T. V. K. NATARAJA CHANDRAN, A.M.: In this appeal by Revenue which is directed against order of AAC, issue involved is whether foreign income of Rs. 12,528 being share income form M/s A. Y. AR. M. AR. Firm, Seramban, Malaysia is includible in total income of assessee, resident HUF in accordance with provisions of Avoidance of Double Taxation Agreement between India and Malaysia. assessee is resident HUF and drives income from property, own business and share income from A. Y. AR. M. AR. Firm, Seramban, Malaysia and also share income from M/s AR.M.AR.S. Saminathan Chettiar Firm, Shanmuganathapuram. For asst. yr. 1980-81, ITO included share income of Rs. 12,258 from foreign firm in total income subject to DIT Relief on production of necessary documents. On appeal AAC deleted foreign income from total income inasmuch as Tribunal in case of 3rd ITO vs. Shri M. Palaniappan, Karaikudi (ITA Nos. 1198, 1199 & 1200/Mds/83 dt. 20th Oct., 1983) has duly considered observation of Madras High Court contained in case of A. A. L. Ramaswamy (TCP No. 169 of 1982 dt. 14th Feb., 1983) and still excluded foreign income from total income on ground that Madras High Court decision was rendered on different context of facts and issue decided by special Bench of Tribunal did not arise for consideration in case decided by High Court. Revenue is in appeal urging that order of AAC should be set aside and that of ITO be restored. ld. Departmental Representative urged that directions of AAC to delete such portions of foreign income as has been assessed in Malaysia was not in keeping with IT Act or observation of Madras High Court in case cited supra. none appeared for respondent although registered notice has been duly sent in this regard. After due consideration, we are of opinion that issue involved stands fully Bench of Tribunal in case of Kulandayan Chettiar vs. ITO (1983) 3 ITD 426 (Mad) (SB). appeal has been filed by Revenue only to keep matter alive. In this connection it is to be observed that in case of A. . L. Ramasawamy, cited supra ITO included foreign income of Rs. 27,035 subject to DIT relief on production of necessary certificate. AAC was of view that if foreign income was taxed in Malaysia it should be treated s not taxable in India though includible in total income in India for rate purposes only. If foreign income was not taxed in Malaysia same was taxable in India. In this view of matter, he directed ITO to revise assessment accordingly. On appeal Tribunal did not accept interpretation of Double Taxation Avoidance Agreement given by AAC. reference application under s. 256(1) was refused by Tribunal and High Court has called for statement of he case under s. 256(2) at instance of Department. On reference, High Court observed that neither assessee officer nor AAC nor Tribunal had gone into question whether foreign income was actually taxable or not. Further it observed that none of authorities below referred to terms of Agreement and given decision thereon. It is in this context that High Court made certain observation which is relied upon by Revenue to urge that AAC erred in giving direction to ITO. Further High Court has observed that only when two facts namely whether assessee has been taxed in Malaysia and if so at what date it should be decided, whether assessee was liable to be taxed on foreign income and if so what was his liability to pay tax on foreign income. In this view of matter, therefore, High Court did not accept question referred to by Tribunal and dismissed petition. From above facts it will be abundantly clear that High Court has not answered question and, therefore, High Court has not decided issue on merits of case. Further whole approach of issue was confined to double income taxation relief only and not as has been pointed out by Madras High Court in that case whether foreign income was taxable at all in India. Special Bench of Tribunal has set upon itself task of considering terms of agreements for avoidance of double taxation and addressed itself to question whether Malaysian income was taxable India and whether it should be included at least for rte purposes. Special Bench of Tribunal held that income was not taxable in India and was not includible even for rate purposes if firm has permanent establishment abroad and there is no other permanent establishment in India over which assessee cold exercise power of control and management. orders of authorities are silent on this aspect. Respectfully following Special Bench decision of Tribunal in case of M. Palaniappan (supra), we uphold order of AAC as it is in accordance with decision of Special Bench of Tribunal. In result, appeal is dismissed. *** THIRD INCOME TAX OFFICER v. AB. M. AR. AP. ARUNACHALAM CHETTIAR