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TMI Blog2016 (10) TMI 1336X X X X Extracts X X X X X X X X Extracts X X X X ..... laysia. 3. Dr. Anita Sumanth, the Ld.counsel for the assessee, submitted that the Malaysian branch of the assessee-company was registered as a company in Malaysia. The assessee invested in bonds, debentures, derivatives, shares, etc. in Malaysia. Since the assessee invested its funds in Malaysia, the income earned by the assessee-company from Malaysian investment is exclusively attributable to Malaysian branch, therefore, the provisions of Double Taxation Avoidance Agreement between Union of India and Government of Malaysia would come into operation. According to the Ld. counsel, the income earned by the Malaysian branch of the assessee-company cannot be assessed in India. 4. Referring to Double Taxation Avoidance Agreement, the Ld.counsel for the assessee submitted that the asset of the Malaysian branch was assessed by the assessee-company in making investment in Malaysia. Therefore, according to the Ld. counsel, the income earned on the investments made out of the assets of the Malaysian branch is attributable only to Malaysian branch, therefore, the same has to be assessed only in Malaysia and not in India. Referring to the decision of this Bench of the Tribunal in the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee-company was from investments. The income was in the nature of interest and dividend from such investments. Therefore, it has to be classified as "income from other sources" and not from business. 7. Referring to the order of this Tribunal in the assessee's own case for assessment year 2000-01, the Ld. D.R. submitted that the Tribunal found that the assessee's branch at Malaysia was holding the investment not as a stock-in-trade but as investments only. Therefore, the purchase and sale of the investments is liable for capital gain. Since in the assessee's own case, this Tribunal found that the assessee was holding the shares, debentures, etc. as investments only and not as stock-in-trade, the Tribunal found that the loss on sale of investments cannot be set off. Therefore, according to the Ld. D.R., the CIT(Appeals) disallowed the claim of the assessee by rightly placing his reliance on the order of this Tribunal for assessment year 2000-01. 8. We have considered the rival submissions on either side and perused the relevant material available on record. As rightly submitted by the Ld. D.R., this Tribunal examined the issue for assessment year 2000-01 and fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndia. Therefore, the expenditure incurred by the assessee for earning such income has to be reduced from the income earned in Malaysia. According to the Ld. counsel, the assessee made investments through Goldman Sachs, Singapore, therefore, the CIT(Appeals) has rightly allowed the claim of the assessee. 12. We have considered the rival submissions on either side and perused the relevant material available on record. Apparently, the CIT(Appeals) allowed the claim of the assessee on the ground that the expenditure incurred by the assessee has to be reduced from the income earned from investments in Malaysia. The Revenue in ground No.2.2 clarifies that this Tribunal in I.T.A. No.558/Mds/2007 for the assessment year 2003-04, by an order dated 26.06.2009, decided the matter in favour of Revenue. The Revenue has filed a copy of the order of this Tribunal dated 26.06.2009 in the paperbook. 13. We have carefully gone through the order of this Tribunal. This Tribunal found that the income from Malaysian branch has to be classified as "income from other sources" and it cannot be said to be arising from business, therefore, there cannot any question of allowing the expenditure against the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the income earned in Malaysian investments would be included in the total income of the assessee, therefore, the assessee is under the bona fide belief that the Malaysian income is not taxable in India, hence the interest under Section 234B of the Act is not chargeable. 17. We have considered the rival submissions on either side and perused the relevant material available on record. The payment of advance tax was increased due to inclusion of income of Malaysian branch in India. The assessee claims that there was a bona fide belief that the Malaysian income would not form part of total income of the assessee in India. 18. We have carefully gone through the judgment of Madras High Court in Revathi Equipment Limited (supra). In the case before Madras High Court, the assessee has paid advance tax voluntarily. Section 35DDA of the Act was introduced by Finance Act, 2001 with effect from 01.04.2001. In fact, Finance Bill received assent of President on 11.05.2000. Therefore, the Madras High Court found that the assessee could not have envisaged that the voluntary retirement payments are liable for taxation. In view of the legislative change brought in by Finance Act, 2001, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Referring to the judgment of Madras High Court in CIT v. Infrastructure Development Finance Co. Ltd. (2013) 33 taxmann.com 622, the Ld. D.R. submitted that since the excess amount was refunded to the assessee, the assessee is liable to pay interest on the excess amount refunded. The Ld. D.R. has also placed reliance on the decision of the Bangalore Bench of this Tribunal in Sigma Aldrich Foreign Holding Company v. ACIT (104 ITD 95) and Ahmedabad Bench of this Tribunal in JCIT v. Sardar Sarovar Narmada Nigam Ltd. (93 ITD 321). 