TMI Blog2006 (3) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... rapti Trading and Investment Ltd. Since all these appeals raise similar questions, reference is being made to the facts contained in I. T. A. No. 96 of 2003. In so far as the appeals of the assessees are concerned, being appeals from Serial Nos. 14 to 26, the facts have been taken from I. T. A. No. 112 of 2003 which are common to all appeals. 2. Though the appeals filed by the Department have raised a large number of questions, the appeals have been admitted on the following questions of law: " 1. Whether the Income-tax Appellate Tribunal was justified in holding that dividend income earned by the assessee amounting to Rs. 21,35,766 from a company called Pan Century Edible Oils SDN, BHD, Malaysia is not liable to be taxed in the hands of assessee in India under any of the provisions of Income-tax Act? 2. In view of section S(1)(c) of the Income-tax Act, whether the finding recorded by the Income-tax Appellate Tribunal that income earned out of dividend from the company outside the country is not liable to be taxed under the Act? 3. Whether the Income-tax Appellate Tribunal was justified in law in recording a finding on an issue which was not raised by the assessee eit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is as to whether in the face of the agreement covered by the provisions of section 90 of the Income-tax Act, the income accruing outside the country made taxable only in the country where the income is earned, can be taxed in India. Under these circumstances, question No. 2 raised by the Department does not require any answer in the facts and circumstances of the present case and in view of the concession of learned counsel that law is well-settled that the income accrued or arising outside India is part of the total income of the resident assessee. 6. It takes us to the core question with regard to the taxability of the dividend income in Malaysia of the assessee-company in the light of the Agreement for avoidance of double taxation of income and prevention of fiscal evasion of tax between the Government of India and the Government of Malaysia. Though learned counsel has submitted that no question has been formulated with regard to the effect and applicability of the said notification vis-a-vis the provisions of the Act, even otherwise, the said notification having already been construed by the Madras High Court in CIT v. Vr. S. R. M. Firm [1994] 208 ITR 400, and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment of assessing the income derived in Malaysia in all cases, that the right under section 5(1) (c) of the Act to tax a resident on his global income cannot be denied to the State and that the object of the agreement was only to eliminate double taxation In the above context, it was contended that it was only in cases where it was shown that the same income had been subjected to tax both in India and Malaysia that tax payable in Malaysia shall be allowed as credit against the tax payable in respect of such income. 9. It was observed by their Lordships that article XI of the agreement provided that dividends paid by the company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in the first mentioned Contracting State. Considering the submission of counsel, it was observed that section 90 enables the Government of India to enter into an agreement with the Government of any country outside India for the granting of relief in respect of income on which income-tax has been paid under the Indian Act and the other country outside India and for the avoidance of double taxation of income under the Act, and under the corresponding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of difference which would per se render the commentaries on the Model Convention Wholly inapplicable and expose the unreasonableness and futility in seeking to apply the same as a guide for interpretation and construction of the articles in the agree under Consideration 10. It was further observed that as far as the taxability of dividends income is concerned the provisions of sections 8 and 9 of the Income-tax Act, 1961, deal with the same. But at the same time, article XI of the a provides that dividends paid by a company Which is a resident of a Contracting State may be taxed in the first mentioned contracting state. In this view of the matter, their Lordships answered the question of law in the affirmative and held that the dividend income in Malaysia cannot be subjected to tax in India in view of the said agreement. 11. The Department had filed these appeals contending that SLP against the said decision was pending before the apex court. Learned counsel for the asessee has invited our attention to the decision of the Supreme Court in CIT v. P. V. A. L. Kulandagan Chettiar [2004] 267 ITR 654 in which while considering the effect of the a between India and Mala ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the assessee. 15. Coming to questions Nos. 3 and 4, whether the issue could be raised by the assessee before the Income-tax Appellate Tribunal for the first time and having dismissed the cross-objection, the Income-tax Appellate Tribunal could proceed to give a finding on the same, learned counsel for the assessee has invited our attention to the decision of the CIT Appeal Ex./C in I. T. A. No. 112 of 2003 in which reference has been made to the decision of the hon'ble Madras High Court in CIT v. Vr. S. R . M. Firm [1994]208 ITR 400, but he has erroneously stated that it was held in the said decision that the said dividend is taxable in India under sections 8 and 9 of the Income-tax Act, 1961, though the decision holds to the contrary. Learned counsel, therefore, contends that the fact that the said decision was cited bears testimony to the fact that contention was raised with regard to the non-taxability of the dividend earned in Malaysia in India under the agreement in question. Learned Counsel has further submitted that in the appeals filed by the respondents, they have clearly raised the questions that the Tribunal was not justified in dismissing the cros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in dismissing the cross-objection filled by the appellant (assessee) on the ground of limitation and if so, whether such finding is sustainable in law? (ii) Having considered the case of the assessee on the merits and recorded a categorical finding on the merits of the case to the effect that dividend income received from Pan Malaysia cannot be taxed in India, did it not result in allowing the cross-objection so submitted by the appellant /assessee ? (iii) Having held in favour of the assessee that the dividend income in question is not taxable in the hands of assessee, was it not necessary for the Tribunal to have further recorded the finding that issue relating to grant of credit Sought by the assessee has become redundant and hence need not be gone into? (iv) Having decided the issue in favour of the assessee, whether the Tribunal was justified in then allowing the appeal filed by the Department or the Tribunal should have then either dismissed the appeal filed by the Revenue or should have held it to have rendered infructuous in the light of a categorical finding recorded in favour of the assessee ? 17. Though in view of our answer to the questions formula ..... X X X X Extracts X X X X X X X X Extracts X X X X
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