Thursday, June 4, 2015

Credit of foreign TDS can't be denied even against tax levied on corresponding income eligible for sec. 10A relief


Assessee qualified for tax relief under article 23 of DTAA between India and Japan in respect of income that has been subjected to tax in Japan even if such income was exempt in India under Secton 10A

Facts

a)The assessee filed its return wherein credit of tax deducted at Japan was claimed in respect of its income covered under Section 10A.

b)The Assessing Officer (AO) rejected assessee's claim holding that the income on which the assessee was charged to tax in Japan was not chargeable to tax in India being exempt under the provisions of section 10A and, therefore, assessee was not eligible to claim credit for the tax deducted in Japan.

c)On appeal, Order passed by AO was confirmed by CIT(A). Aggrieved by the order of CIT(A), assessee filed the instant appeal before the tribunal.

The Tribunal held in favour of assessee as under:

1)The profits and gains to which the provisions of section 10A apply are not excluded from total income and instead 'a deduction of such profits and gains…..' shall be allowed from the total income of the assessee. It means 'total income' must first be determined from which deduction under section 10A shall be allowed. Therefore, it could not be said that the profits and gains to which section 10A applies are not charged to tax in India

2)As income that has been subjected to tax in Japan was also chargeable to tax in India (although exempted under Section 10A), assessee was qualified for tax relief under article 23 of DTAA between India and Japan- BLUE STAR INFOTECH LTD. V. ACIT [2015] 57 taxmann.com 386 (Mumbai - Trib.)
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