TMI Blog2020 (2) TMI 1400X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable income on the ground that it pertains to the profits of its branches in Italy, UAE, Qatar and Saudi Arab and India has DTAAs with these countries. This decision by the Assessing Officer, whatever its merits, certainly does not constitute any estoppel against the statute, and, in any case, there is no res judicata in the income tax proceedings. Just because the AO himself has allowed a relief to the assessee, which, in our humble understanding of law-whatever is its worth, is patently inadmissible in law, we are not obliged to give the assessee the same relief. If at all the stand of the Assessing Officer indicates or explains anything, it explains the anxiety of the assessee to go back to the assessment stage on this issue. We are, however, not inclined to follow the plan so laid out. Validity of notifications in respect of amendment in law by re-enactment of the statutory provisions under the Income Tax Act - according to the learned counsel, the notification issued under old section 90(3) will not hold good in law after 1st October 2009, unless such notification is reissued on or after 1st October 2009 - The argument of the learned counsel is only fit to be noted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar, 1. This appeal challenges correctness of the order dated 31st October 2018 passed by the Assessing Officer under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961, for the assessment year 2014-15. 2. Core grievance of the assessee is that the Assessing Officer ought to have excluded a sum of ₹ 11,91,18,391 from total income chargeable to tax in the hands of the assessee in India, as this amount represents aggregate of profits earned by assessee's branches in UAE and Qatar, and, as is the alleged settled legal position, once an income of an Indian assessee is taxable in the treaty partner source jurisdiction under a treaty provision, the same cannot be included in its total income taxable in India as well i.e. the residence jurisdiction. The related grounds of appeal are being reproduced below for ready reference: On the facts and in the circumstances of the case and in law, the learned AO/learned TPO/Hon'ble DRP 1. erred in not reducing the income earned by the appellant's branch offices located in the United Arab Emirates (UAE) and Qatar, [amounting to ₹ 11,91,18,391] from the appellant's total income chargeable to tax in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... implied that tax will not be charged by the other state in respect of such income . As noted in the DRP's order, further at page 11, the contentions of the assessee have been that it has been held that once an income is held to be taxable in a particular jurisdiction under a tax treaty, unless there is a specific mention that it can be taxed in the other jurisdiction as well, the latter is denuded of the powers to tax such income and that accordingly, income earned by the foreign branches in UAE and Qatar where the assessee was forming PE should not be liable to tax in India based on relevant tax treaties . The assessee has also relied upon a large number of judicial precedents, including the judicial precedents in the cases of PAVL Kulandagan Chettiar [3 ITD 426 (SB)], which has been upheld right upto Hon'ble Supreme Court (267 ITR 654) and a review petition has also been dismissed by Hon'ble Supreme Court (300 ITR 5), CIT Vs. Bank of India [64 taxmann.com 335 (Bom)], CIT Vs. VRSRM Firm (208 ITR 401), CIT Vs. R.M. Muthiah [202 ITR 508 (Karnataka)], DCIT Vs. Patni Computer Systems Ltd. [114 ITD 159 (Pune)], Apollo Hospitals Enterprises Limited [53 SOT 103 (Chennai)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the matter to the file of the Assessing Officer. Learned Departmental Representative, on the other hand, vehemently relies upon the stand of the authorities below, and leaves the matter to us. 6. For the sake of completeness, we may also place on record that the fact that in assessee's own case for the assessment year 2012-13, the Dispute Resolution Panel has given relief of ₹ 10,81,17,104 on this issue, and likewise for the assessment year 2013-14, the Dispute Resolution Panel has given relief of ₹ 28,47,44,212 on the same issue. That is what probably explains the assessee's eagerness to go back to the assessment stage, and claim it as a covered issue before them. The reasoning adopted by the Dispute Resolution Panel, for example for the assessment year 2013-14 (at page 294 of the paper book, and internal page 15 of the respective order), is as follows: 9.1 We have gone through the core objection raised with respect to inclusion of foreign branches income in the hands of the assessee. It is a fact that the assessee has two foreign branches situated in UAE and Bahrain. It is also a fact that there exists a DTAA between India and UAE. Reference is made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is stage, not concerned about how the above legal position was at some variance with the first principles and what impact the aforesaid decision had on the workability of the double taxation relief mechanism. It would appear that the very scheme of tax credit, as envisaged in the international tax treaties, was perhaps rendered redundant. There was no question of tax credits being granted in India in view of the fact that any income taxed by source jurisdiction abroad was held to be exempted from taxation in India, and if these tax credits were to be granted it would have resulted in plain and simple refund of the taxes paid abroad since the incomes relating thereto were held to be not at all taxable in India. A double dip of losses abroad, howsoever inappropriate on the first principles, was actually possible, and was approved by the coordinate benches of this Tribunal, as in the case of Patni Computers (supra), wherein speaking through one of us (i.e. the Vice President), the legal position was respectfully followed nevertheless and it was also observed thus: The law laid down by the Hon'ble Supreme Court in binding on us under Article 141 of the Constitution of India. