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2020 (2) TMI 1400 - AT - Income TaxIncome accrued in India - income earned by the appellant's branch offices located in the United Arab Emirates (UAE) and Qatar - taxability of income earned by appellant's branch offices located in UAE and Qatar - Double Taxation Avoidance Agreements between India and UAE/Qatar - HELD THAT - There was no question of tax credits being granted in India in view of the fact that any income taxed by source jurisdiction abroad was held to be exempted from taxation in India, and if these tax credits were to be granted it would have resulted in plain and simple refund of the taxes paid abroad since the incomes relating thereto were held to be not at all taxable in India. A double dip of losses abroad, howsoever inappropriate on the first principles, was actually possible, and was approved by the coordinate benches of this Tribunal, as in the case of Patni Computers 2007 (6) TMI 277 - ITAT PUNE-B . AO has accepted the claim of the assessee, in the assessment year 2016-17, for exclusion of ₹ 56,39,11,560 from its taxable income on the ground that it pertains to the profits of its branches in Italy, UAE, Qatar and Saudi Arab and India has DTAAs with these countries. This decision by the Assessing Officer, whatever its merits, certainly does not constitute any estoppel against the statute, and, in any case, there is no res judicata in the income tax proceedings. Just because the AO himself has allowed a relief to the assessee, which, in our humble understanding of law-whatever is its worth, is patently inadmissible in law, we are not obliged to give the assessee the same relief. If at all the stand of the Assessing Officer indicates or explains anything, it explains the anxiety of the assessee to go back to the assessment stage on this issue. We are, however, not inclined to follow the plan so laid out. Validity of notifications in respect of amendment in law by re-enactment of the statutory provisions under the Income Tax Act - according to the learned counsel, the notification issued under old section 90(3) will not hold good in law after 1st October 2009, unless such notification is reissued on or after 1st October 2009 - The argument of the learned counsel is only fit to be noted and rejected. It is only elementary that merely because a section is amended or even substituted, whether by repeal of the legislation itself or by amendment in the legislation, the notifications, circulars and instructions issued therein do not cease to hold good - Under section 24 of the General Clauses Act, Where any Central Act or Regulation, is, after the commencement of this Act, repealed and re-enacted with or without modification, then, unless it is otherwise expressly provided any appointment notification, order, scheme, rule, form or bye-law, made or issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions re-enacted, continue in force, and be deemed to have been made or issued under the provisions so re-enacted - The scheme of law is thus unambiguous. Its only when an notification issued under the old statutory provision, whether repealed or modified, is inconsistent with the corresponding new statutory provisions, that such an notification ceases to hold good in law - The argument of the learned counsel, howsoever absurd, destroys his own case. If all the notifications under the old section 90 are to be held to be not good in law under the present section 90, the assessee cannot claim the benefits of the related tax treaties either since these treaties were also notified prior to 1st April 2009. Mere fact of taxability in the treaty partner jurisdiction will not take it out of the ambit of taxable income of an assessee in India and that such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement We reject the claim of the assessee on merits. No matter how tempting is it to get a quick disposal by remitting the matter to the assessment stage, as the matter was not adjudicated on merits at that stage, when, in our considered view, quite clearly it is a patently inadmissible claim, we have to hold so and thus decline to remit it to the assessment stage.
Issues Involved:
1. Exclusion of income earned by the appellant's branch offices in UAE and Qatar from total income chargeable to tax in India. 2. Examination of the taxability of income earned by appellant's branch offices in UAE and Qatar. 3. Tax credits, foreign tax reliefs, and tax deduction at source credits being partly declined. Detailed Analysis: Issue 1: Exclusion of Income Earned by Branch Offices in UAE and Qatar - Core Grievance: The appellant argued that the income earned by its branches in UAE and Qatar, amounting to ?11,91,18,391, should be excluded from the total income chargeable to tax in India as per Article 7 of the Double Taxation Avoidance Agreements (DTAAs) between India and UAE/Qatar. The appellant contended that such income is taxable only in the source jurisdiction (UAE and Qatar) and should not be taxed again in India. - Tribunal's Stand: The Tribunal noted that the claim was previously rejected on technical grounds without examining the merits. The Tribunal decided to adjudicate the issue on merits. - Legal Precedents Cited: The appellant relied on several judicial precedents, including the case of PAVL Kulandagan Chettiar, which held that income taxable in the source jurisdiction under a tax treaty cannot be taxed again in the residence jurisdiction unless specifically mentioned. - Notification No. 91/2008: The Tribunal highlighted that the legislative developments, specifically the notification issued under Section 90(3) of the Income Tax Act, 1961, overruled the Supreme Court's judgment in Kulandagan Chettiar's case. The notification clarified that income taxable in the treaty partner jurisdiction should still be included in the total income chargeable to tax in India, with relief granted as per the DTAA. - Conclusion: The Tribunal rejected the appellant's claim on merits, stating that the income earned by the branches in UAE and Qatar should be included in the total income chargeable to tax in India, as per the notification under Section 90(3). Issue 2: Examination of the Taxability of Income Earned by Branch Offices in UAE and Qatar - Appellant's Request: The appellant requested the Tribunal to remit the matter to the Assessing Officer for examination on merits. - Tribunal's Response: The Tribunal declined this request, emphasizing that the matter should be adjudicated on merits at the Tribunal level. - Legal Position: The Tribunal reiterated that the notification under Section 90(3) and the legislative amendments overruled the previous legal position established by the Supreme Court in Kulandagan Chettiar's case. - Conclusion: The Tribunal held that the income earned by the appellant's branches in UAE and Qatar is taxable in India, as per the notification under Section 90(3), and rejected the appellant's request to remit the matter to the Assessing Officer. Issue 3: Tax Credits, Foreign Tax Reliefs, and Tax Deduction at Source Credits - Appellant's Grievance: The appellant was aggrieved by the partial denial of certain tax credits, foreign tax reliefs, and tax deduction at source credits. - Tribunal's Observation: The Tribunal noted that these issues were due to factual verifications and that the appellant had taken up the matter with the concerned authorities for rectification. - Conclusion: The Tribunal directed the Assessing Officer to deal with the rectifications in accordance with the law and declined to interfere in the matter at this stage. Final Judgment: The appeal was dismissed, with the Tribunal upholding the inclusion of income earned by the appellant's branches in UAE and Qatar in the total income chargeable to tax in India and directing the Assessing Officer to address the factual verifications related to tax credits and foreign tax reliefs. The judgment was pronounced in the open court on February 14, 2020.
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