2019 (4) TMI 95

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....ct, 1961 (in short 'the Act'). AO allowed the tax credit to the extent of federal taxes paid and did not allow the state tax paid. 3. Aggrieved, assessee filed appeal before the CIT(A), ld. CIT(A) dismissed the appeal of the assessee. 4. Aggrieved by the order of the CIT(A), the assessee is in appeal before us raising the following grounds of appeal: 1. The Order of the Commissioner (Appeals) of Income Tax is in gross violation of the provisions of law and hence is bad in law. 2. The Commissioner of Income Tax (Appeals) has erred in upholding the restriction of Foreign Tax Credit of Income tax remitted to the State of New York of United States of America. 3. The Commissioner of Income Tax (Appeals) has erred in upholding the restr....

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....; propositions were correct, there was clearly an inherent contradiction in those propositions on tax treatment for State Income-taxes paid abroad. There cannot obviously be a tax payment which is neither treated as admissible expenditure, because it is treated as an Income-tax, nor is it taken into account for tax credits, because it is not to be treated as Income-tax. It was incorrect to proceed on the assumption that State Income-tax paid in USA, or in Canada, cannot be taken into account for the purposes of computing admissible tax credits. It was so for the elementary reason that the provisions of a tax treaty, based on which tax credits are said to be inadmissible, cannot be pressed into service to decline a benefit to the assessee, w....

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....racting State at a disadvantage vis-a-vis other taxpayers, section 90 of the Income-tax Act had been amended to clarify any beneficial provisions in the law will not be denied to a resident of a contracting country merely because corresponding provisions in a tax treaty is less beneficial. In the instant case, however, tax credit provisions in Indo US tax treaty were admittedly less advantageous to the assessee, but just because then; was a tax treaty between India and USA, the benefits of the domestic law provisions were being declined to the assessee. That was an interpretation which led to absurdity and called for an interpretation harmonious with the scheme of the Income-tax Act. In case of any conflict between the provisions of the agr....