TMI Blog1992 (12) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... to be included in the total income of the assessee for the assessment year 1982-83 ?" The assessee is an individual and resident in India. During the previous year relevant to the assessment year 1982-83, which is now under consideration, the assessee had earned income in Malaysia and had claimed it as exempt from tax in India in view of the Double Taxation Avoidance Agreement between India and Malaysia. The Income-tax Officer did not accept the contention of the assessee ; he included the income earned by the assessee in Malaysia in the total income of the assessee and stated that credit would be given after the assessee had paid tax on this income in Malaysia. The assessee appealed before the Commissioner of Income-tax (Appeals). The Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icle 22 of the agreement would operate. Clause 2(a) of the said article, which is relevant, reads thus : "The amount of Malaysian tax payable under the laws of Malaysia, and in accordance with the provisions of this agreement, whether directly or by deduction, by a resident of India, in respect of income from sources within Malaysia, which has been subjected to tax both in India and Malaysia, shall be allowed as a credit against the Indian tax payable in respect of such income but in an amount not exceeding that proportion of Indian tax which such income bears to the entire income chargeable to Indian tax." Therefore, the assessee can claim the benefit of the avoidance of double taxation only by proving that he has paid tax in respect o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld govern the assessee's case and that the assessee should establish that he has, or had paid tax at Malaysia, before claiming any credit or exemption in India. When a power is specifically recognised as vesting in one, exercise of such a power by others is to be read as not available ; such a recognition of power with the Malaysian Government would take away the said power from the Indian Government ; the agreement thus operates as a bar on the power of the Indian Government in the instant case. This bar would operate on sections 4 and 5 of the Income-tax Act, 1961, also. Clause 2 of article 22 is attracted only when tax is levied by both countries. In a case where one of the Governments is precluded from levying a tax on the income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by any of the provisions of the agreement, then the provisions of sections 4 and 5 of the Income-tax Act would operate on the said income and the tax certainly could be levied by the Indian Government. In such an event, to claim the benefit against double taxation, clause 2 of article 22 of the agreement shall have to be satisfied. The effect of an " agreement " entered into by virtue of section 90 of the Act would be : (i) If no tax liability is imposed under this Act, the question of resorting to the agreement would not arise. No provision of the agreement can possibly fasten a tax liability where the liability is not imposed by this Act ; (ii) if a tax liability is imposed by this Act, the agreement may be resorted to for negativing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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