Tribunal directs AO to delete disallowance, verify TDS credit, and grant tax credit under Section 90

The Tribunal allowed the appeal directing the AO to delete the disallowance of scholarship expenses, verify and allow the TDS credit, and grant the tax credit under Section 90 for taxes paid in the UK after due verification.

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Issues Involved:
1. Disallowance of Scholarship Expenses.
2. Non-adjudication of TDS credit.
3. Non-adjudication of relief under Section 90 of the Income Tax Act for taxes paid in the UK.

Issue-Wise Detailed Analysis:

1. Disallowance of Scholarship Expenses:

The primary issue revolves around the disallowance of Rs. 99,84,863/- claimed by the assessee as "Scholarship Expenses" under Section 37 of the Income Tax Act. The Assessing Officer (AO) disallowed this expense, treating it as a gift rather than an expenditure incurred wholly and exclusively for the purpose of the profession. The AO's decision was influenced by similar disallowances in the assessee's previous assessment years (2012-13 and 2014-15), where it was concluded that there was no specific provision in the Income Tax Act allowing such scholarships as business expenses.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting the facts were identical to the previous years where such disallowances were confirmed.

Upon appeal, the assessee argued that similar disallowances in previous years were overturned by the Tribunal, which recognized the scholarships as expenses incurred wholly and exclusively for the profession. The Tribunal had previously noted that the scholarships helped build the assessee's international profile and were thus essential for his professional growth. The Tribunal in the current appeal followed its earlier decisions, finding no distinguishing features in the current year's facts compared to previous years. Consequently, the Tribunal directed the AO to delete the addition, allowing the assessee's ground.

2. Non-adjudication of TDS Credit:

The second issue pertains to the non-adjudication of the credit for TDS amounting to Rs. 6,66,17,666/-. The CIT(A) did not adjudicate this issue, as the assessee had filed a rectification application before the AO, which was pending. The assessee requested the Tribunal to direct the AO to allow the TDS credit as reflected in the Form 26AS.

The Tribunal acknowledged the pending rectification application and directed the AO to verify and allow the TDS credit in accordance with the law. This ground was allowed for statistical purposes.

3. Non-adjudication of Relief under Section 90 for Taxes Paid in the UK:

The third issue concerns the non-adjudication of the relief claimed under Section 90 of the Income Tax Act for taxes paid in the United Kingdom, amounting to Rs. 8,57,07,736/-. The CIT(A) did not adjudicate this issue either, citing the pending rectification application before the AO.

The assessee provided detailed submissions and evidence of the overseas income earned and taxes paid in the UK, arguing that the proportionate tax credit should be allowed under Section 90 since the corresponding income was offered to tax in India. The Tribunal found merit in the assessee's claim and directed the AO to allow the credit for the foreign taxes paid, as per the provisions of the Act and in accordance with the law, after necessary verification. The Tribunal restored the issue to the AO with directions to grant adequate opportunity of hearing to the assessee.

Conclusion:

The appeal was allowed, with the Tribunal directing the AO to delete the disallowance of scholarship expenses, verify and allow the TDS credit, and grant the tax credit under Section 90 for taxes paid in the UK after due verification. The order was pronounced in the open court on 16.12.2021.

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