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CASE NO.: Appeal (civil)  4485 of 2007

PETITIONER: Dy. Commissioner of Income Tax, Ujjain

RESPONDENT: Torqouise Investment & Finance Ltd

DATE OF JUDGMENT: 20/02/2008

BENCH: ASHOK BHAN & DALVEER BHANDARI

JUDGMENT: JUDGMENT O R D E R

CIVIL 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.         For the sake of convenience, the facts are taken from Civil Appeal No. 4485 of 2007.         Assessee-respondent, hereinafter referred to as ’the assessee’ filed its return of i ncome for  the assessment year 1992-1993 declaring income of Rs.4,30,06,580/- by showing its business a s  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 assess ee  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. Malayasia..         The Assessing  Officer raised a demand of Rs.1,07,370/- after rejecting the credit c laimed  by the assessee on the basis of deemed credit on dividend received from the aforesaid  Malaysian company.         Being aggrieved, assessee filed an appeal before the CIT(Appeals) which was accepted .   Revenue 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 fro m  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.          Aggrieved by the order of the Tribunal, the department filed further appeal in the H igh  Court of Madhya Pradesh at Indore Bench which was admitted on the following questions of  law:

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"1.     Whether ITAT was justified in holding that dividend  income earned by the Assessee  CIVIL APPEAL NO. 4485 OF 2007

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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?

2.      In 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?

3.      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.

4.      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."

       On 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 department.         Insofar as question No.2 is concerned, counsel for the assessee conceded that tax un der  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 Tribu nal.          On question Nos.3 and 4, it was observed that this point had been raised by the asse ssee  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 poi nt 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 f avour  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.

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       We 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 t he  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 November, 2007.

       Accordingly, these appeals are dismissed.  Parties shall bear their own costs.