Article
A quandary of claim of foreign tax credit
By Sanjhi Agarwal and Snehal Ranjan Shukla
The same income of an entity can become liable to tax in two countries, leading to harsh consequences. To provide relief, the assessees are allowed to claim credit of the tax paid in a foreign country against the tax liability in India, provided that such foreign income is also taxable under the Income Tax Act, 1961 in India. The article in this issue of Direct Tax Amicus, highlighting the provisions pertaining to avoidance of double taxation and foreign tax credit in the IT Act and the provisions relating to relief from double taxation in various DTAAs, discusses the question as to whether the claim of FTC will be lower of the income tax payable in India and the tax paid in the foreign country or the entire tax paid in a foreign country will be allowed as FTC. The authors highlight various case law for both the views. Discussing the UN Model Commentary 2021 and OECD Model Commentary 2017, the authors state that it seems that the claim of FTC in India should be restricted to the amount of income tax payable on the foreign income which was subject to tax in the foreign country. According to them, however, one may, until the Supreme Court has settled the issue, place reliance on the judgement of the Karnataka High Court to claim the entire tax paid in foreign countries (having provision in the DTAA similar to that of India-USA DTAA) as FTC in India…
Notifications & Circulars
- TDS on benefits and perquisites – Second set of guidelines to clarify application of Section 194R
- Time for furnishing modified returns under Section 170A extended till 31 March 2023
- Statement to be furnished under Section 285B by producers of cinematograph film or persons engaged in specified activity
- Application for re-computation of total income under Section 155(18) – Procedure notified
- Compounding of Offences under the Income Tax Act, 1961 – Guidelines issued
Ratio decidendi
- FTC claim to be allowed if Form No. 67 filed before completion of assessment, even though beyond the time limit prescribed in Rule 128 – ITAT Mumbai
- Time limit to initiate reassessment for A.Y. 2013-14 under unamended Section 149 stands extended till 30 June 2021; first proviso of amended Sec. 149 not applicable for A.Y. 2013-14 – Delhi High Court
- Service tax collected from customers and deposited with Government is not a part of the gross receipts for calculating income on presumptive basis under Section 44BBA – ITAT Kolkata
- Section 269SS applicable to advances received in relation to transfer of immoveable property only on or after 1 June 2015 – ITAT Delhi
- Payment for clinical testing/trials services is not taxable as FTS under India-USA DTAA and India-Canada DTAA, however, is taxable as FTS under India-Mexico DTAA – ITAT Ahmedabad
