Foreign tax credit under section 91(1) is limited by section 80RRA where only part of foreign income qualifies for relief.

Section 91(1) of the Income-tax Act must be read harmoniously with section 80RRA when determining relief for foreign tax paid on foreign income. Where the statutory scheme limits the relevant foreign income to 50% for exemption purposes, credit cannot be claimed for the entire foreign tax deducted by the foreign government on the total income. The foreign tax relief is therefore restricted to the income actually brought within the Indian tax relief framework, and full credit is not allowable on the whole foreign income.

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Issues: Whether the assessee was entitled to deduct the full amount of tax deducted at source by the foreign Government from the tax payable in India on the foreign income.

Analysis: Section 91(1) of the Income-tax Act, 1961 was construed along with section 80RRA as part of the same scheme. The Court followed its earlier view that relief under section 91(1) is not available on the whole of the foreign income where only fifty per cent of such income is liable to be considered for the relevant exemption scheme. On that construction, the assessee could not claim credit for the entire foreign tax paid on the total foreign income.

Conclusion: The assessee was not entitled to deduct the full amount of tax deducted at source by the foreign Government; the question was answered in favour of the Revenue and against the assessee.

Final Conclusion: The reference was decided by denying full foreign tax credit and limiting relief consistently with the statutory scheme under sections 91(1) and 80RRA.

Ratio Decidendi: Relief for foreign tax paid under section 91(1) must be construed in harmony with section 80RRA, and full credit is not allowable where the statutory scheme limits the relevant foreign income to fifty per cent.

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