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2008 (2) TMI 426 - SC - Income TaxWhether Tribunal was justified in holding that dividend income earned by the Assessee 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 IT Act? - Whether In view of s. 5(1)(c) of the IT Act, the finding recorded by the Tribunal that income earned out of dividend from the Company outside the country is not liable to be taxed under the Act? Whether Tribunal 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(A) but was raised for the first time before the Tribunal and that too in an appeal filed by the Department? Whether the Tribunal having dismissed the cross objection filed by the assessee was justified in then proceeding to decide the issue raised by the assessee on merits in their favour? Held 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. VR. S.R.M. Firm & Ors. 1994 (3) TMI 71 - MADRAS High Court which was duly affirmed by this Court in the case of CIT vs. P.V.A.L. Kulandagan Chettiar (Dead) Through LRs 2004 (5) TMI 8 - SUPREME Court were in held 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. In favour of assessee.
Issues involved:
1. Interpretation of Double Taxation Avoidance Agreement (DTAA) provisions regarding taxation of dividend income. 2. Application of Section 5(1)(c) of the Income Tax Act on income accrued outside the country. 3. Consideration of points raised by the assessee before different appellate authorities. 4. Determining the taxability of income based on the DTAA provisions. Analysis: 1. The case involved the interpretation of the DTAA provisions concerning the taxation of dividend income earned by the assessee from a Malaysian company. The Tribunal held that under the DTAA, dividend income would only be taxed in the contracting states where the income accrued. The High Court, following precedents, affirmed this decision, stating that the dividend income derived by the assessee from a company in Malaysia was not liable to be taxed in India under any provisions of the Income Tax Act. 2. Regarding the application of Section 5(1)(c) of the Income Tax Act on income accrued outside the country, the High Court noted that while tax would have been exigible under this section, the DTAA between India and Malaysia dictated that tax should be levied in the country where the income had accrued. The court concluded that the question of taxing income accrued outside the country under Section 5(1)(c) did not arise from the Tribunal's order. 3. The High Court addressed the points raised by the assessee before different appellate authorities. It was observed that the assessee had raised certain points before the CIT(A), and since the CIT(A) had decided against the assessee, the assessee filed cross-objections before the Tribunal. The High Court clarified that the assessee had not raised new points before the Tribunal and that the issue of TDS tax credit could not be addressed due to the earlier decision in favor of the assessee. 4. The judgment highlighted that the decision in this case was consistent with previous rulings by the Madras High Court and the Supreme Court. The Court emphasized that the point involved in the appeals had already been concluded in favor of the assessee based on the precedents cited. The dismissal of the review petition further solidified the decision. Consequently, the appeals were dismissed, with each party bearing their own costs.
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