Canon India Pvt Ltd Vs DCIT (ITAT Delhi)
ITAT Delhi held that the assessee is eligible for entire credit of foreign taxes, even if the taxability was nil consequent to the deduction on account of business losses or section 10A exemption. Accordingly, appeal is allowed.
Facts- During the Assessment Year 2003-04, the assessee earned certain income from its operations in Japan, on which taxes amounting to RS 20,39,37,900/- were withheld in Japan in accordance with the domestic tax laws of that jurisdiction. In its return of income filed in India, the assessee claimed Foreign Tax Credit (FTC) under Section 90 of the Income-tax Act, 1961, read with Article 23 of the India-Japan Double Taxation Avoidance Agreement (DTAA). The Assessing Officer, while completing the assessment, disallowed the FTC claim on the ground that in the same year, the income corresponding to the Japanese receipts was either exempt under Section 10A or neutralized by brought-forward business losses, resulting in no tax liability in India hence no credit could be granted when there was no Indian tax liability against which the foreign taxes paid could be adjusted.
Conclusion- Held that the issue under consideration is no longer res integra. We are of the considered view in light of the above judicial precedents, that the assessee be granted complete credit of taxes paid by it in Japan on export revenues from sale of software and not restricted owing to nil tax liability on account of business losses or 10A deduction under the Income Tax Act, 1961. The ground is allowed.