22. We have heard Dr. Anita Sumanth, the Ld.counsel for the assessee, also. It is not in dispute that the excess amount was refunded and the levy of interest under Section 234D was made on excess amount refunded. The claim of the assessee before the lower authorities was that no interest could be chargeable under Section 234D of the Act prior to assessment year 2001-02. The Madras High Court in Infrastructure Development Finance Co. Ltd. (supra) found that Section 234D of the Act came into force with effect from 01.06.2003. When the regular assessment was completed after the provisions of Section 234D of the Act came into force, the assessee was li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m assessment. This Tribunal for assessment year 2000-01, in the assessee's own case, found that the Malaysian branch of the assessee-company cannot constitute a permanent establishment and the assessee's Malaysian branch is not doing any business other than making investments. Therefore, income from Malaysian branch is taxable India. In view of the finding of this Tribunal for assessment year 2000-01 that the income escaped assessment, therefore, the Assessing Officer has rightly reopened the assessment under Section 147 of the Act. On identical situation, for assessment years 2002-03 and 2003-04, this Tribunal confirmed the order of the Assessing Officer for reopening assessment. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 27. The next issue arises for consideration is the classification of interest income and dividend income. 28. Dr. Anita Sumanth, the Ld.counsel for the assessee, submitted that the business of the assessee is investment, therefore, the interest income earned by the assessee from investments and dividend income have to be classified as "income from business". Howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional gain, the same was not crystallised. The CIT(Appeals) placed his reliance on the judgment of Uttarakhand High Court in CIT v. ONGC (301 ITR 415). Accordingly, he deleted the addition made by the Assessing Officer. Referring to Rule 115, the Ld. D.R. submitted that the rate of exchange for the calculation of value in rupees has to be deemed to be received or arrived or accrued to the assessee depending upon foreign exchange rate prevailing on the particular date. This rule was not taken into consideration by the CIT(Appeals) while placing reliance on the judgment of Uttarakhand High Court in ONGC (supra). 33. On the contrary, Dr. Anita Sumanth, the Ld.counsel for the assessee, submitted that unrealised foreign currency translation is only a contingent and notional gain. Even though it was credited to the Profit & Loss account, it is not a real income. Therefore, according to the Ld. counsel, it has to be excluded, hence, the CIT(Appeals) has rightly allowed the claim of the assessee. 34. We have considered the rival submissions on either side and perused the relevant material available on record. The gain on foreign currency translation from various international currencies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ither side and perused the relevant material available on record. As rightly submitted by the Ld.counsel for the assessee, the assessee continuously valuing the current investments at cost or market price, whichever is lower Therefore, as on the last day of the financial year, the quantum of diminution in the value of current asset can be ascertained. Hence, as rightly submitted by the Ld.counsel for the assessee, it is not a provision. Therefore, the CIT(Appeals) has rightly allowed the claim of the assessee. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 39. Now coming to Revenue's appeal for assessment year 2007- 08, the first ground of appeal is with regard to diminution in the value of stocks. 40. Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the profit on sale of investments was found to be a capital gain by this Tribunal for assessment years 2002-03 and 2003-04. Therefore, diminution in the value cannot be allowed as deduction. 41. On the contrary, Dr. Anita Sumanth, the Ld.counsel for the assessee, submitted that the current investment was found to be an investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue arises for consideration is foreign exchange fluctuation loss. 48. Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the Assessing Officer disallowed the claim of the assessee on the ground that it is only a notional loss. However, the CIT(Appeals) found that the loss is a capital loss, therefore, it has to be considered under the head "capital gain". According to the Ld. D.R., the loss is on account of restatement of valuing of investment made in foreign currency, therefore, it cannot be allowed as loss. 49. On the contrary, Dr. Anita Sumanth, the Ld.counsel for the assessee, submitted that on identical situation, for the assessment year 2001-02, the CIT(Appeals), placing his reliance on the judgment of Uttarakhand High Court in CIT v. ONGC (301 ITR 415), deleted the addition made by the Assessing Officer. Referring to Rule 115, the Ld. D.R. submitted that the rate of exchange for the calculation of value in rupees has to be deemed to be received or arrived or accrued to the assessee depending upon foreign exchange rate prevailing on the particular date. This rule was not taken into consideration by the CIT(Appeals) while placing reliance on the j ..... X X X X Extracts X X X X X X X X Extracts X X X X
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