INCOME TAX ACT, 1961

Section 115JB

MAT - Book profit under section 115JB - Income earned from permanent establishment in foreign countries -

AO noticed that while computing total income assessee excluded the income earned in Malaysia and Sri Lanka amounting of Rs. 159,62,39,471 on the basis of DTAA entered into by India with Malaysia and Sri Lanka. AO was of the view that in case of a resident person as per provision of IT Act, global income is taxable in India. The assessee was accordingly asked to show-cause as to why income earned in Malaysia and Sri Lanka excluded from taxable income not be added back assessee made detailed submissions which not found acceptable to AO noted that assessee had followed 'exemption' method whereby all the profits derived from projects in Malaysia and Sri Lanka was excluded from the inclusion in computation of income for the purpose of taxation in India. AO was of the view that assessee should have included overseas income against which credit for tax split abroad should have been availed. AO, therefore, following the order of his predecessor, held the income aggregating of Rs. 159,62,39,471 to be taxable for the purpose of computing MAT under section 115JB. He, however, held that credit of taxes paid in Malaysia and Sri Lanka, be given as per DTAA entered with Malaysia and Sri Lanka. Held: Income earned from permanent establishment in foreign countries was liable to be excluded from the computation of book profit and when such income was not to be taxed as per DTAA, it could not be brought to tax indirectly under the deeming fiction under section 115JA.

Followed:Tokyo-Mitsubishi UFJ Ltd v. ADIT (2014) 152 1TD 796 (Del-Trib) : 2014 TaxPub(DT) 3990 (Del-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2016-17

INCOME TAX ACT, 1961

Section 80-IA

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