TaxTMI 
TaxTMI 
2020 (3) TMI 1170
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.... the case in confirming the action of Id. AO in not granting Foreign Tax Credit of Rs. 21,88,147/- as claimed by the Appellant u/s 91 of the Act. 3. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. 4. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in levying interest u/s 234A/B/C of the Act. 5. The learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s 271(l)(c) of the Act. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 2. The 1st issue raised by the assessee is that the learned CIT-A erred in confirming the part disallowance of interest expenses for Rs. 5 lakh out of the total disallowance of Rs. 9,97,000/- made by the AO on account of diversion of interestbearing fund under section 36(1)(iii) ....
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....Accordingly, the learned AR claimed that it can be presumed that the investment was made out of the interest free fund of the assessee. 7. On the other hand, the learned DR vehemently supported the order of the authorities below. 8. We have heard the rival contentions of both the parties and perused the materials available on record before us. Admittedly, the own fund of the assessee as on 31st March 2012 was excess to the amount of investment as evident from the Balance Sheet of the assessee placed on page 8 of the paper book. The relevant extract of the audited financial statement stands as under: Particulars Note No. As on 31st march 2012 As on 31st march 2011 Rs. Rs. Rs. Rs. 1. EQUITY AND LIABILITIES 1.Shareholder's funds a.Share capital b.Reserves and surplus 1 2 48,450,000.00 17,727,486.13 66,177,486.13 48,450,000.00 13,376,310.55 61,826,310.55 In view of the above, it can be presumed that the investment was made by the assessee for Rs. 2.43 crores out of its own funds despite the fact that the payment was made by the assessee out of the HDFC OD account as discussed above. In holding so we place our reliance on the j....
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....ed TDS for Rs. 23,17,075.00 being 7% of the income received by the assessee. Accordingly the assessee claimed that it has paid the taxes on the foreign income at the rate of 7% whereas the rate of income tax in India is 30.90% the income. As per the assessee, it is entitled for the relief under section 91 of the Act, with respect to doubly taxed income for the entire amount of TDS deducted in the foreign country being lower rate of tax in the said country. 10.1 The assessee also submitted that provision of section 91 of the Act have referred the income and not overseas net profit, net income or proportionate income. Therefore the rate of tax in the foreign country should be worked out after considering the gross receipts and the amount of TDS deducted which comes out at 7% which is lower than the rate of tax in India. Accordingly the assessee claimed the foreign tax credit of Rs. 23,17,075.00 under section 91 of the Act. 10.2 However, the AO disagreed with the contention of the assessee by observing that the tax in the foreign country cannot be applied to the amount of gross receipts. As such, the amount of income which is getting tax twice should be worked out for determining t....
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....he excess tax credit claimed by assessee of Rs. 21,88,147/- - (23,17,075 - 1,28,928) is hereby disallowed in view of the provisions of section 91 of the Act. Aggrieved assessee preferred an appeal to the learned CIT (A) 11. The assessee before the learned CIT (A) submitted that the gross foreign income which is being taxed in India should only be considered as doubly taxed income and not the element of profit on which tax has been paid. 12. However, the learned CIT (A) disregarded with the contention of the assessee by observing that the relief under section 91 of the Act is available to the assessee with respect to the doubly taxed income. The doubly taxed income shall be construed with respect to the net amount of receipts i.e. gross receipts minus the expenses. Thus the learned CIT (A) confirmed the order of the AO. Being aggrieved by the order of the learned CIT (A), the assessee is in appeal before us. 13. The learned AR before us submitted that the assessee has paid the tax in the foreign country @ 7% which is less than the rate of tax in India. Therefore, the assessee should be given relief for the entire amount of tax paid in the foreign country. The learned AR in supp....
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....provides mechanism for determining the rate of tax in the foreign country. It requires that the income tax/super tax actually paid in the foreign country as per the laws prevailing therein and dividing the same by the whole amount of income as assessed in the foreign country. The relevant extract of the clause (iii) to explanation of section 91 of the Act reads as under: Explanation.-In this section,- (i) *********** (ii) ********* (iii) the expression "rate of tax of the said country" means income-tax and super-tax actually paid in the said country in accordance with the corresponding laws in force in the said country after deduction of all relief due, but before deduction of any relief due in the said country in respect of double taxation, divided by the whole amount of the income as assessed in the said country; 15.2 From the above, it is revealed that the amount of tax/super tax needs to be divided by the whole amount of income to work out the rate of tax. The word used whole amount of income denotes the income which signifies after the expenses. The word gross receipts have not been used therein. Even under the normal parlance, the income denotes only to the net prof....