TaxTMI 
TaxTMI 
2021 (10) TMI 1011
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....nt in Japan, by completely disregarding the decision of Karnataka High Court in the case of Wipro vs DCIT [2015] 62 taxmann.com 26 (Karnataka) and other judicial precedents placed by the appellant on record on the ground that decision of the Karnataka High Court in the case of Wipro vs DCIT is in appeal before the Hon'ble Supreme Court. 2. That on the facts and circumstances of the case and in law, the Ld. AO has erred in withdrawing credit of taxes paid by appellant in Japan on export revenues from sale of software duly allowed in the original assessment order passed under section 143(3) of the Act dated 22 December 2006 without making any adverse inference on the same. 3. That on the facts and circumstances of the case and in law, the Ld. AO has erred in considering incorrect MAT tax rate @ 8.25% instead of the statutory rate of 7.69% provided under section 115JB of the Act. 4.That on the facts and in the circumstances of the cafe and in law, the Ld. AO has erred not granting interest under section 244A(a) of the Act from the first date of the assessment year and under section 244A(b) of the Act from the first date of paymentof tax, on the income-tax re....
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....n'ble Supreme Court. Further, the Assessing Officer calculated MAT liability by taking MAT @ 9.75% instead of 7.69% as provided u/s115JB of the Act. 10. It would not be out of place to point out that during the original assessment proceedings, there was no error in calculation of net liability. It is only in the remand proceedings, and in particular, the rectification order that the Assessing Officer calculated the MAT liability incorrectly. 11. In so far as the claim of 100% credit tax paid in Japan is concerned, this issue was considered by this Tribunal in the case of HCL Comet in ITA No. 5555/DEL/2014, 6162/DEL/2013 and 835/DEL/2014. The relevant findings of the coordinate bench read as under: "48. Facts on record show that during the year under consideration, the assessee has PE in USA and accordingly paid tax in USA on the income arising therefrom. The income which was subjected to tax in USA was included in the total income computed for payment of tax in India. However, in respect of the said income earned from USA, the assessee claimed deduction u/s 10A of the Act in the return of income filed in India and did not claim credit of foreign taxes. 4....
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.... law in force in that country, etc. It is proposed to substitute clause (a) of sub-section (1) of the said section to provide that the Central Government may enter into an agreement with the Government of any country outside India for the granting of relief, inter alia, in respect of income-tax chargeable under the Income-tax Act or under the corresponding law in force in that country to promote mutual economic relations, trade and investment." 29. The memorandum explaining provisions in the Finance Bill 2003 reads as follows: "Double Taxation Avoidance Agreements- extending the scope to include agreements for developing mutual trade and investment Under the existing section 90, the Central Government may enter into an agreement with the Government of any country outside India for granting of relief in respect of income on which have been paid both income-tax under the Income-tax Act and incometax in that country, or for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country, etc. In order to encourage international trade and commerce, it is proposed to insert a new clause in sub-section (1) of Section 90....
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....ed but not defined in this Act or in the agreement referred to in sub-section (1) shall, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf." 30. Sub-section (1) lays down that the Central Government may enter into an agreement with the Government of another country. Clause (a) (i) contemplates situation when tax is already paid on the same income in both the countries and it empowers the Central Government to grant relief in respect of such double taxation. Clause (b) which is wider than clause (a) provides that any agreement may be made for the avoidance of the double taxation of income under the Act and under the corresponding law in force in that country. Clauses (c) and (d) essentially deals with the agreements made for the exchange of information, investigation of cases and recovery of income tax. With effect from 1.4.2004, clause (a)(ii) was substituted to provide for entering into an agreement for granting relief in respect of income tax chargeable under this Act and under c....
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....h the rates are equal. 34. In fact, the Circular No.333 dated April 2, 1982 clarifies the legal position. The said circular reads as under:-- "The correct legal position is that where a specific provision is made in the Double Taxation Avoidance Agreement, that provision will prevail over the general provisions contained in the Income Tax Act, 1961. In fact the Double Taxation Avoidance Agreements which have been entered into by the Central Government under Section 90 of the Income Tax Act, 1961, also provide that the laws in force in either country will continue to govern the assessment and taxation of income in the respective country except where provisions to the contrary have been made in the agreement. Thus where a Double Taxation Avoidance Agreement provided for a particular mode of computation of income, the same should be followed, irrespective of the provisions in the Income Tax Act. Where there is no specific provision in the agreement, it is the basic law i.e., Income tax Act that will govern the taxation of income." 35. It is necessary to notice that if no tax liability is imposed under this Act, the question of resorting to the agreement woul....
