2011 (4) TMI 884 - AT - Income Tax

India U.K. DTAA - dividend from UK Companies - Held that - As decided in CIT v. Ambalal Kilachand 1994 (4) TMI 67 - BOMBAY HIGH COURT that dividend from UK Companies was to be assessed net of tax This appeal of the assessee as well as the appeal of the revenue are covered by the decision of the ITAT in assessee s own case for assessment years 1999-2000 to 2004-05, thus respectfully following the said decision of the ITAT, the appeals remitted back to the file of AO with a direction to decide the same afresh after providing reasonable opportunity of hearing to the assessee.

Summary

Issues:
1. Appeal against enhancement of assessment without proper opportunity.
2. Dispute regarding double taxation relief on dividend income from a foreign company.

Issue 1: Appeal against enhancement of assessment without proper opportunity

The case involved cross-appeals challenging the order of CIT(A)-27, Mumbai, for the assessment year 2006-07. The appellant contested the enhancement of assessment by the CIT(A) without providing the necessary opportunity as per section 251(2) of the Act. The appellant argued that the enhancement was incorrect, illegal, and violated principles of natural justice. Additionally, the appellant raised concerns about the lack of double taxation relief on dividend income from shares held in a foreign company. The Assessing Officer was directed to grant relief from double taxation and recalculate the tax liability accordingly.

Issue 2: Dispute regarding double taxation relief on dividend income from a foreign company

The revenue raised grounds of appeal related to the tax treatment of dividend income received by the assessee from a UK-based company. The Assessing Officer had disallowed the claim for double taxation relief based on Circular No. 369, dated 17-9-1983, which required assessing dividend income on the gross amount inclusive of tax deducted at source (TDS). The appellant relied on a Bombay High Court decision stating that dividend from UK companies should be assessed net of tax. The CIT(A) upheld the Assessing Officer's decision, directing the taxation of the amount on net dividend income without allowing relief under the double taxation agreement. Both the assessee and the revenue appealed to the ITAT, arguing that the issue was covered by a previous ITAT decision in the assessee's case for assessment years 1999-2005. The ITAT remitted the appeals back to the Assessing Officer to decide afresh in line with the previous ITAT decision, providing a reasonable opportunity of hearing to the assessee. The appeal of the assessee was partly allowed for statistical purposes, while the appeal of the revenue was treated as allowed for statistical purposes.

In conclusion, the judgment addressed the issues of enhancement of assessment without proper opportunity and the dispute over double taxation relief on dividend income from a foreign company. The ITAT remitted the appeals back to the Assessing Officer based on a previous decision, emphasizing the need for a fair hearing and consistent application of tax laws.