Disallowance U/s. 14A not applicable on investment on which dividend received is chargeable to tax but allowed Rebate under DTAA

ACIT Vs M/s. Indian Farmers Fertiliser Cooperative Ltd (ITAT Delhi)

Levy of income tax on global income of an Indian resident is thus subject, inter- alia, to provisions of Section 90(2) of the Act, in terms of which provisions of DTAA entered into by India with any other country would apply and prevail over the provisions of the Act, to the extent the provisions of such DTAA are more beneficial to the assessee entitled to benefits of the DTAA. Thus, where the income is taxable under the Act but is exempt under the DTAA, tax under the Act is not leviable thereon. The Ld. AR submitted that in the instant case the dividend received by the assessee from OMIFCO, Oman through its PE is chargeable to tax in India under the head “Income from other sources” and forms part of the total income and after such inclusion the rebate of taxes has to be allowed from the total taxes in terms of Section 90(2) of the Act read with Article 25 of the Indo-Oman, DTAA which the AO has done. It was submitted that consequently the provisions of Section 14A are not applicable to dividend received from OMIFCO, Oman in as much as the income is included in the total income of assessee.  

FULL TEXT OF THE ITAT JUDGMENT

Present appeal has been filed by Revenue against the order dated 20^th May, 2014 passed by Ld. CIT (A) 11, New Delhi for Assessment Year 2006-07 on the following grounds:

“1. Whether the Ld.CIT(A), on the facts and in circumstances of the case, has erred in deleting disallowance of an amount of Rs.140.19 lakhs made by the A.O. u/s 14A, as the assessee has claimed deduction of expenses in relating to income which is exempt from tax.

Please become a Premium member. If you are already a Premium member, login here to access the full content.