Wipro Ltd. v. Dy. CIT - Taxpublishers.in

Case Laws Analysis
Relied on Ittiam Systems (P) Ltd. v. ITO 2021 TaxPub(DT) 1735 (Bang-Trib)
Relied on Tecnotree Convergence Ltd. v. ITO 2021 TaxPub(DT) 1482 (Bang-Trib)
Relied on Pr. CIT v. Kawasaki Micro Electronics Inc. 2020 TaxPub(DT) 5531 (Karn-HC)
Followed on Wipro Ltd. v. Addl. CIT 2020 TaxPub(DT) 4218 (Bang-Trib)
Distinguished on Asstt. CIT v. Tecnotree Convergence Ltd. 2020 TaxPub(DT) 2467 (Del-Trib)
Followed on Veerannagiri Gopal Reddy v. ITO 2019 TaxPub(DT) 4751 (Hyd-Trib)
Relied CIT v. Yokogawa India Ltd. 2011 TaxPub(DT) 1778 (Karn-HC)
Followed Dy. CIT v. Glaxo Smithkline Consumer Healthcare Ltd. 2008 TaxPub(DT) 0833 (Chd-Trib)
Relied CIT (Central) v. Nahar Exports Ltd. 2008 TaxPub(DT) 0657 (P&H-HC)
Distinguished CIT v. Lakshmi Machine Works 2007 TaxPub(DT) 1188 (SC)
Relied CIT v. Shri Ram Honda Power Equip 2007 TaxPub(DT) 0899 (Del-HC)
Followed CIT v. Himatasingike Seide Ltd. 2006 TaxPub(DT) 1783 (Karn-HC)
Followed Avada Trading Co. (P) Ltd. v. Assistant CIT 2006 TaxPub(DT) 1222 (Mum-Trib)
Relied CIT v. Micromax Systems (P) Ltd. 2005 TaxPub(DT) 1715 (Mad-HC)
Followed Wipro Ltd. v. Deputy CIT 2005 TaxPub(DT) 1673 (Bang-Trib)
Followed Berger Paints India Ltd. v. CIT 2004 TaxPub(DT) 1388 (SC)
Followed CIT v. Anjum M.H. Ghaswala & Ors. 2001 TaxPub(DT) 1637 (SC)
Applied Motilal Pesticides (I) (P) Ltd. v. CIT 2000 TaxPub(DT) 1241 (SC)
Applied CIT v. Best & Co. (P) Ltd. 1995 TaxPub(DT) 0465 (Mad-HC)
Followed CIT v. Syndicate Bank 1986 TaxPub(DT) 1185 (Karn-HC)
Followed Sutlej Cotton Mills Ltd. v. CIT 1979 TaxPub(DT) 0782 (SC)
Relied Sinclair Murray & Co. (P) Ltd. v. CIT 1974 TaxPub(DT) 0424 (SC)

