Case Law Details
RELEVANT PARAGRAPHS:
9. We have considered the rival submissions and also perused the relevant material on record. It is observed that a similar issue was involved in assessee’s own case for the earlier years i.e. AY 1991-92, 92-93 & 93-94 and the Tribunal vide its consolidated order dated 12.6.1998 has decided the same in favour of the assessee for the said years following the decision of Special Bench of ITAT in the case of P.A.V.L. Kulandayan Chettiar (supra) which has been subsequently affirmed by the Hon’ble Supreme Court. The learned DR, however, has made an attempt to distinguish the said decision by raising various contentions. First of all he has submitted that the Tribunal has applied a wrong treaty to decide the issue in assessee’s own case for AY 1991-92, 92-93 & 93-94 inasmuch as the treaty taken into consideration by it was applicable Only from AY 2000-01. He has contended that the treaty entered into between India and USSR as notified by Notification No.GSR-812(E) dated 4.9.1989 was actually applicable upto AY 1999-2000. He has also filed a copy of the said treaty and it is worthwhile to refer to Article 7 of the said treaty which, being relevant in the present context, is extracted below:-
“7(1) The profits of a resident of a Contracting State shall be taxable only in that State unless the resident carries on business in the other Contracting State through a permanent establishment situated therein. If the resident carries on business as aforesaid, the profits of the resident may be taxed in the other State but only so much of them as is directly or indirectly attributable to that permanent establishment. “
10. The relevant Article 7(1) of the treaty between India and USSR which is stated to be relied upon by the Tribunal while deciding the similar issue in assessee’s own case for AY 1991-92, 92- 93 & 93-94 and which is claimed to be applicable only from 2000-01 by the learned DR reads as under:-
“7(1). The profits derived in a Contracting State by an enterprise of the other Contracting State may be taxed in the first-mentioned State only if it is derived through a permanent establishment situated therein and only so much of them as is attributable to the activity of such permanent establishment. “
11. A comparative reading of the provisions of Article 7 (1) as contained in both the treaties shows that there is no material change in the position insofar as the present context is concerned. The provisions of both the articles are similar in this regard inasmuch as the profits derived from the business carried on through a permanent establishment in a contracting state by a resident or an enterprise of the other contracting state is liable to be taxed in the first mentioned state to the extent the same is directly or indirectly attributable to the permanent establishment and the same thus shall not be taxable in other contracting state. In the present case, the profit in question was earned by the assessee company in USSR through its PE in that country and since it is not the case of the Revenue that the assessee company had no permanent establishment in USSR or that any portion of the profit earned by it in USSR was not attributable to that PE, it follows that the entire income earned by the assessee company in USSR through its PE was chargeable to tax in that country as per Article 7 (1) of the DTAA between India and USSR.
