TMI Blog2022 (11) TMI 1447X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of IL FS Energy Development Company Ltd.[ 2017 (8) TMI 732 - DELHI HIGH COURT] held that no disallowance u/s 14A of the Act can be made if the assessee had not earned any exempt income. Disallowance of deemed tax credit - HELD THAT:- This issue was also decided in assessee s own case [ 2017 (4) TMI 1035 - DELHI HIGH COURT] as held tax exemption on dividend is granted with the objective of promoting economic development within Oman by attracting investments. - Shri N.K. Billaiya, Accountant Member, And Shri Kul Bharat, Judicial Member For the Assessee : Shri K.V.S.R Krishna, CA. For the Department : Shri Sanjay Kumar, CIT- DR. ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- The above two captioned cross appeals by the assessee and the Revenue are preferred against the order of the ld. CIT(A) - 30, New Delhi dated 10.02.2022 pertaining to Assessment Year 2016-17. Both these appeals were heard together and are disposed of by this common order for the sake of convenience and brevity. 2. We will first address to the appeal of the assessee in ITA No. 581/DEL/2022. 3. The solitary grievance of the assessee is that the ld. CIT(A) erred in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in examining the matter once again; and therefore, the issue was set aside to the file of the learned Assessing Officer for considering the arguments of the assessee de novo in accordance with law. 9. Ld. AR, in all fairness, submits that the same course as adopted for the assessment year 2008-09 may also be followed for this assessment year in restoring the issue to the file of the learned Assessing Officer for considering the facts and circumstances relevant for this particular assessment year and to take a call de novo. Ld. DR reports no objection for sending it back to the learned Assessing Officer. Recording the same, we allow this ground for statistical purpose, by restoring the issue to the file of the learned Assessing Officer to take a view de novo for this particular assessment year after hearing the assessee de novo in accordance with law. 7. Finding parity on facts, respectfully following the findings of the co-ordinate bench, amortization portion of the lease taken from Noida authority is decided against the assessee and the challenge in respect of land at Vishakapatnam and Tuticorn is restored to the file of the Assessing Officer to be decided as per dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the deletion of disallowance of deemed tax credit of Rs. 18,06,24,855/- by the Assessing Officer. 14. This issue was also decided by the Hon'ble High Court of Delhi in assessee s own case in 395 ITR 572. The relevant findings of the Hon'ble High Court read as under: The second question: Did the ITAT err in deciding that dividend income was taxable but exempt under Omani law to entitle the assessee to the benefits of the Indo Oman DTAA. 24. The rival contentions on this aspect are whether dividend income is at all taxable or if it taxable, but exempt. This is relevant in the context of the assessee's contention that under Article 25 (2) of the treaty, it is entitled to benefit of whatever was the tax treatment it received in Oman. The relevant part of the said provision states ..Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in the Sultanate of Oman, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in the Sultanate of Oman, whether directly or by deduction. Article 25 (4) further clarifies one eventuality, i.e. if divid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income in the hands of the recipients if such dividends were received out of the profits on which Omani income tax was paid by distributing companies. It meant that Omani income tax was payable by the recipients on any dividend income received out of the exempt profits from tax exempt companies. As a result, investors in tax exempt companies that undertake those activities considered essential for the country's economic development suffered a tax cost on their return on investments. the tax treatment under the above mentioned Article 5 had the negative impact on investments in tax exempt project. The Company Income Tax Law of 1981 was, therefore, recently amended by Royal Decree No. 68/2000 by the insertion of a new Article 8 (bis) which is effective as from the tax year 2000. As per the newly introduced Article 8 (bis) of the Company Income Tax Law, dividend distributed by all companies, including the tax exempt companies would be exempt from payment of income tax in the hands of the recipients. In his manner, the Government of Oman would achieve its aim objective of promoting economic development within Oman by attracting investments. We presume from our rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as conclusive; if the tax authorities had any doubts, they could not have proceeded to elevate them into findings, but rather addressed them to Omani authorities- if not directly, then through Indian diplomatic channels. In not doing so, but proceeding to interpret the laws and certificate of Omani authorities, the revenue, especially the Commissioner fell into error. 27. As far as the submission of the revenue, that the assessee did not have a Permanent Establishment in Oman is concerned, this court is of opinion that admittedly, for about 5 years, i.e 2002 to 2006, a common order was made under Article 26 (2) (b) of the Income Tax Law of Oman. The opening para of this order reads as under: We refer to the returns of income and determine the taxable income as under: Kribhco Muscat is a permanent establishment supported by M/s. Krishak Bharati Cooperative Limited, a multi- state cooperative society registered in India. As per the accounts, Kribhco-Muscat is in receipt of dividend income from Omifco, a joint stock company registered in Oman, and that dividend income is connected with the investment of Kribhco-Muscat. The dividend income is, however, exempt from t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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