Commissioner of Income Tax, Ujjain Vs. Torqouise
Investment & Finance Ltd  Insc 223 (20 February 2008)
Bhan & Dalveer Bhandari
O R D
APPEAL NO.4485 OF 2007 WITH CIVIL APPEAL NO.4502/2007 CIVIL APPEAL NO.4497/2007
CIVIL APPEAL NO.4498/2007 CIVIL APPEAL NOS.4499-4501/2007 CIVIL APPEAL
NO.4495/2007 CIVIL APPEAL NO.4496/2007 CIVIL APPEAL NOS.4486-87/2007 CIVIL
APPEAL NOS.4488-4489/2007 CIVIL APPEAL NO.4492/2007 This Order shall dispose of
the aforesaid appeals as the point involved is the same.
the sake of convenience, the facts are taken from Civil Appeal No. 4485 of
hereinafter referred to as 'the assessee' filed its return of income for the
assessment year 1992-1993 declaring income of Rs.4,30,06,580/- by showing its
business as investment and finance, which was processed under Section 143(1)(a)
of the Income Tax Act, 1961 (for short 'the Act') on 18.1.1996 on the same
income. Along with the return the assessee CIVIL APPEAL NO. 4485 OF 2007 -2-
claimed refund amounting to Rs.29,16.660/- on the basis of credit of deemed TDS
on dividend received from a Malaysian company i.e. Pan Century Edible Oils Sdn.Bhd.
Assessing Officer raised a demand of Rs.1,07,370/- after rejecting the credit claimed
by the assessee on the basis of deemed credit on dividend received from the
aforesaid Malaysian company.
aggrieved, assessee filed an appeal before the CIT(Appeals) which was accepted.
thereafter filed appeal before the Income Tax Appellate Tribunal (for short
'the Tribunal'). The Tribunal disposed of the appeal with the observation that
Double Taxation Avoidance Agreement (for short 'DTAA') entered into by the
Government of India with the Government of Malayasia would override the provisions
of the Act if they are at variance from the provisions of the Act. It was held
that from a plain reading of Article XI of the DTAA, it was clear that dividend
income would be taxed only in the contracting states where such income accrued.
by the order of the Tribunal, the department filed further appeal in the High
Court of Madhya Pradesh at Indore Bench which was admitted on the following
questions of law:
Whether ITAT was justified in holding that dividend income earned by the Assessee
CIVIL APPEAL NO. 4485 OF 2007 -3- amounting to Rs.21,35,766/- from a Company
called Pan Century Edible Oils SDN, BHD. Malaysia is not liable to be taxed in
the hands of Assessee in India under any of the provisions of the
Income Tax Act?
view of Section 5(1)(c) of the Income Tax Act, whether the finding recorded by
the ITAT that income earned out of dividend from the Company outside the
country is not liable to be taxed under the Act?
Whether ITAT was justified in law in recording a finding on an issue which was
not raised by the assessee either before the AO or before the CIT(Appeals) but
was raised for the first time before the Tribunal and that too in an appeal
filed by the Department.
Having dismissed the cross objection filed by the assessee, whether the
Tribunal was justified in then proceeding to decide the issue raised by the assessee
on merits in their favour."
question No.1, the High Court, following the decision of the Madras High Court
in the case of CIT vs. SRM Firm & Ors. reported in 208 ITR 400 which was
affirmed by the Supreme Court in the case of CIT vs. PVAL Kulandagan Chettiar
reported in 267 ITR 654, held that the Tribunal was justified in holding that
dividend income derived by the assessee from a company in Malaysia is not
liable to be taxed in the hands of the assessee in India under any of the
provisions of the Act. Accordingly, the High Court has CIVIL APPEAL NO. 4485 OF
2007 -4- answered question No.1 in favour of the assessee and against the
as question No.2 is concerned, counsel for the assessee conceded that tax under
section 5(1)(c) of the Income Tax Act would have been exigible but under
Article XI of DTAA entered into between India and Malaysia, tax is liable to be levied in the
country where the income had accrued. Under these circumstances the Court held
that this question as to whether income of an assessee accrued outside the
country could be taxed within the country under the provisions of Section 5(1)(c)
of the Act did not arise from the order of the Tribunal.
question Nos.3 and 4, it was observed that this point had been raised by the assessee
before the CIT(Appeals). Since, the CIT(Appeals) had decided the appeal against
the assessee, assessee filed cross-objections before the Tribunal and therefore
it could not be said that the assessee had not raised this point earlier or
that the assessee had raised this point for the first time before the Tribunal.
Insofar as TDS tax credit is concerned, the High Court has observed that it
could not go into this question since it has decided the question No.1 in favour
of the assessee to the effect that the income arrived by the assessee in CIVIL
APPEAL NO. 4485 OF 2007 -5- Malaysia was
not taxable in India at all.
have gone through the judgment of the Madras High Court in CIT vs. SRM Firm
& Ors.(supra) and judgment of this Court in CIT vs. PVAL Kulandagan Chettiar
(supra) and we are satisfied that the point involved in these appeals stands
concluded in favour of the assessee and against the revenue by the decision of
the Madras High Court in CIT vs. SRM Firm & Ors.(supra) which was duly
affirmed by this Court in the case of CIT vs. PVAL Kulandagan Chettiar (supra).
Incidently, it may be mentioned that the review petition filed against the
decision of this Court in CIT vs. PVAL Kulandagan Chettiar (supra) was also
dismissed on 1st
these appeals are dismissed. Parties shall bear their own costs.