The main legal point established in the judgment is the interpretation of tax treaties and their impact on the taxability of income earned outside India under the IT Act.

S. K. KULSHRESTHA, J.

( 1 ) THE first appeals from serial Nos. 1 to 13 under Section 260a of the IT Act, 1961, have been filed by the Department, the Dy. CIT (2) Ujjain, against the order dt. 15th July, 2003 of the Tribunal in various income-tax appeals in the case of M/s Turquoise Investment and Finance Ltd. , Nagda, and Trapti Trading and Investment Ltd. Since all these appeals raise similar questions, reference is being made to the facts contained in IT Appeal No. 96 of 2003. Insofar as the appeals of the assessees are concerned, being appeals from serial Nos. 14 to 26, the facts have been taken from IT Appeal No. 112 of 2003 which are common to all appeals.

( 2 ) THOUGH the appeals filed by the Department have raised a large number of questions, the appeals have been admitted on the following questions of law:1]. Whether 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? 2]. In view of Section 5 (1) (c) of the IT Act, whether 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? 3]. 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? 4]. Having dismissed the cross-objection filed by the assessee, whether the tribunal was justified in then proceeding to decide the issue raised by the assessee on merits in their favour?

( 3 ) THE facts lie in a narrow compass. The assessee-company filed its return of income declaring income of Rs. 4,30,06,580 by showing its business as investment and finance, which was processed under Section 143 (1) (a) on 18th Jan. , 1996 on the same income and demand amounting to Rs. 1,07,370 was issued by rejecting the credit claimed by the assessee-company on the basis of deemed credit on dividend received from Pan Century Edible Oils Sdn. , Bhd, Malaysia.

( 4 ) THE company filed an appeal before the CIT (A) against the said order which was decided by order dt. 7th Aug. , 1996, passed in IT/86/9697/204 with the finding that the claim of the appellant for credit of deemed TDS on dividend to be allowed towards TDS for the year under appeal. The Department, therefore, preferred an appeal before Tribunal which was decided by order dt. 15th July, 2003 with the observation that DTAA entered into with any country would override the provisions of IT Act, 1961, if they are at variance from the provisions of the Act. It held that from a plain reading of art. XI of the DTAA, it was clear that dividend income would be taxed only in the Contracting States where such income accrued. Aggrieved by the said judgment of the Tribunal, the Department has preferred this appeal.

( 5 ) APROPOS the question No. 2 raised by the Department with reference to the taxability of the income accrued to an assessee with the resident status, learned counsel for the assessee has rightly contended that the question in the facts and circumstances of the present case, is redundant as it is not the case of the assessee that income of an assessee accrued outside the country, could not be taxed within the country under the provisions of Section 5 (1) (c) of the IT Act. The controversy involved, in the present case, is quite different. The question posed for consideration is as to whether in the face of the agreement covered by the provisions of Section 90 of the IT Act, the income accruing outside the country made taxable only in the country where the income is earned, can be taxed in India. Under these circumstances, the question No. 2 raised by the Department does not require any answer in the facts and circumstances of the

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