Foreign tax credit under the India-Tanzania DTAA was limited to Indian tax on the same income; section 80G claim was remanded.

Foreign tax credit under section 90 was available for tax paid in Tanzania, but the credit was confined to the lower of the foreign tax actually paid and the Indian tax attributable to the same doubly taxed income under Article 23 of the India-Tanzania DTAA. The Tribunal treated the treaty relief mechanism as pari materia with earlier double taxation relief provisions and allowed the claim only to that extent. The section 80G deduction claim, however, had not been examined by the first appellate authority and was restored for verification, with the assessee given an opportunity to file supporting evidence.

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Issues: (i) Whether the assessee was entitled to foreign tax credit under section 90 in respect of tax paid in Tanzania and whether the credit was to be limited to the tax payable in India attributable to the foreign income; (ii) Whether the claim for deduction under section 80G required fresh adjudication.

Issue (i): Whether the assessee was entitled to foreign tax credit under section 90 in respect of tax paid in Tanzania and whether the credit was to be limited to the tax payable in India attributable to the foreign income.

Analysis: Article 23 of the India-Tanzania DTAA was held to be pari materia with the corresponding double taxation relief provisions considered earlier by the Tribunal. The relief mechanism was applied on the basis that foreign tax credit is available where income is taxable in both States, but the credit cannot exceed the Indian tax attributable to the doubly taxable income. The computation, therefore, had to be confined to the lower of the tax paid in Tanzania and the tax payable in India on the foreign income.

Conclusion: The assessee was entitled to foreign tax credit to the extent determined by the lower-of-two rule, and the matter was partly in favour of the assessee.

Issue (ii): Whether the claim for deduction under section 80G required fresh adjudication.

Analysis: The claim had not been adjudicated by the first appellate authority, and the assessee stated that supporting evidence was available to substantiate the donation claim. The issue was therefore restored for verification and decision on the available evidence.

Conclusion: The issue was remanded to the Assessing Officer for fresh consideration, with opportunity to the assessee to produce supporting evidence.

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