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement. 11. The effect of Hon'ble Supreme Court's judgment in Kulandagan Chettiar's case (supra) thus was clearly overruled by the legislative developments. It was specifically legislated that the mere fact of taxability in the treaty partner jurisdiction will not take it out of the ambit of taxable income of an assessee in India and that such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement . A coordinate bench of this Tribunal, in the case of Essar Oil Ltd. Vs. ACIT [(2013) 28 ITR (Trib.) 609 (Mumbai)], also proceeded to hold that this notification was retrospective in effect inasmuch as it applied with effect from 1st April 2004 i.e. the date on which sub-section 3 was introduced in Section 90. 12. When we invited learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions re-enacted, continue in force, and be deemed to have been made or issued under the provisions so re-enacted....... The scheme of law is thus unambiguous. Its only when an notification issued under the old statutory provision, whether repealed or modified, is inconsistent with the corresponding new statutory provisions, that such an notification ceases to hold good in law. In a rather recent judgment in the case of Fibre Boards Pvt. Ltd. Vs. CIT [(2017) 376 ITR 596 (SC)], Hon'ble Supreme Court has reiterated this principle, and, inter alia, observed as follows: 34. In CIT v. Venkateswara Hatcheries (P.) Ltd. [1999] 237 ITR 174/103 Taxman 503 (SC), this Court was faced with an omission and re-enactment of two Sections of the Income Tax Act. This Court found that Section 24 of the General Clauses Act would apply to such omission and re-enactment. The Court has stated as follows: As noticed earlier, the omission of Section 2(27) and re-enactment of Section 80-JJ was done simultaneously. It is a very well-recognized rule of interpretation of statutes that where a provision of an Act is omitted by an Act and the said Act simultaneously re-enacts a new provision whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng validity of notification after 1st April 2009 was not before the coordinate bench, and these observations thus have no relevance on the proposition being canvassed before us. The law laid down by Hon'ble Supreme Court, as analysed above, is against the plea advanced by the learned counsel. In any case, the argument of the learned counsel, howsoever absurd, destroys his own case. If all the notifications under the old section 90 are to be held to be not good in law under the present section 90, the assessee cannot claim the benefits of the related tax treaties either since these treaties were also notified prior to 1st April 2009. 15. Let us now turn to judicial precedents cited by the learned counsel. 16. None of these judicial precedents take into account the developments with respect to the provisions of Section 90(3) and the notification issued there under. The only exception is a coordinate bench decision in the case of Bank of India (supra) wherein the issue of notification was specifically raised but then the coordinate bench, following Hon'ble jurisdictional High Court's judgment in assessee's own case for the assessment year 2003-04 and without real ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d then making whatever aggressive claim one makes is one thing, but not explaining the correct legal position and then hoping to succeed with the claim, by keeping the adjudicator in dark about the statutory developments, is quite another. The path chosen by the assessee could have fallen in the first category if submissions were made before the DRP about the amendment in law by way of Section 90(3) and notification thereunder, and yet the exemption claim was to be justified due to no fresh notification being issued after the substitution of section 90(3) with effect from 1st October 2009. That is not the case. In any case, the DRP decisions cannot fetter our adjudication. 17. We have also noted that, as per details furnished before us at pages 327 to 376 of the paper-book, the Assessing Officer has accepted the claim of the assessee, in the assessment year 2016-17, for exclusion of ₹ 56,39,11,560 from its taxable income on the ground that it pertains to the profits of its branches in Italy, UAE, Qatar and Saudi Arab and India has DTAAs with these countries. This decision by the Assessing Officer, whatever its merits, certainly does not constitute any estoppel against the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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