Foreign tax credit under DTAA upheld where source-country withholding on professional income was matched by consistent coordinate-bench precedent.

Foreign tax credit under section 90 was held allowable where professional service income was subjected to withholding tax in Japan, Nepal and Singapore under the relevant DTAA framework and the income was offered to tax in India. The ITAT Mumbai applied earlier coordinate-bench rulings on materially identical facts, including the India-Japan, India-Singapore and India-Nepal treaty provisions, and held that credit could not be denied merely because the Revenue viewed the source-country taxation as inconsistent with its own treaty interpretation. The Tribunal also relied on the principle of consistency, found no distinguishing facts, and rejected the Revenue's challenge.

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Issues: Whether the assessee was entitled to foreign tax credit in India for taxes withheld in Japan, Nepal and Singapore on income from professional services, and whether the Revenue's appeals against the allowance of such credit were liable to fail.

Analysis: The dispute turned on the interaction between section 90 of the Income-tax Act, 1961 and the relevant DTAA provisions. The Tribunal noted that the assessee's claim had already been accepted in earlier coordinate-bench decisions on materially identical facts, including the treatment of professional service income under the India-Japan DTAA and the corresponding clauses under the India-Singapore and India-Nepal treaties. It was held that where the source State had deducted tax under its understanding of the treaty and the income had been offered in India, the foreign tax credit could not be denied merely because the Revenue considered the income not taxable in the source State. The Tribunal also applied the principle of consistency and found no distinguishing feature to depart from the earlier rulings.

Conclusion: The foreign tax credit claimed by the assessee was held allowable, and the Revenue's challenge to the order granting such credit was rejected.

Final Conclusion: The assessment relief granted for taxes withheld abroad was sustained, and both Revenue appeals were dismissed.

Ratio Decidendi: Foreign tax credit under section 90 cannot be declined merely because the Revenue considers the source-country withholding inconsistent with its own treaty interpretation, where the tax has in fact been deducted abroad under the treaty framework and the issue is covered by binding coordinate-bench precedent.

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