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The Tax PublishersITA Nos. 879 to 882 of 2008 & 108, 109 & 333 & 334 of 2009 2016 TaxPub(DT) 0327 (Karn-HC) : (2016) 069 (I) ITCL 0597 : (2016) 382 ITR 0179 : (2016) 282 CTR 0346 : (2016) 236 TAXMAN 0209 : (2016) 129 DTR 0068 Wipro Ltd. v. Dy. CIT INCOME TAX ACT, 1961 --Interest under section 234D--LeviabilityApplicability of section 234D--The assessee contended, interest under section 234D is not leviable if a refund was due unless it was actually granted for use in the business of the assessee. Further, section 234D is not applicable as it came into force with effect from 1-6-2003. However, the AO levied interest under section 234D. Both the CIT(A) and the Tribunal upheld the levy of interest. *Held:* On the day the Tribunal passed the impugned order, Explns. (1) and (2) to section 234D was not on the statute book. It was inserted by the Finance Act, 2003, which came into effect from 1-6-2003. This provision has not been considered by the Tribunal while passing the impugned order. Therefore, it is appropriate that the findings recorded by the Tribunal be set aside and the matter is remitted back to the Tribunal for fresh consideration after taking note of the explanations inserted and then decide whether it is prospective in nature or retrospective in nature and whether the said provision applies to the factual situation in the assessee's case. That would meet the ends of justice. Income Tax Act, 1961 Section 234D, Explns. 1 & 2 *REFERRED :* FAVOUR : ?? A.Y. : 2001-02 to 2004-05 INCOME TAX ACT, 1961 --Double taxation releif--Credit for tax paid in foreign countryAssessee entitled to exemption under section 10A--The assessee-company was a public limited company, listed in India and US engaged in the business of software exports, computer peripherals, IT enabled services, etc. The business of the company was carried on through the various business units or divisions of the company. It is the case of the assessee that it runs each business unit as an independent profit center. Accordingly separate accounts are maintained for each business unit. The accounts of the assessee are compiled on the basis of consolidation of all accounts maintained at the business unit levels. The assessee was entitled to exemption under section 10A. The assessee-company was engaged in the business of export of computer software including services for on-site development of software through its permanent establishment (PE) in many countries such as USA, UK, Canada, Japan, Germany. The assessee computes the profits attributable to the PEs, pays the applicable income-taxes on such profits and files the returns of income as required by the domestic tax laws in the respective countries. The clients in some countries withhold tax at source from the consideration payable to the assessee-company which is regarded as the final tax in such countries. It is, therefore, liable to tax in India on its worldwide income including the profits attributable to its PEs in foreign countries and also the incomes which are subjected to withholding tax in foreign countries. The assessee-company claims that it is entitled to relief of such income-taxes paid in the foreign jurisdiction. Since the claim for foreign tax credit is an entitlement like any other pre-paid tax, no revised return as contemplated under section 139(5) was required. The limitations of the domestic tax law, if any, would also not apply where relief is to be allowed as per the provisions of DTAA. By a letter, request was made to allow tax credit at the fag end of the assessment proceedings which was erroneously not claimed earlier. Therefore, the assesses raised a claim for tax credit for the tax paid in foreign countries. The assessing authority relying on s. 139(5) held that the claim is not admissible at this juncture. Thereafter, the assessing authority proceeded to decide the claim on merits also. The AO held that the credit is being claimed under the provisions of section 90, which is applicable for the grant of relief in respect of income on which have been paid both income-tax under this Act and income-tax in the foreign country. The issue of credit under section 90 clearly does not arise. It was also held by the AO that the assessee has also made a claim for tax relief against the State Taxes paid in USA and Canada. A perusal of the DTAA with USA and Canada shows that the claim is admissible only for the taxes paid under the IT Act in India and Federal-tax in USA and Canada. Therefore, the claim for relief for the State Taxes paid is not admissible. The assessee's claim is only admissible for the income for which deduction has been rejected under section 10A i.e., for the unit at Bangalore and a proportionate claim for the foreign-tax payment is being considered. The CIT(A) relying on the judgment in the assessee's case itself for the assessment year 1990-91 as well as 2000-01 where foreign tax credit was allowed, allowed the claim of the assessee for all the years, setting aside the order passed by the assessing authority. The Tribunal felt that the issue requires to be reconsidered by the CIT(A) in view of the facts and arguments considered by the AO in his order. Hence, the issue was restored back to the file of the CIT(A). However, a finding was recorded that when the assessee is not liable to pay tax in view of the exemption under section 10A, the assessee is not entitled to tax relief in respect of taxes paid in the contracting country. *Held:* If the agreement with the foreign country is under clause (a)(i) of section 90(1) for relief against double taxation and not under clause (b) for the avoidance of double taxation; the assessee must show that the identical income has been doubly taxed and that he has paid tax both in India and in the foreign country on the same income. Section 91 makes it clear that if a person who is residing in India has paid tax in any country with which, there is no agreement under section 90 for the relief or