Assessee, a firm, earned business income from rubber estates in Malaysia. During the year, assessee also sold an immovable property situated at Malaysia\u00a0\u00a0 and earned short term capital gains. The Assessing Officer charged the business income as well as capital gains to tax in India. CIT(A) and Tribunal held that<\/p>\n
(i) business income earned in Malaysia was not taxable in India as the assessee\u00a0\u00a0 did not have a permanent establishment in India (ii) capital gain was also not taxable in India as the property was situated in Malaysia. High Court upheld the view of the Tribunal and held that where a DTAA contains a specific provision, laws of any one of the respective Contracting States cannot be applied. High Court also held that as the DTAA provided that the aforesaid incomes \u2018may be taxed\u2019 in Malaysia, the tax authorities in India did not have the right to assess the same income.<\/p>\n
\u00a0<\/p>\n
Whether income from business carried on in Malaysia and from sale of an immovable property in Malaysia would be taxable only in Malaysia and not in India?<\/p>\n
\u00a0<\/p>\n
Section 90(2) of the Act provides that in relation to an assessee to whom a DTAA applies, the provisions of the Act shall apply to the extent they are more beneficial to the assessee.<\/p>\n
\u00a0<\/p>\n
With respect to the meaning of the term \u2018may be taxed\u2019, Supreme Court did not \u201center into an exercise in semantics as to whether the expression \u201cmay be\u201d will mean allocation of power to tax or is only one of the options and it only grants power to tax in that State and unless tax is imposed and paid no relief can be sought.\u201d Supreme Court, however, held that if an Indian resident is deemed to be<\/p>\n
\u00a0<\/p>\n
\u00a0<\/p>\n
a resident of other Contracting State where his personal and economic relations\u00a0\u00a0 are closer, then his residence in India will become irrelevant and the provisions of\u00a0 the DTAA will prevail over sections 4 and 5 of the Act. Supreme Court observed that the immovable property from which income was derived was situated in Malaysia. Similarly, assessee earned business income from the business of rubber plantations which was carried out\u00a0 in\u00a0 Malaysia\u00a0 and\u00a0 the\u00a0 assessee did not\u00a0 have a permanent establishment in India. Supreme Court, therefore, held that the business income and capital gains cannot be taxed in India because the assessee has closer economic relations with Malaysia where the permanent establishment has been set up and where the immovable property is situated. Supreme Court\u00a0\u00a0 also rejected the argument of the revenue that capital gain is not income and therefore not covered by the DTAA. Supreme Court held that capital gain derived from immovable property is income and covered under Article 6 of the DTAA.\u00a0 \u00a0(CA No. 5746\/5752 & Ors of 1997\/2006\/& 2451 of 2000 dt. 26-5-2004)<\/p>\n
Editorial: <\/em><\/strong>Review petition against CIT v. Kulandagan Chettiar (P.V.A.L.) (2004) 267 ITR 654 <\/em><\/strong>dismissed on account of delay as well as on merits CIT v. Kulandagan Chettiar (P.V.A.L.) (2008) 300 ITR 5 (SC).<\/em><\/strong><\/p>\n \u00a0<\/em><\/strong><\/p>\n \u201cIn a gentle way, you can shake the world.\u201d<\/em><\/p>\n – Mahatma Gandhi<\/p>\n","protected":false},"excerpt":{"rendered":" S. 90 : Double taxation relief \u2013 Business income arising out of rubber plantations in Malaysia cannot be taxed in India – capital gains derived from immovable property is not taxable in India as the property being situated in Malaysia – In case of conflict between Income-tax Act and the provisions of DTAA, provisions of DTAA would prevail over the provisions of Income-tax Act – DTAA India – Malaysia [S. 4, 5, 28(i), 45, Art . 4, 5, 6, 7 & 22] <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-13393","post","type-post","status-publish","format-standard","hentry","category-income-tax-act"],"acf":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p9S2Rw-3u1","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13393","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/comments?post=13393"}],"version-history":[{"count":1,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13393\/revisions"}],"predecessor-version":[{"id":13394,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/posts\/13393\/revisions\/13394"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/media?parent=13393"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/categories?post=13393"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/itatonline.org\/digest\/wp-json\/wp\/v2\/tags?post=13393"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}