INCOME TAX ACT, 1961

Sections 90 & 91

Double taxation relief - Foreign tax credit - Taxes paid by assessee in Japan, Korea, Germany and USA -

Assessee claimed relief under section 90 for taxes paid in USA, Germany, Japan and Korea, AO took the view that effective rate of taxation by USA exceeded 100 per cent of income and hence, assessee was eligible for relief of Rs. 40,48,267 under section 90, as it was the amount of tax paid in India in respect of receipt of Rs. 12,60,52,970 from outside India. Held: Respective treaty countries withheld taxes against income from the source State at a particular rate. Article 25 of Indo-US Tax Treaty, Article 23(2) of Indo-Japan Tax Treaty and Article 23(2) Indo-Germany Tax Treaty deals with elimination of double taxation and allows FTC in India to the extent of tax being paid in these countries, whereas, Article 23 of Indo-Korea Treaty allows FTC which would not tax payable on such doubly taxable income in India. AO failed to understand whether the treaty provisions were applicable in present facts with these countries regarding granting of FTC to the assessee. On perusal of treaty provisions, it was clear that assessee was eligible for FTC in full, amounting to taxes paid in USA, Japan and Germany. Only in case of Korea, FTC was limited to taxes payable on such doubly taxed income in India, before any deduction. In other words, FTC was limited to lesser of taxes paid in Korea or India.

Relied:Wipro Ltd. v. Dy. CIT (2016) 382 ITR 179 (Karn-HC) : 2016 TaxPub(DT) 327 (Karn-HC).

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2013-14

SUBSCRIBE FOR FULL CONTENT