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Issues:
1. Whether Indian income-tax was chargeable on foreign income earned by the assessee. 2. Interpretation of the Double Taxation Avoidance Agreement between India and Malaysia. 3. Taxability of various sources of foreign income under Indian Income-tax Act. Issue 1: The primary issue in this case was whether Indian income-tax was chargeable on the foreign income earned by the assessee. The assessee argued that the Agreement between the Government of India and Malaysia exempted Indian income-tax on foreign income. However, the Assessing Officer disagreed and taxed the entire foreign income. The CIT (Appeals) later allowed the assessee's claim based on a previous Tribunal order. The Department challenged this decision, arguing that the Agreement required the foreign income to be included in the total income. The Tribunal analyzed the Double Taxation Avoidance Agreements' role, emphasizing that they do not supersede national tax laws but aim to avoid double taxation. Issue 2: The Tribunal examined the taxability of different sources of foreign income under the Indian Income-tax Act. Firstly, regarding income from the property in Kuala Lumpur, the Tribunal referred to the Agreement's provision stating that income from immovable property may be taxed in the contracting state where the property is situated. It concluded that no tax was exigible in India on the rental income from the property in Kuala Lumpur. Secondly, concerning income from business, the Tribunal remitted the decision back to the Assessing Officer for further consideration on whether the enterprises carried on business in India through a permanent establishment. Lastly, on income from other sources like dividends and lottery winnings, the Tribunal held that the dividend income was not taxable in India under the Agreement, while lottery winnings were chargeable to Indian income-tax. Issue 3: The Tribunal also addressed the compensation received for vacating premises in Kuala Lumpur. It determined that the compensation received for surrendering the tenancy right was to be treated as income from property. Even though the Agreement did not specifically cover such receipts, the compensation was considered capital account income and not chargeable under the Indian Income-tax Act. The Tribunal partially allowed the departmental appeal for statistical purposes, ruling in favor of the assessee on various aspects of foreign income taxability under the Agreement. This detailed analysis of the judgment highlights the interpretation of the Double Taxation Avoidance Agreement between India and Malaysia and the taxability of different sources of foreign income under the Indian Income-tax Act.
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