Income Tax Tribunal Upholds Bilt Plea Against Double Taxation
Royalties from Malaysia not to be taxed in India
The Nagpur bench of the Income-Tax Appellate Tribunal (ITAT) has held that royalty received by an Indian resident in Malaysia will not form part of the residents`s total income in India and will be taxable in Malaysia only.
In the case of CIT vs. Ballarpur Industries (Bilt), the company received income in the form of royalty and interest from Malaysia. The company claimed that since it was taxable in Malaysia under the tax treaty, it should be excluded from the computation of income in India. According to the tax treaty between the two countries, royalty derived by a resident of one state may be taxed in the country where the income was derived from.
Bilt relied on the decision of the Karnataka High Court in the case of CIT vs. R M Muthaiah, in which the court held that when a power to tax the income was specifically recognized as vested in the Malaysian government, an exercise of such power by the Indian government was barred. It clearly held that the agreement took away the power of the Indian government to levy tax on income in those specified categories.