avoidance of double taxation, income-tax if deducted or otherwise paid as per law in force in that country, then he shall be entitled to the deduction from the Indian income-tax payable by him in a sum computed on such doubly taxed income, at the Indian rate of tax or the rate of tax of the said country, whichever is lower or the Indian rate of tax, if both the rates are equal. P2- It is necessary to notice that if no tax liability is imposed under this Act, the question of resorting to the agreement would not arise. No provision of the agreement can possibly fasten a tax liability where the liability is not imposed by the Act. P3-For the payment of income-tax in the foreign jurisdiction, the assessee gets the benefit of its credit in this country. P4- When exemption is granted in respect of the income chargeable to tax under this Act in respect of which no benefit is granted in the corresponding country the assessee gets no benefit. However, if the benefit is extended to a portion of the income say for example 90 per cent and 10 per cent is subjected to tax then to that extent the assessee would be entitled to benefit of tax credit as he has paid tax in the foreign jurisdiction as per section 90(1)(a)(i). P5-The total income specified in ss. 4 and 5 chargeable to income-tax is also subject to the provisions of the agreement to the contrary, if any. P6- As per the definition of gross total income, as defined under section 80B(5), the other provisions of the Act will have to be first given effect to. There is no reason why reference to the provisions of the Act should not include section 10A. In other words, the gross total income would be arrived at after considering section 10A deduction also. Therefore, it would be inappropriate to conclude that section 10A deduction is to be given effect to after Chapter VI-A deductions are exhausted. P7- By virtue of the statutory provision namely section 10A of the Act, the income of the assessee from exports in respect of the said unit is exempted from payment of income-tax. The very fact that it is exempted from payment of tax means but for that exemption such income is chargeable to tax. This relief under section 10A is in the nature of exemption although termed as deduction. P8- The statute by itself is not granting any relief. But, by virtue of the statute, if an agreement is entered into providing for such relief, then the assessee would be entitled to such relief. P9-It is not the requirement of law that the assessee, before he claims credit under the Indo-US Convention or under this provision of Act should pay tax in India on such income. P10- In other words, the assessee is entitled to such tax credit only in respect of that income, which is taxed in the United States. This provision became necessary because the accounting year in India varies from the accounting year in America. P11- In other words, the income- tax paid in the same calendar year in United States of America is to be accounted for two financial years in India. Of course, this exercise should be done by the assessing authority on the basis of the material to be produced by the assessee. If the income-tax paid in India is less than the income-tax paid in Canada, the assessee would be entitled to relief only to the extent of tax paid in India and not to the extent of tax paid in Canada. P13- Therefore, the benefit of this treaty is not available to the Indian assessee.P14- If the entire income assessed by the assessee under section 10A is exempted in India, then, the aforesaid clause does not confer any benefit on the assessee. P16-Even in the absence of an agreement under section 90 of the Act, by virtue of the statutory provision, the benefit conferred under section 91 of the Act is extended to the income-tax paid in foreign jurisdictions. India has entered into agreement with the Federal country and not with any State within that country. P17-Even though, India has not entered into any agreement with the State of a country and if the assessee has paid income-tax to that State, the income-tax paid in relation to that State is also eligible for being given credit to the assessee in India. Therefore, the argument that in the absence of an agreement between India and the State, the benefit of section 90 is not available to the assessee is ex facie illegal and requires to be set aside. P18-If the provisions contained in section 90 is more beneficial to the assessee as compared to the terms in the agreement by India with the Government of any country outside India then, notwithstanding such agreement, the provisions of the Act to the extent they are beneficial to that assesseee apply. P19-If prior to the amendment, of section 90 w.e.f. 1-4-2004, there was no thorough provision granting the said benefit as the said benefit was conferred on the assessee under DTAs, the assessee was entitled to the said benefit as DTAAs override the provisions of IT Act. P20- The assessment is nothing but another name for adjustment of the tax liability to. accord with the taxable event in the particular tax payer's case. While determining the tax liability of the assessee, the assessing authority shall allow the credit for all prepaid taxes referred to in section 234B. P21-In the course of assessment the said claim cannot be rejected on the ground that the same is not made in the return filed under section 139(1) and on the ground that no revised return is filed under section 139(5). What the assessee is claiming by way of a letter is to bring to notice of the assessing authority the statutory provisions as well as the provisions of the DTAA under which the assessee is entitled to claim tax benefit, as the said benefit of tax was not claimed in the return filed under section 139(1). SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA Nos. 879 to 882 of 2008 & 108, 109 & 333 & 334 of 2009
2016 TaxPub(DT) 0327 (Karn-HC) : (2016) 069 (I) ITCL 0597 : (2016) 382 ITR 0179 : (2016) 282 CTR 0346 : (2016) 236 TAXMAN 0209 : (2016) 129 DTR 0068

