TMI Blog2016 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the material on record are that the assessee filed its return of income for the assessment year 2005-06 on 29.10.2005 declaring a total income ₹ 9,15,250/-. For the assessment year 2006-07, the assessee filed its return of income 29.10.2005, declaring a total income of ₹ 13,77,120/-. Both the returns were processed under Section 143(1) of the Income-Tax Act. Alleging that the income chargeable to tax has escaped assessment, notices have been issued under Section 148. 3. According to the appellant, the assessee has deliberately kept away the income of Malaysian Plantation from Indian Taxation Laws, when the company affairs are controlled in India. Regarding Taxation of Malaysian Income from India, the assessee has raised two facts for consideration, viz., (a) Income from Penang branch of Malaysian Plantation is income derived from plantation in Malaysia and immovable property at Malaysia, and (b) As per article 5(g) of the Double Taxation Avoidance Agreement (In short, DTAA ), the term permanent establishment shall be deemed to include Farm or Plantation. 4. Referring to Article V(3)(e) of the existing DTAA between India and Malaysia, the appellant has c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60,224/- and ₹ 55,92,897 for the assessment years 2005-06 and 2006-07 respectively, made by the Assessing Officer in his re-assessment order, dated 30.03.2013 under Income from business (Malaysian income) . He further submitted that the Tribunal ought to have appreciated the fact that the assessee has deliberately kept away the income of Malaysian Plantation from Indian Taxation Law, when the company affairs are controlled in India. He placed reliance on Article V(3)(e) of the existing DTAA between India and Malaysia. Heard the learned counsel for the appellant and perused the materials available on record. 7. Before adverting to the merits of the case, let us extract the Articles V and VI of the DTAA between India and Malaysia, Article V Permanent Establishment: 1. For the purposes of this Agreement, the term permanent establishment means a fixed place of business in which the business of the enterprise is wholly or partly carried on. 2. The term permanent establishment shall include especially: a. a place of management; b. a branch; c. an office; d. a factory; e. a workshop; f. a warehouse; g. a mine, oil well, quarry or ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erchandise for the enterprise; or b. he maintains in the first-mentioned Contracting State a stock of goods or merchandise belonging to the enterprise from which he regularly fills orders on behalf of the enterprise. 3. An enterprise of one of the Contracting States shall not be deemed to have a permanent establishment in the other Contracting State merely because it carries on business in that other Contracting State through a broker, general commission agent or any other agent of an independent status, where such persons are acting in the ordinary course of their business. 4. The fact that a company which is a resident of one of the Contracting States controls or is controlled by a company which is a resident of the other Contracting State or which carries on business in that other Contracting State whether through a permanent establishment or otherwise shall not of itself constitute either company a permanent establishment of the other. ARTICLE VI Income from Immovable Property: 1. Income from immovable property may be taxed in the Contracting State in which such property is situated. 2. The term immovable property shall be defined in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an income from immovable property. Disposal of the property or the capital asset itself is in our view as much a form or method of use of the immovable property as such, and the words direct use........ or use in any other form are sufficiently wide enough to include within its scope the transfer, sale or exchange of the property. As held by the apex court in the decision in Sevantilal Maneklal Sheth v. CIT [1968] 68 ITR 503, the profits and gains which arise from the sale of the asset would arise or spring from the asset, although the operation by which the profits or gains is made to arise out of the asset is the operation of the sale and consequently, there is no warrant for the submission that the capital gain is not income arising from the use of the assets. The provisions of article VI alone would apply and govern the assessment of capital gains also derived from the immovable property situated at Malaysia. 9. In CIT v. P.V.A. Kulandagan Chettiar reported in 2004 (267) ITR 654 (SC), the Hon'ble Supreme Court, at Paragraph 12, held as follows: 12. The immovable property in question is situate in Malaysia and income is derived from that property. Further, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the revenue. Decision of the ITAT, Chennai, following the judgment of the Hon'ble Supreme Court, which has considered the significance of DTAA entered between India and Malaysia and notified in G.S.R.No.667(E), cannot be said to be erroneous, warranting interference. 13. Revenue is not able to distinguish the decision of the Hon'ble Supreme Court, either on facts or law, excepting to state that the Commissioner of Income Tax (Appeals) and the Income-Tax Appellate Tribunal have failed to note that the assessee had deliberately kept away the income from Malaysia. The fact that the plantation is in Malaysia, would be a permanent establishment, in terms of DTAA, extracted supra, through which, business is carried on, by the assessee and therefore, the income from such plantation, would be taxable only in Malaysia and not in India, has been substantiated by the assessee. 14. There are no valid grounds to reverse the orders impugned. Question of law raised is answered against the revenue and in favour of the assessee. 15. In the result, the Tax Case Appeals are dismissed. No costs. Consequently, connected Miscellaneous Petition is also closed. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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