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2012 (4) TMI 193 - AT - Income TaxTaxability in India of income earned in a foreign countries covered under DTAA, by the assessee who is a resident of India - assessee engaged in providing full range of consultancy, design and engineering services in all fields of telecommunication in India as well as abroad Held that:- If, in the DTAA, an item of income is "may be taxed" in state of source and nothing is mentioned about taxing right of state of residence in convention itself, then state of residence is not precluded from taxing such income and can tax such income using inherent right of state of residence to tax such global income of its resident. Only in the case of phrase "shall be taxed only" used, then only the state of residence is precluded from taxing it. In such cases, where the phrase "may be taxed" used, the state of residence has been given its inherent right to tax. Also, in case of CIT vs PVAL Kulandagan Chettiar (2007 - TMI - 40400 - Supreme Court) it was held that state of residence has right to tax global income of its resident. Since, Residence based taxation is followed in India rendering residents to be taxed on their global income, and non-residents to be taxed only on income sourced inside the country. Therefore, assessee is liable to be taxed on its global income Decided against the assessee. Validity of reopening of assessment beyond 4 years from the end of relevant A.Y excessive deduction u/s 80HHC & 80HHB assessee contending change of opinion Held that:- As per Explanation (2)(c)(iv) to section 147, if excessive loss, depreciation allowance or any other allowance under the act has been computed, it shall be deemed to be an escapement of income. In present case, indirect expenses attributable to the exported trading goods were understated. There was no discussion about deduction u/s 80HHC & 80HHB in assessment order and even there was no working of attributable indirect expenses in Form No. 10CCAC which was vital element for computation of deduction available to the assessee which has not been furnished by the assessee. Therefore, there was a reasonable belief that income has escaped assessment. Further, existence of belief can be challenged by assessee but not the sufficiency of the reasons to belief Decided against the assessee. Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148. Deduction u/s 80HHB - dis-allowance of Rs 8 lacs - Claim of Rs 32.08 crores made and reserves made upto Rs 32 crores only Held that:- Since there is shortfall in reserves , hence conditions laid down in Section 80HHB(3)(ii) are not fulfilled. Thus, dis-allowance is upheld Decided against the assessee. Dis-allowance u/s 80HHC - assessee contending that it is maintaining separate books of account for export business, therefore, indirect expenses relatable to the export goods need not to be worked out as per provisions of section 80HHC(3) Held that:- Administrative expenses will have to be apportioned in the ratio of export turnover to total turnover which have relations with the export business Decided against the assessee.
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