Wipro Ltd. v. Dy. CIT

INCOME TAX ACT, 1961

--Interest under section 234D--LeviabilityApplicability of section 234D--The assessee contended, interest under section 234D is not leviable if a refund was due unless it was actually granted for use in the business of the assessee. Further, section 234D is not applicable as it came into force with effect from 1-6-2003. However, the AO levied interest under section 234D. Both the CIT(A) and the Tribunal upheld the levy of interest. Held: On the day the Tribunal passed the impugned order, Explns. (1) and (2) to section 234D was not on the statute book. It was inserted by the Finance Act, 2003, which came into effect from 1-6-2003. This provision has not been considered by the Tribunal while passing the impugned order. Therefore, it is appropriate that the findings recorded by the Tribunal be set aside and the matter is remitted back to the Tribunal for fresh consideration after taking note of the explanations inserted and then decide whether it is prospective in nature or retrospective in nature and whether the said provision applies to the factual situation in the assessee's case. That would meet the ends of justice.

Income Tax Act, 1961 Section 234D, Explns. 1 & 2

REFERRED :

FAVOUR : ??

A.Y. : 2001-02 to 2004-05

INCOME TAX ACT, 1961

--Double taxation releif--Credit for tax paid in foreign countryAssessee entitled to exemption under section 10A--The assessee-company was a public limited company, listed in India and US engaged in the business of software exports, computer peripherals, IT enabled services, etc. The business of the company was carried on through the various business units or divisions of the company. It is the case of the assessee that it runs each business unit as an independent profit center. Accordingly separate accounts are maintained for each business unit. The accounts of the assessee are compiled on the basis of consolidation of all accounts maintained at the business unit levels. The assessee was entitled to exemption under section 10A. The assessee-company was engaged in the business of export of computer software including services for on-site development of software through its permanent establishment (PE) in many countries such as USA, UK, Canada, Japan, Germany. The assessee computes the profits attributable to the PEs, pays the applicable income-taxes on such profits and files the returns of income as required by the domestic tax laws in the respective countries. The clients in some countries withhold tax at source from the consideration payable to the assessee-company which is regarded as the final tax in such countries. It is, therefore, liable to tax in India on its worldwide income including the profits attributable to its PEs in foreign countries and also the incomes which are subjected to withholding tax in foreign countries. The assessee-company claims that it is entitled to relief of such income-taxes paid in the foreign jurisdiction. Since the claim for foreign tax credit is an entitlement like any other pre-paid tax, no revised return as contemplated under section 139(5) was required. The limitations of the domestic tax law, if any, would also not apply where relief is to be allowed as per the provisions of DTAA. By a letter, request was made to allow tax credit at the fag end of the assessment proceedings which was erroneously not claimed earlier. Therefore, the assesses raised a claim for tax credit for the tax paid in foreign countries. The assessing authority relying on s. 139(5) held that the claim is not admissible at this juncture. Thereafter, the assessing authority proceeded to decide the claim on merits also. The AO held that the credit is being claimed under the provisions of section 90, which is applicable for the grant of relief in respect of income on which have been paid both income-tax under this Act and income-tax in the foreign country. The issue of credit under section 90 clearly does not arise. It was also held by the AO that the assessee has also made a claim for tax relief against the State Taxes paid in USA and Canada. A perusal of the DTAA with USA and Canada shows that the claim is admissible only for the taxes paid under the IT Act in India and Federal-tax in USA and Canada. Therefore, the claim for relief for the State Taxes paid is not admissible. The assessee's claim is only admissible for the income for which deduction has been rejected under section 10A i.e., for the unit at Bangalore and a proportionate claim for the foreign-tax payment is being considered. The CIT(A) relying on the judgment in the assessee's case itself for the assessment year 1990-91 as well as 2000-01 where foreign tax credit was allowed, allowed the claim of the assessee for all the years, setting aside the order passed by the assessing authority. The Tribunal felt that the issue requires to be reconsidered by the CIT(A) in view of the facts and arguments considered by the AO in his order. Hence, the issue was restored back to the file of the CIT(A). However, a finding was recorded that when the assessee is not liable to pay tax in view of the exemption under section 10A, the assessee is not entitled to tax relief in respect of taxes paid in the contracting country. Held: If the agreement with the foreign country is under clause (a)(i) of section 90(1) for relief against double taxation and not under clause (b) for the avoidance of double taxation; the assessee must show that the identical income has been doubly taxed and that he has paid tax both in India and in the foreign country on the same income. Section 91 makes it clear that if a person who is residing in India has paid tax in any country with which, there is no agreement under section 90 for the relief or avoidance