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....and 14 of List I of the Seventh Schedule. But making of law under that authority is necessary when the treaty or agreement operates to restrict the rights of the citizens or others or modifies the law of the State. If the rights of the citizens or others which are justiciable are not affected, no legislative measure is needed to give effect to the agreement or treaty. When it comes to fiscal treaties dealing with double taxation avoidance, different countries have varying procedures. In the United States such a treaty becomes a part of municipal law upon ratification by the Senate. In the United Kingdom such a treaty would have to be endorsed by an order made by the Queen in Council. Since in India such a treaty would have to be translated into an Act of Parliament, a procedure which would be time consuming and cumbersome, a special procedure was evolved by enacting section 90 of the Act." 37. It is in this background, when we notice Section 90 of the Act - relief from double taxation is granted in the following circumstances. Firstly, Section 90 (1)(b) of the Act speaks about avoidance of double taxation i.e., Central Government may enter into an agreeme....
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....tion granted, the assessee would be entitled to benefit only in this country on account of the exemption and the benefit in the other country is not extended. Thus when exemption is granted in respect of the income chargeable to tax under this Act in respect of which no benefit is granted in the corresponding country the assessee gets no benefit. However, if the benefit is extended to a portion of the income say for example 90% and 10% is subjected to tax then to that extent the assessee would be entitled to benefit of tax credit as he has paid tax in the foreign jurisdiction as per Section 90 (1)(a)(i) of the Act. 41. In this connection, it is contended on behalf of the Revenue that if the income is chargeable to tax in India, then only the assessee can have the benefit of tax credit in respect of the tax paid in foreign jurisdiction. In respect of exemption under Section 10A, the income derived is not included in the total income. It is not charged to income tax. Therefore, Section 90 of the Act has no application at all. 42. Section 4 of the Act is the charging section. It provides, "Where any Central Act enacts that income-tax shall be charged for any assessme....
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....of which falls under Section 10A, the assessee's entire income from all the undertakings is computed to arrive at the total income. However, the income from such undertaking falling under Section 10A has to be deducted from the total income. 51. If section 10A is to be given effect to as a deduction from the total income as defined in Section 2(45), it would mean that section 10A is to be considered after Chapter VI-A deductions are given from out of the gross total income. The term "gross total income" is defined in section 80B(5) to mean the total income computed in accordance with the provisions of this Act, before making any deduction under this Chapter. As per the definition of gross total income, the other provisions of the Act will have to be first given effect to. There is no reason why reference to the provisions of the Act should not include Section 10A. In other words, the gross total income would be arrived at after considering section 10A deduction also. Therefore, it would be inappropriate to conclude that section 10A deduction is to be given effect to after Chapter VI-A deductions are exhausted. 52. Section 10A (1) speaks of "deduction". The ded....
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....n of India [1995] 1 SCC 274, it was held that merely because exemption has been granted in respect of the taxability of particular source of income, it cannot be formulated that the entity is not liable to tax as contended by the respondents. 54. In fact the Apex Court in the case of Kasinka Trading (supra), a case arising under Customs Act at para 21 has held as under: 'The power to grant exemption from payment of duty, additional duty etc. under the Act, as already noticed, flows from the provisions of Section 25(1) of the Act. The power to exempt includes the power to modify or withdraw the same. The liability to pay customs duty or additional duty under the Act arises when the taxable event occurs. They are then subject to the payment of duty as prevalent on the date of the entry of the goods. An exemption notification issued under Section 25 of the Act had the effect of suspending the collection of customs duty. It does not make items which are subject to levy of customs duty etc. as items not leviable to such duty. It only suspends the levy and collection of customs duty, etc. wholly or partially and subject to such conditions as may be laid down in the notificat....
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.... (1) INDO-US AGREEMENT: 58. 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." 59. 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 allow as a deduction from the tax on the income of the resident, amount equal to the income tax paid in United States of America, whether directly or by deduction. The conditions mandated in the treaty is that if any "income derived" and "tax paid in United States of America on such income", then tax relief/credit shall be grante....