TMI Blog1988 (8) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... 1981-82 5,47,569 1,09,513 4,38,056 1982-83 7,27,711 1,45,542 5,82,169 4A. On the aforesaid facts, the assessee offered for taxation net dividend of Rs. 4,38,056 in the first year and of Rs. 5,82,169 in the second year under appeal. The ITO, however, was of the view that the gross dividend of Rs. 5,47,569 in the first year and of Rs. 7,27,711 in the second year should be brought to tax. As the variation in the total income declared by the assessee and that proposed by the ITO was more than Rs. 1 lakh, the ITO framed a draft assessment order for the asst. yr. 1981-82 under s. 143(3) r/w s. 144B of the Act, wherein he proposed to tax the gross dividend with the following observations: "The company is receiving income by way of dividend from its investments only. This year the company has received dividend from PT Kamaltax, Indonesia, and has claimed Double Income Tax Relief on the dividend received from this company In absence of original documents, the same is not allowed. However, if the original documents will be filed, double income tax relief will be allowed as provided under that Act. The company has shown net divide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidend after deducting withholding tax return issued by State Treasury, Indonesia to M/s PT Kamaltex. During the course of the proceedings under s. 144_B the representative of the assessee company produced the certificate from M/s PT Kmaltex Jakarta certifying that the withholding tax amounting to Rs. 88,70,625 (Indonesian currency) has been deposited with the State Treasury of Indonesia on 20th Aug., 1979. I have considered submission as made by the assessee. Sec. 91(1) provides that if any person who is resident in India in any previous year proves that in respect of income which accrued or arose during that previous year outside India, he has paid in any country with which there is no agreement under s. 90 for the avoidance of double taxation, income-tax by deduction or otherwise under the law in force in that country, he shall be entitled to the deduction from the Indian Income-tax payable by him for sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country, whichever is lower or at the Indian rate of tax if both the rates are equal. The assessee is, therefore, entitled to double taxation relief under s. 91 on the dividend i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Government of Indonesia, nothing can be concluded at this juncture. Therefore, for the discussion made above the gross dividend received from PT Kamaltex is being taken as the income of the assessee. The addition on this score is of Rs. 1,45,542 (Gross receipt of Rs. 7,27,711 is taken as the income). The assessee has claimed double taxation relief on the dividend received from PT Kamltex, Indonesia. Since there is no double taxation avoidance agreement between the two countries, the relief is being claimed under s. 91(1). According to the provision of s. 91(1), the assessee is entitled to deduction from the Indian Income-tax payable by it for a sum calculated on such doubly taxed income at the Indian rate of tax or the rate of tax of the said country whichever is lower, or at the Indian rates of tax, if both the rates are equal. The original TDS certificates by Kamltex are not produced before me. So no double taxation benefit is to be given. If the original vouchers are produced for perusal the double taxation benefit according to the provisions of s. 91(1), is to be given, later on." 7. It appears that during the assessment proceedings for the asst. yr. 1982-83 the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time of hearing before the CIT(A), the assessee had invited the attention of the CIT(A) to the provisions of s. 5(1)(C), 194 and 198 of the Act with a view to impress upon the CIT(A) that only the net dividend income should be brought to tax as the words "deemed to have accrued outside India" were absent in s. 5(1)(c) of the Act. The CIT(A) in his appellate order for the asst. yr. 1981-82 upheld the actin of the ITO as under: "The Department is assessing gross dividend income received from a foreign company by the Indian company in view of the instructions of the Board. Instructions contained in the Circular issued by the Board are based on the decision of the Hon'ble Supreme Court in CIT vs. Clive Insurance Co. Ltd. (1978) CTR (SC) 68 : (1978) 113 ITR 636 ((SC)). It this case, their Lordships observed that: "It is the gross dividend and not the net dividend that has to be brought to tax in India." Of course, in the case cited by the learned counsel, it has been held otherwise that only net dividend brought to India, is taxable in the hands of the Indian Company. But, having regard to the observations of their Lordships of the Hon'ble Supreme Court in CIT vs. Clive Insurance Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the assessee. Both the Hon'ble High Court have clearly pointed out the lacuna in s. 5(1)(c) of the Act vis-a-vis ss. 5(1)(a) (b) of the Act. The learned counsel for the assessee invited our attention to the decision of the Hon'ble Calcutta High Court in the case of CIT vs. Shaw Wallace Co, Ltd. and highlighted the fact that in the said decision the Hon'ble High Court has followed the ratio laid down by the Hon'ble Supreme Court in the case of CIT vs. Clive Insurance Co. Ltd. (1978) CTR (SC) 68 : (1978) 113 ITR 636 (SC). In other words, he wanted to impress upon us that the CIT(A) has unnecessarily laboured hard and given the decision against the assessee in the manner he did as could be see from his appellate order for the asst. yr. 1981-82. The learned counsel for the assessee also relied on the order of the Tribunal in the case of M/s Swastik Household and Industrial Products Pvt. Ltd., which incidentally is a company in the same group and had received dividend from M/s PT Kamaltex, Indonesia, wherein on identical point which came up before the Tribunal, the Tribunal, following the aforesaid decisions reported in (1978) CTR (Ker) 335 : (1979) 116 ITR 20 (Ker). (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly comprehended the provisions of s. 5(1)(C) of the Act, coupled with the direct decisions of the Hon'ble High Court on the issue involved in the present appeal. It is pertinent to note that no decisions were cited or referred to in the orders of the IT authorities taking a view contrary to the aforesaid decisions reported in (1978) CTR (ker) 335 : (1979) 116 ITR 20 (Ker), (1981) 21 CTR (Cal) 285 : (1981) 132 ITR 466 (Cal) and (1981) 132 ITR 481 (Cal). Again we are constrained to observe that a senior officer of the rank of CIT(A) ought not to have ignored the decision of the Hon'ble Calcutta High Court reported in (1981) 21 CTR (Cal) 285 : (1981) 1321 ITR 466 (Cal) wherein the Hon'ble High Court has not only followed but considered at length the decision of the Hon'ble Supreme Court in the case of CIT vs. Clive Insurance Co. Ltd. We make this observation as it would appear from the order of the CIT(A) for the asst. yr. 1981-82 that he had picked up one observation from the decision in the case of CIT vs. Clive Insurance Co. Ltd. out of context and decided the appeal against the assessee. In view of the aforesaid reported decisions in (1978) CTR (ker) 335 : (1979) 116 ITR 20 (ker), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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