TaxTMI 
TaxTMI 
2019 (1) TMI 1357
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....uced hereunder: 1. "On the facts and circumstances of the case, the order passed by the Ld.CIT(A) is bad both in the eyes of law and on facts. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law in confirming the disallowance of tax credit of Rs. 1,59,13,089/- claimed by the assessee us/ 90 of the Income Tax Act. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law in confirming the disallowance despite the fact that the credit has been availed in view of the provisions of Article 23(3) of the Double Tax Avoidance Agreement (DTAA) between India and Thailand. 4. On the facts and circumstances of the case, the ld. CIT(A) has erred, both on facts and in law in misinterpretating para 2 of Article 23 which specifically allows the tax benefit for which tax is not payable in Thailand. 5. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law in ignoring the fact that the interpretation placed on para 2 of Article 23 by AO will make the para 2 otiose. 6. (i) On the facts and circumstances of the case, Ld. CI....
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....ion of assessee that Article 23 of DTAA with Thailand allows relief for tax which has been exempted and has never been paid by assessee is falsified. Ld.AO is of the view that Article nowhere allows tax benefit for tax which has not been paid at all. Para 2 of Article 23, specifically allows relief against income "which has been subjected to tax both in India and in Thailand" but in case of assessee, tax has only been paid in India, since dividend income has been exempted under Investment Promotion Act of Thailand. Further, para 3 of Article 23 explains Thai tax payable and specifically excludes exemptions granted of tax, from Thai tax payable, "Thai tax payable" shall be deemed to include any amount which would have been payable as Thai tax for any year but for an exemption or reduction of tax granted for that year or any part thereof under the provisions of the Investment Promotion Act (B.E. 2520) or of the Revenue code (B.E. 2481) which are designed to promote economic development in Thailand, or which may be introduced hereafter in modification of, or in addition to, the existing laws for promoting economic development in Thailand. In view of the above, provisions of t....
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...., provided such credit shall not exceed Indian tax. He placed reliance on decision of Hon'ble Delhi High Court in case of Pr.CIT vs. Krishak Bharati Cooperative Ltd. (2017) reported in (4) TMI 1035, in support of his arguments. 14. On the contrary, Ld.Sr.DR submitted that, by placing reliance upon promotion certificate issued by board of investment of Thailand would not entitled assessee to claim credit of deemed tax payable in Thailand on the dividend income received. He submitted that exemption as per the promotion certificate is applicable for Thailand company and not for assessee as no references made in such certificates on deemed payment of tax on dividend distributed by Thailand company. Ld. senior DR vehemently argued that, unless tax is paid by assessee in Thailand on the dividend income, no credit can be allowed against tax payable on such dividend income in India. 15. We have carefully considered relevant facts and arguments advanced by both sides and have perused submission advanced by both sides on the basis of records placed before us. 16. Before assailing to our view, it is necessary to refer to laws applicable to issue in hand as per Income Tax Act, 1960....
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....e deemed to include any amount which would have been payable as Thai tax for any year but for an exemption or reduction of tax granted for that year or any part thereof under the provisions of the Investment Promotion Act (B.E. 2520) or of the Revenue Code (B.E. 2481) which are designed to promote economic development in Thailand or which may be introduced hereafter in modification of, or in addition to, the existing laws for promoting economic development in Thailand. 4. The amount of Indian tax payable under the laws of India and in accordance with the provisions of this Convention, whether directly or by deduction, by a resident of Thailand, in respect of profits or income arising in India, which has been subjected to tax both in India and Thailand, shall be allowed as a credit against Thai tax payable in respect of such profits or income provided that such credit shall not exceed the Thai tax (as computed before allowing any such credit) which is appropriate to the profits or income arising in India. 5. For the purposes of the credit referred to in paragraph 4, the term " Indian tax payable " shall be deemed to include any amount which would have been payable ....
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.... Indian Taxes. Credit is granted against tax liability in resident country. Therefore, resident would not be required to pay tax to the extent of credit available to him. * in the event assessee is not liable to pay tax in India, or if tax payable by him in India, because of deduction/exemption granted, is less than tax payable outside India, assessee cannot claim credit for entire taxes paid. The credit is out of tax on income, of resident. Thus, if there is no tax or lesser tax because of exemption/deduction in India, there is no double taxation and applicability of article 23 of Indo Thailand DTAA does not arise. 23. For several developing countries tax sparing credits become essential to ensure that incentives offered by them to foreign investors yield results. Commentary to UN Model Convention notes; "One of the principal defects of the foreign tax credit method, in the eyes of the developing countries, is that the benefit of low taxes in developing countries or of special tax concessions granted by them may in large part inure to the benefit of the treasury of the capital-exporting country rather than to the foreign investor for whom the benefits were ....
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....cle 23. 25. We shall now analyse taxability of dividend income under Thailand Revenue Code and whether any exemption has been granted to such dividend income to assessee in Thailand either under 'Revenue Code of Thailand' or as per 'Investment Promotion Act B.E, 2520(1977)'. In paper book filed before us, at pages 103-276 assessee has placed copy of Revenue Code of Thailand. 26. Ld.AR submitted that page 178 deals with Schedule of Income Tax Rate applicable in Thailand, as per Thailand Revenue Code, where for a Company or Juristic Partnership following tax rates apply: Schedule of Income Tax Rate (a) tax from net profit of a company or journalistic partnership - 30% (b) tax under section 70, except those mentioned in (c) - 1 5% (c) tax under section 70, only for the case of payment of assessable income under section 40 (4) (b) - 10% (d) tax under section 70bis - 10% (e) tax from cross income before deduction of any expenses of a foundation or Association operating a business that generates money which is not income under section 65bis (13) - 10% 27. Ld.AR submitted that assessee's case falls under section 70bis, of 'Thailand Revenue Code....