TaxTMI 
TaxTMI 
2021 (8) TMI 909
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....s against Rs. 1,71,80,438/- claimed by the Appellant: 3.1. The Learned Commissioner (Appeals) is not justified in upholding the action of the Learned Assessing Officer in restricting the claim of Foreign Tax Credit (FTC) relief under section 90 to Rs. 3,71,874/- as against available credit of Tanzanian tax of Rs. 1,71,80,438/- subject to maximum of Rs. 1,37,87,386/-. 3.2. The lower authorities are not justified in considering 'total revenue as per financial statements' as against 'total income' as per the provisions of the Act for the purpose of computation of the relief of FTC under section 90. 3.3. Without prejudice to above, the lower authorities are not justified in not allowing deduction of Tanzanian tax in computing the total income under the provisions of the IT Act in respect of which the Appellant is not eligible for relief. 4. As regards denying deduction under Section 80G in respect of donation of Rs. 3,78,000/-: 4.1. The Assessing Officer ought to have allowed deduction under Section 80G in respect of donations made to the extent of evidences available i.e. for Rs. 3,78,000/-. 4.2. The Learned Commiss....
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....tion, Testing and Supply, Transport worthy export packing, Start up Commissioning Spares, Special Tools and Tackles, Forwarding Charges, Sea Freight up to Dares salaam Port, Comprehensive Insurance on ware house to ware house basis, Covering all Risks, including but not limited to risk associated with transit, flood, fire Storage, burglary theft, erection, testing & commissioning, Tagging/Marking and Painting/Preservation. During the year, total billing done by the Company against above mentioned project is Rs. 63.32 Crores and the same is included in the total turnover of Rs. 380 Crore for the year considering the Tanzanian tax laws, out of the above billing Lake Cement Limited has deducted a sum equivalent to Rs. 1,71,80,438/- against the turnover of Rs. 10,27,10,579/-. The Assessing Officer allowed only a sum of Rs. 3,71,874/- as relief u/s. 90/90A which is arrived as below:- Particulars Amount Total tax liability for the financial year A 1,37,87,386/- Total Income as per financial Statements B 3,80,80,41,649/- Income from Tanzania C 10,27,10,579/- Total tax payable in India attributable to Income from Tanzania D=(A/B)*C 3,7....
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....ce it is necessary to reproduce the relevant clauses of double taxation agreement with the countries in respect of which foreign tax credit has been claimed by assessee. India US DTAA 18. Article 25 of the Indo - US Double Taxation Agreement deals with Relief from double taxation. Clause 2(a) is the relevant provision. It reads as under: 2.(a) Where a resident of India derives income which, in accordance with the provisions of this Convention, may be taxed in the United States, India shall allow as a deduction from the tax on the income of that resident an amount equal to the income-tax paid in the United States, whether directly or by deduction. Such deduction shall not, however, exceed that part of the income-tax (as computed before the deduction is given) which is attributable to the income which may be taxed in the United States." (emphasis supplied) 19. A perusal of the aforesaid provision makes it clear that, if a resident Indian derives income, which may be taxed in United States, India shall allowed as a deduction from the tax on the income of the resident, an amount equal to the tax paid in United States of America, whether dire....
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.... (emphasis supplied) 22. All these clauses are identically worded as Article 25(2)(a) of India US DTAA. 23. Relevant clauses for elimination of double taxation in the treaties under consideration states that, foreign tax credit shall not exceed the part of the income tax as computed before the deduction is given, "which is attributable as the case may be, to the income which may be taxed in that other State". We also note that, these clauses uses the expression 'income', which essentially means 'income' embedded in the gross receipt, and not the 'gross receipt' itself. We therefore do not agree with the computation adopted by Ld.AO. 24. In all the above clauses, for eliminating double taxation of doubly taxable income in the hands of assessee, it would be necessary to establish the taxes paid by assessee in USA, Japan, and Germany. The condition stipulated is very clear that FTC is available on taxes paid in these countries. India- Korea DTAA 25. We note that Ld.AR relied on Article 24(3), whereas, in India Korea DTAA, Article 23 deals with Elimination of double taxation. Clause (a)(i) is the relevant prov....
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.... provides as follows:- "ARTICLE 23 METHODS FOR ELIMINATION OF DOUBLE TAXATION 1. The laws in force in either of the Contracting States will continue to govern the taxation of income in the respective Contracting States except where provisions to the contrary are made in this Agreement. 2. When income is subject to tax in both Contracting States, relief from double taxation shall be given as follows: (a) In India: (i) Where a resident of India derives income which, in accordance with the provisions of this Agreement, may be taxed in Tanzania, India shall allow as a deduction from the tax on the income of that resident, an amount equal to the tax paid in Tanzania. Such deduction shall not, however, exceed that portion of the tax as computed before the deduction is given, which is attributable, as the case may be, to the income which may be taxed in Tanzania. (ii) Where in accordance with any provision of the Agreement income derived by a resident of India is exempt from tax in India, India may nevertheless, in calculating the amount of tax on the remaining income of such resident, take into account the exempted income. ....