Tc/228/2003 Of The Commissioner Of Income Tax v. The Ayer Manis Rubber Estates

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 13.2.2006 CORAM : THE HONOURABLE MR.JUSTICE P.D.DINAKARANANDTHE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.228 of 2003 Commissioner of Income TaxTamil Nadu III, Madras The Ayer Mani's Rubber Estate Ltd.,Alagappa Road,Chennai ..Appellant -Vs-..Respondent Appeal under Section 260 A of the Income Tax Act, 1961 against theorder of the Income Tax Appellate Tribunal Madras Bench "A" dated 5.3.2001in I.T.A.3236/MDS/1992. The assessment year involved is 1989-90 againstOrder in Appeal No.105/92-93/Company Ward III dated 17.6.92 on the file ofthe Commissioner of Income Tax (Appeals) VI, Madras 34 against Order inPAN/GIR No.47-066-CN-2835/1-A, dated 24.8.1992, on the file of the IncomeTax Officer, Company Ward – III, Madras 34. For Appellant :Mrs.Pushya SitaramanFor Respondent : No appearanceO R D E R (Order of the Court was made by P.D.DINAKARAN, J,.) Heard. The appeal is directed against the order of the Income TaxAppellateTribunalMadrasBench"A"dated05.03.2001inI.T.A.No.3236/Mds/1992. 2.1. The assessee, is a company deriving income from Plantationsituated in Malaysia. The assessee claimed the income from Malaysia asexempt and filed income for the assessment year 1989-90 on 29.12.1989,showing 'Nil' income. The assessee did not disclose the foreign income ofRs.34,51,204/- in view of double taxation agreement between India andMalaysia. The assessing officer, finding that the assessee's last yearincome earned in Malaysia has been treated as taxable, applied the same tothe assessment year in question. 2.2. Aggrieved by the assessment order, the assessee filed an appealbefore the Commissioner of Income Tax (Appeals). The Commissioner ofincome Tax (Appeals) allowed the issue in favour of the assessee byfollowing the decision of the Madras High Court reported in 208 ITR 400(COMMISSIONER OF INCOME TAX -vs- VR.S.R.M.FIRM AND OTHERS) 2.3. Aggrieved by the order of the Commissioner of Income Tax(Appeals), the revenue filed further appeal before the Income TaxAppellate Tribunal, and the Tribunal, following the decision of this Courtin the case of SRM firm (208 ITR 400), held that the income formMalaysia cannot be taxed in India and dismissed the appeal. Hence, thepresent appeal by the Revenue. 4. The issue that arises for consideration in this appeal is whetherthe income derived by the assessee from Malaysia can be included in thetotal income and taxed in India? 5. In identical facts and circumstances, the Apex Court inCommissioner of Income Tax (vs) P.V.A.L.Kulandagan Chettiar (267 ITR 654),held as follows:- 2.3. Aggrieved by the order of the Commissioner of Income Tax(Appeals), the revenue filed further appeal before the Income TaxAppellate Tribunal, and the Tribunal, following the decision of this Courtin the case of SRM firm (208 ITR 400), held that the income formMalaysia cannot be taxed in India and dismissed the appeal. Hence, thepresent appeal by the Revenue. 4. The issue that arises for consideration in this appeal is whetherthe income derived by the assessee from Malaysia can be included in thetotal income and taxed in India? 5. In identical facts and circumstances, the Apex Court inCommissioner of Income Tax (vs) P.V.A.L.Kulandagan Chettiar (267 ITR 654),held as follows:- " Where liability to tax arises under the local enactment,the provisions of Sections 4 and 5 of the Income Tax Act, 1961,provide for taxation of global income of an assessee chargeableto tax thereunder. But this is subject to the provisions of anagreement entered into between the Central Government and theGovernment of a foreign country for avoidance of double taxationas envisaged under Section 90 to the contrary, if any, and suchan agreement will act as an exception to or modification ofsections 4 and 5 of the Income Tax Act. The provisions of suchagreement cannot fasten a liability where the liability is notimposed by a local Act. Where tax liability is imposed by theAct, the agreement may be resorted to either for reducing thetax liability or altogether avoiding the tax liability. In caseof any conflict between the provisions of the agreement and theAct, the provisions of the agreement would prevail over the Actin view of the provisions of Section 90(2). Section 90(2) makesit clear that "where the Central Government has entered into anagreement with the Government of any country outside India forgranting relief of tax, or for avoidance of double taxation,then in relation to the assessee to whom such agreement applies,the provisions of the Act shall apply to the extent they aremore beneficial to that assessee", meaning thereby that the Actgets modified in regard to the assessee in so far as theagreement is concerned if it falls within the category statedtherein. When it is intended under the Double Taxation AvoidanceAgreement between India and Malaysia that, even though it ispossible for a resident in India to be taxed in terms ofSections 4 and 5 of the Income Tax Act, 1961, if he is deemed tobe a resident of contracting State where his personal andeconomic relations are closer, then his residence in India willbecome irrelevant, the Double Taxation Avoidance Agreement willhave to be interpreted as such and would prevail over Sections 4and 5 of the Act." 6. The said decision was followed by the Division Bench of this Court(N.V.BALASUBRAMANIAN AND M.THANIKACHALAM, JJ.) in T.C.A.No.182 of 2004dated 15.6.2004. 7. In view of the above conclusion, we do not find any error orinfirmity in the order of the Tribunal and no substantial question of lawwould arise for consideration of this Court. Hence, the appeal standsdismissed. No costs. Sd/-Asst. Registrar./true copy/ Sub Asst. Registrar. msk. To:1. The Assistant Registrar,Income Tax Appellate TribunalMadras Bench "A", Rajaji Bhavan III Floor, Besant Nagar, Chennai-90.2. The Commissioner of Income Tax (Appeals), Tamil Nadu III, Madras 3. The Income Tax Officer, Company Ward III, Madras 34. 4. The Commissioner of Income Tax (Appeals) VI, Madras 600 034. 5. The Income Tax Officer, Company Ward (III)(2), Madras-34. + 1 CC to M/s.Pushya Sitaraman, Advocate SR NO 6449 mab(co)gp/10.3. T.C.(A) No.228 of 2003 13.2.2006