of double taxation, income-tax if deducted or otherwise paid as per law in force in that country, then he shall be entitled to the deduction from the Indian income-tax payable by him in a sum computed on such doubly taxed income, at the Indian rate of tax or the rate of tax of the said country, whichever is lower or the Indian rate of tax, if both the rates are equal. P2- It is necessary to notice that if no tax liability is imposed under this Act, the question of resorting to the agreement would not arise. No provision of the agreement can possibly fasten a tax liability where the liability is not imposed by the Act. P3-For the payment of income-tax in the foreign jurisdiction, the assessee gets the benefit of its credit in this country. P4- When exemption is granted in respect of the income chargeable to tax under this Act in respect of which no benefit is granted in the corresponding country the assessee gets no benefit. However, if the benefit is extended to a portion of the income say for example 90 per cent and 10 per cent is subjected to tax then to that extent the assessee would be entitled to benefit of tax credit as he has paid tax in the foreign jurisdiction as per section 90(1)(a)(i). P5-The total income specified in ss. 4 and 5 chargeable to income-tax is also subject to the provisions of the agreement to the contrary, if any. P6- As per the definition of gross total income, as defined under section 80B(5), the other provisions of the Act will have to be first given effect to. There is no reason why reference to the provisions of the Act should not include section 10A. In other words, the gross total income would be arrived at after considering section 10A deduction also. Therefore, it would be inappropriate to conclude that section 10A deduction is to be given effect to after Chapter VI-A deductions are exhausted. P7- By virtue of the statutory provision namely section 10A of the Act, the income of the assessee from exports in respect of the said unit is exempted from payment of income-tax. The very fact that it is exempted from payment of tax means but for that exemption such income is chargeable to tax. This relief under section 10A is in the nature of exemption although termed as deduction. P8- The statute by itself is not granting any relief. But, by virtue of the statute, if an agreement is entered into providing for such relief, then the assessee would be entitled to such relief. P9-It is not the requirement of law that the assessee, before he claims credit under the Indo-US Convention or under this provision of Act should pay tax in India on such income. P10- In other words, the assessee is entitled to such tax credit only in respect of that income, which is taxed in the United States. This provision became necessary because the accounting year in India varies from the accounting year in America. P11- In other words, the income- tax paid in the same calendar year in United States of America is to be accounted for two financial years in India. Of course, this exercise should be done by the assessing authority on the basis of the material to be produced by the assessee. If the income-tax paid in India is less than the income-tax paid in Canada, the assessee would be entitled to relief only to the extent of tax paid in India and not to the extent of tax paid in Canada. P13- Therefore, the benefit of this treaty is not available to the Indian assessee.P14- If the entire income assessed by the assessee under section 10A is exempted in India, then, the aforesaid clause does not confer any benefit on the assessee. P16-Even in the absence of an agreement under section 90 of the Act, by virtue of the statutory provision, the benefit conferred under section 91 of the Act is extended to the income-tax paid in foreign jurisdictions. India has entered into agreement with the Federal country and not with any State within that country. P17-Even though, India has not entered into any agreement with the State of a country and if the assessee has paid income-tax to that State, the income-tax paid in relation to that State is also eligible for being given credit to the assessee in India. Therefore, the argument that in the absence of an agreement between India and the State, the benefit of section 90 is not available to the assessee is ex facie illegal and requires to be set aside. P18-If the provisions contained in section 90 is more beneficial to the assessee as compared to the terms in the agreement by India with the Government of any country outside India then, notwithstanding such agreement, the provisions of the Act to the extent they are beneficial to that assesseee apply. P19-If prior to the amendment, of section 90 w.e.f. 1-4-2004, there was no thorough provision granting the said benefit as the said benefit was conferred on the assessee under DTAs, the assessee was entitled to the said benefit as DTAAs override the provisions of IT Act. P20- The assessment is nothing but another name for adjustment of the tax liability to. accord with the taxable event in the particular tax payer's case. While determining the tax liability of the assessee, the assessing authority shall allow the credit for all prepaid taxes referred to in section 234B. P21-In the course of assessment the said claim cannot be rejected on the ground that the same is not made in the return filed under section 139(1) and on the ground that no revised return is filed under section 139(5). What the assessee is claiming by way of a letter is to bring to notice of the assessing authority the statutory provisions as well as the provisions of the DTAA under which the assessee is entitled to claim tax benefit, as the said benefit of tax was not claimed in the return filed under section 139(1).