2024 (10) TMI 745 - AT - Income Tax

Tax Tribunal Overturns Double Taxation: Grants Foreign Tax Credit of Rs. 98,852 to Assessee, Corrects NFAC Error.

The ITAT ruled in favor of the assessee, overturning the NFAC's denial of a foreign tax credit of Rs. 98,852. The tribunal found that the lower ... Denial of foreign tax credit - AO having taxed the additional income offered by the assessee in the revised computation denied foreign tax credit while completing the assessment - HELD THAT:- Only an additional income towards salary from HSBC USA was offered in the revised computation during the course of assessment proceedings. A sum as already offered by the assessee in the original return of income. Hence, the lower authorities ought not to have taxed the very same sum again in the assessment. The action of the AO is without any basis and reflects complete non-application of mind. Assessee for the additional income offered in the revised computation had claimed foreign tax credit which would be obviously allowable to the assessee. It is not the case of the revenue that the assessee had not paid the tax to the tune of Rs. 98,852/- in USA. Hence, we hold that the assessee would be entitled for foreign tax credit - We also direct the ld AO to delete the addition made reflecting the double addition - Appeal of the assessee is allowed. Issues:Appeal against order of National Faceless Appeal Centre regarding foreign tax credit denial.Analysis:The appeal in ITA No.1778/Del/2022 for AY 2013-14 was filed against the order of the National Faceless Appeal Centre (NFAC) in Appeal No. ITBA/NFAC/S/250/2022-23/1046001421(1) dated 27.09.2022. The main issue in this appeal was the denial of foreign tax credit amounting to Rs. 98,852 by the lower authorities. The assessee, an individual with various sources of income, filed a revised computation of income during scrutiny assessment proceedings, offering additional income earned in the USA towards salary. The assessee claimed foreign tax credit for this additional income, which was allowed by the Assessing Officer initially. However, the AO proceeded to add the same salary income in the original return, resulting in double taxation. The AO then denied the foreign tax credit of Rs. 98,852 in the revised computation, a decision upheld by the NFAC without proper justification.Upon review, the ITAT found that the assessee had offered only an additional income of Rs. 8,14,961 in the revised computation, with Rs. 29,37,294 already declared in the original return. The lower authorities erred in taxing the same sum of Rs. 29,37,294 again, indicating a lack of proper consideration. The assessee was entitled to the foreign tax credit of Rs. 98,852 as claimed, as there was no dispute regarding the tax payment in the USA. The ITAT directed the AO to delete the double addition and allow the foreign tax credit. Consequently, the grounds raised by the assessee were upheld, and the appeal was allowed.In conclusion, the ITAT ruled in favor of the assessee, holding that the denial of foreign tax credit by the lower authorities was unjustified. The decision highlighted the importance of proper assessment and consideration of income to avoid double taxation and ensure the rightful entitlement of tax credits.