SUPREME COURT OF INDIA

Deputy Commissioner of Income tax, Ujjain

v.

Torqosiue Investment & Finance Ltd.

ASHOK BHAN AND DALVEER BHANDARI, JJ.

CIVIL APPEAL NOS. 4485, 4486, 4489, 4492, 4495 TO 4499-4502 OF 2007

February 20, 2008

Section 5 of the Income-tax Act, 1961, read with article XI of the Double Taxation Avoidance Agreement between India and Malaysia - Income - Accrual of - Assessment year 1992-93 - Assessee-company, engaged in investment and finance business, filed its return and claimed refund of certain amount on basis of credit of deemed TDS on dividend received from a Malaysian company - Assessing Officer, however, raised certain demand by rejecting credit claimed by assessee - Whether in view of decision in case of CIT v. VR. S.R.M. Firm [1994] 208 ITR 400 (Mad) which was affirmed by Supreme Court in case of CIT v. P.V.A.L. Kulandagan Chettiar 267 ITR 654/137 Taxman 460, dividend income derived by assessee from a company in Malaysia was not liable to be taxed in its hands in India - Held, yes

FACTS

The assessee-company, engaged in the investment and finance business, filed its return and claimed refund of certain amount on the basis of credit of deemed TDS on dividend received from a Malaysian company. The Assessing Officer, however, raised certain demand by rejecting the credit claimed by the assessee. On appeal, the Commissioner (Appeals) accepted the assessee’s appeal. On revenue’s appeal, the Tribunal held that from a plain reading of article XI of the DTAA between India and Malaysia, it was clear that dividend income would be taxed only in the Contracting States where such income accrued. On further appeal, the High Court, following the decision in the case of CIT v. VR. S.R.M. firm [1994] 208 ITR 400 (MAD), which was affirmed by the Supreme Court in the case of CIT v. P.V.A.L. Kulandagan Chettiar [2004] 267 ITR 654/137 Taxman 460 (SC) held that the Tribunal was justified in holding that dividend income derived by the assessee from a company in Malaysia was not liable to be taxed in its hands in India under any of the provisions of the Act.

On revenue’s appeal to the Supreme Court:

HELD

The point involved in the instant appeals stood concluded in favour of the assessee and against the revenue by the decision of the Madras High Court in VR. S.R.M. Firm’s case (supra) which was duly affirmed by the Supreme Court in the case of P.V.A.L. Kulandagan Chettiar (supra). The review petition filed against the decision in P.V.A.L. Kulandagan Chettiar’s case (supra) was also to be dismissed. [Para 9]

Accordingly, the instant appeals were to be dismissed. [Para 10]

Case Review :

CIT v. P.V.A.L. Kulandagan Chettiar [2004] 267 ITR 654/137 Taxman 460 (SC) - Followed [Para 9]