Facts:
a) The assessee, an investment company, had a
branch in Malaysia. It had admitted foreign income from Malaysian branch in its
return of income and had claimed exemption on as per India-Malaysia DTAA.
b) Thus, the issue that arose before the Tribunal
was whether the Malaysian Branch of the assessee-company had a permanent
establishment in Malaysia?.
c) The levy of tax on the income of Malaysian
Branch entirely hinges on the aforesaid question. In case the answer to above
question was in affirmative, the income arising from foreign Branch would be
exempt from tax in view of DTAA between India and Malaysia.
The
Tribunal held as under:
1) The order passed by Tribunal in earlier assessment year relating to
assessee's own case was as under:
a) There was nothing on record to deny the
Malaysian branch of assessee-company the status of a permanent establishment
operating in Malaysia;
b) There was no dispute that the taxability of the
income of the assessee and its Malaysian branch was governed by the India-MalaysiaDTAA (‘treaty’);
c) As far as the income attributable in the hands
of the assessee's Malaysian branch was concerned, the income was to be taxed in
Malaysia;
d) The income generated in the hands of the
Malaysian branch of the assessee company was rent and interest income. They
were generated from assets of assessee situated outside India;
e) Therefore, the income of Malaysian branch of assessee-company
was liable for taxation in Malaysia. Once it was liable for taxation in
Malaysia, treaty made it clear that the said income was not subjected to the
jurisdiction of Indian taxation.
2) Thus, following the aforesaid order, it was
held that the Malaysian Branch of the assessee was having a permanent
establishment in Malaysia and the income arising there from was not taxable in
India in view of treaty.
3) Thus, the appeal of revenue was to be dismissed.
– ACIT v. Sivagami Holdings (P.) Ltd [2014] 42
taxmann.com 418 (Chennai - Trib.)
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