TaxTMI 
TaxTMI 
2025 (7) TMI 442
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....nch office in Manila, Philippines, through which it carried out certain business operations catering to global clients. The financials of the branch were incorporated in the books of the Indian company, and the consolidated Profit & Loss account reflected the income and expenditure of the Philippines branch as well. The original return of income for A.Y. 2020- 21 was filed by the assessee on 29.12.2020, declaring total income of Rs. 1,24,60,12,980/-, which was subsequently revised on 04.01.2021, offering the same income. The return was selected for complete scrutiny under CASS, and statutory notices under section 143(2) were issued on 29.06.2021, followed by multiple notices under section 142(1) dated 08.11.2021, 21.02.2022, and 20.07.2022. The assessee furnished its responses electronically through the ITBA portal, submitting detailed workings, explanations, and documentary evidence as called for. 3. In the course of assessment, the assessee disclosed that it had earned foreign exchange fluctuation gain of Rs. 1,44,87,973 and also a translation reserve gain of Rs. 9,39,21,678, out of which a corresponding ICDS VI adjustment of Rs. 9,40,58,390 was offered as income as required u....
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.... 5. Based on these findings, the PCIT concluded that the assessment order was passed without proper enquiry or verification and accordingly attracted the mischief of Explanation 2 to section 263(1). The PCIT thus set aside the assessment order and directed the AO to pass a fresh assessment order after conducting necessary enquiry and verification and recomputing the income by disallowing the deduction under section 80G and revising the foreign income offered to tax in India. 6. Aggrieved by the revisionary order, the assessee has preferred the present appeal raising following grounds - The Appellant aggrieved by the Order passed by the Principal Commissioner of Income Tax, Ahmedabad, (PCIT') under Section 263 of the Income Tax Act, 1961 ('the Act) prefers this appeal against the same on following amongst other grounds which are without prejudice to each other: 1. The order passed by the learned PCIT under Section 263 of the Act is bad in law and needs to be quashed. It is submitted it be so held now. 2. The learned PCIT erred on facts and in law in holding that the order passed by the Assessing officer ('AO') under Section 143(3) of th....
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....et all the conditions required under Section 80G of the Act. It is submitted it be so held now. Your appellant prays for leave to add, alter and/or amend/withdraw any and/or all of the grounds adduced above. 7. During the course of hearing, the learned Authorised Representative (AR) of the assessee appeared and advanced detailed submissions challenging the validity of the revisionary order passed by the PCIT. The AR submitted that the assessment for A.Y. 2020-21 was completed, pursuant to a detailed scrutiny proceeding initiated through notices issued under section 143(2) and several notices under section 142(1). In response to these notices, the assessee had duly furnished the financial statements including segmental P&L for the Philippines branch, tax return filed in the Philippines, reconciliation of income between Indian and Philippine returns, Form 67 for foreign tax credit, donation receipts and working of deduction under section 80G, Tax audit report and Form 10BD and Computation of income and return of income filed in India. All these details were verified by the AO. The AR pointed out that the AO had made specific observations regarding the CSR disallowance and....
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....tutions under section 80G. The AR further submitted that the AO had examined the claim, donation receipts were filed (PB page 131), and no adverse inference was drawn. 9. The learned Departmental Representative (DR) supported the impugned revisionary order passed by the PCIT and submitted that Assessing Officer had failed to conduct proper enquiries and verifications in respect of crucial aspects which have material bearing on the determination of income. 10. We have carefully considered the rival contentions, perused the assessment order, revisionary order passed by the PCIT, and the material placed on record. The revision under section 263 has been invoked on two broad issues: (i) Allowance of relief under section 90 in respect of foreign tax credit claimed on income earned by the assessee's branch office in the Philippines; and (ii) Allowance of deduction under section 80G for donations forming part of CSR expenditure. 11. The learned PCIT, while invoking section 263, alleged that the Assessing Officer failed to verify whether the foreign tax credit (FTC) of Rs. 8,02,50,535/- claimed by the assessee was allowable under section 90 read with Article 24 o....
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....n the Philippines, or methodology of computation has been pointed out. The PCIT merely refers to the reconciliation submitted by the assessee and raises doubt on the admissibility of certain expenses without conclusively demonstrating how such treatment renders the assessment order erroneous. Importantly, the reconciliation was not only submitted during assessment but was considered and accepted by the AO after due inquiry. The fact that the AO has not elaborated the acceptance in the assessment order is not ipso facto evidence of non-application of mind or lack of inquiry, particularly when the record contains detailed submissions, evidences, and calculations in response to statutory notices. The decision of the Coordinate Bench in ITA No. 994/Ahd/2022 for A.Y. 2018-19 squarely covers the issue. The Co-ordinate Bench, in assessee's own case for A.Y. 2018-19, accepted the claim for foreign tax credit after examining the branch's income, supporting documentation, and compliance with the provisions of section 90 and DTAA, without disputing the eligibility of the tax paid in the Philippines for relief under section 90. The PCIT's distinction is based merely on a narrow interpretation ....