Case Details: DCIT v. Cyril Amarchand Mangaldas - [2023] 154 taxmann.com 99 (Mumbai-Trib.)
Judiciary and Counsel Details
- Prashant Maharishi, Accountant Member & Sandeep Singh Karhail, Judicial Member
- Shambhu Yadav for the Appellant.
- Rajesh Parekh for the Respondent.
Facts of the Case
The assessee, a law firm, had received a certain amount of income for legal services rendered in Japan. It had claimed a foreign tax credit (FTC) in respect of taxes withheld by its clients in Japan under section 90.
Assessing Officer (AO) held that the credit of such withholding tax was not allowable to the assessee in India as the receipt was not taxable in Japan. Thus, the tax was not required to be withheld, as it was in the nature of independent personal services. Accordingly, he denied the FTC claimed by the assessee.
On appeal, the Commissioner (Appeals) allowed the claim of FTC under section 90 to the assessee. Aggreived-revenue filed the instant appeal before the Tribunal.
ITAT Held
The Tribunal held that there was no reason to deviate from the ruling given by the co-ordinate bench on similar facts. The Tribunal, in the case of Amarchand & Mangaldas & Suresh A. Shroff & Co. [2020] 122 taxmann.com 248 (Mum. – Trib.), decided a similar issue in favour of the taxpayer.
The Tribunal observed that in terms of Article 23(2) of the DTAA, where a resident of India derives income which, in accordance with the provisions of the Convention, may be taxed in Japan, India shall allow as a deduction from the tax on the income of that resident an amount equal to the Japanese tax paid in Japan, whether directly or by deduction.
Further, it held that the exclusion clause under article 12(4) for IPS was applicable only to individuals; however, the assessee in the instant case was a partnership firm. Therefore, the conclusions arrived at by the Japanese tax authorities, directing tax withholdings from the payments made to the assessee by its Japanese clients, cannot be said to be unreasonable or incorrect. Accordingly, AO was directed to grant the said tax credit to the assessee.
List of Cases Reviewed
- Amarchand & Mangaldas & Suresh A. Shroff & Co. v. Asstt. CIT [2020] 122 taxmann.com 248/[2021] 187 ITD 750 (Mum. – Trib.) (para 9) followed.
List of Cases Referred to
- GVK Industries Ltd. v. ITO [2015] 54 taxmann.com 347/231 Taxman 18/371 ITR 453 (SC) (para 5)
- Amarchand Mangaldas & Suresh A. Shroff & Co. v. Asstt. CIT [2020] 122 taxmann.com 248/[2021] 187 ITD 750 (Mum. – Trib.) (para 9).
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