreement entered into between the
Central Government and the Government of a foreign country for avoidance of
double taxation as envisaged under Section 9 0 to the contrary, if any, and
such an agreement will act as an exception to or modification of sections 4
and 5 of the Income Tax Act. The provisions of such agreement cannot fasten a
liability where the liability is not imposed by a local Act. Where tax
liability is imposed by the Act, the agreement may be resorted to either for
reducing the tax liability or altogether avoiding the tax liability. In case
of any conflict between the provisions of the agreement and the Act, the
provisions of the agreement would prevail over the Act in view of the
provisions of Section 90(2). Section 90(2) makes it clear that ” where the
Central Government has entered into an agreement with the Government of any
country outside India for granting relief of tax, or for avoidance of double
taxation, then in relation to the assessee to whom such agreement applies, the
provisions of the Act shall apply to the extent they are more beneficial to
that assessee”, meaning thereby that the Act gets modified in regard to the
assessee in so far as the agreement is concerned if it falls within the
category stated therein.
When it is intended under the Double Taxation Avoidance Agreement
between India and Malaysia that, even though it is possible for a resident in
India to be taxed in terms of Sections 4 and 5 of the Income Tax Act, 1961, if
he is deemed to be a resident of contracting State where his personal and
economic relations are closer, then his residence in India will become
irrelevant, the Double Taxation Avoidance Agreement will have to be
interpreted as such and would prevail over Sections 4 and 5 of the Act.”
6. The said decision was followed by the Division Bench of this Court
(N.V.BALASUBRAMANIAN AND M.THANIKACHALAM, JJ.) in T.C.A.No.182 of 2 004 dated
15.6.2004.
7. In view of the above conclusion, we do not find any error or
infirmity in the order of the Tribunal and no substantial question of law
would arise for consideration of this Court. Hence, the appeal stands
dismissed. No costs.
Index : Yes
msk.
To:
1.The Assistant Registrar,Income Tax Appellate Tribunal
Madras Bench “A”, Rajaji Bhavan III Floor, Besant Nagar, Chennai-90.
2.The Secretary, Central Board of Direct Taxes, New Delhi.
3.The Commissioner of Income Tax (Appeals),
Tamil Nadu III, Madras
4.The Income Tax Officer, Ward (3), Madras-34.