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2015 (11) TMI 1450 - AT - Income TaxBusiness of plantations in Malaysia - whether there was a permanent establishment in India? - whether plantation income received from Malaysian cannot be taxed in India? - Held that:- Admittedly, a similar issue was considered by the Supreme Court in the case of PVRM Kulandayan Chettiar (2004 (5) TMI 8 - SUPREME Court) wherein it was held that business income arising out of rubber plantations in Malaysia cannot be taxed in India because of closer economic relations between the assessee and Malaysia which determines the fiscal domicle of the assessee in terms of Article 4 of the DTAA between India and Malaysia; Being so, the Assessing Officer not justified in treating the assessee having permanent establishment in India. In Article 5(2)(g) the term "permanent establishment" shall include especially "a farm or plantation". In this case, the plantation in Malaysia would be the permanent establishment through which the business is carried on by the assessee and applying the test of permanent establishment the income from the plantation would be taxable only in Malaysia and not in India. The assessee already filed its return of income and the return filed for all these assessment years which was kept in record. Accordingly, in our opinion the order of the Commissioner of Income Tax (Appeals) is to be confirmed. - Decided in favour of assessee. Disallowance of expenditure - according to the assessee the said amount was incurred by the Malaysain branch of the company and the expenditure incurred by the head office of the company at Chennai was ₹ 15,65,918/- only which is allowable as income from business/other sources - Held that:- Under section 57 only expenditure incurred in connection with earning of income was allowable as deduction. The assessee admitted that the entire income is by way of interest from the bank deposits. It was seen that the expenditure made by the assessee towards salary, remuneration, commission, building maintenance etc, these expenses have no nexus with earning of interest on bank deposits and cannot be allowed as deduction u/s.57 of the Act. Further, the assessee made a plea before us that expenditure at head office at ₹ 15,65,918/- instead of ₹ 43,35,061/-. In our opinion, the Assessing Officer already brought on record the total expenditure at ₹ 43,35,061/- as recorded in earlier para. Being so, the contention of assessee counsel is devoid of merit as it is not based on any evidences. Accordingly, this ground of the appeal of the assessee is rejected Addition being ‘exchange rate fluctuation’ - Held that:- The assessee admittedly received the above amount on account of exchange rate fluctuation which is revenue receipt and the same to be liable to be taxed and it cannot be considered as notional entry Accordingly, this ground of the appeal of the assessee is dismissed. Reopening of assessment - Held that:- In the absence of any averment that the assessment is sought to be reopened by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the relevant assessment year, the very initiation of proceedings under section 147 by issuance of notice under section 148 after expiry of four years from the end of relevant assessment year is bad and cannot be sustained. - Decided in favour of assessee
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