Amarchand Mangaldas & Suresh A Shroff & Co. Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that services rendered by the appellant is taxable in Japan in accordance to Article 12 of the India-Japan DTAA hence Foreign Tax Credit ought to have been granted to Appellant for taxes withheld in Japan.
Facts- The present appeal is preferred by the appellant. Notably, AO, on perusal of the return of the income, noticed that the assessee has claimed relief u/s 90 of the Act for the income received for services rendered in Japan. Since, the receipt was in the nature of independent personal services, it is not taxable in Japan, the tax was not required to be withheld there. Thus, the credit of such withholding tax is not allowable to the assessee in India. CIT(A) granted partial relief.
Conclusion- Held that the Hon’ble ITAT, Mumbai has already decided the identical issue in favour of the Appellant in AY 2014-15. The Hon’ble ITAT has held that Article 14 of the India-Japan DTAA was applicable only to individuals and thus not applicable to the Appellant, which is a partnership firm. It further held that the fees earned by the Appellant firm in Japan was taxable as fees for technical services under Article 12 and that the FTC ought to have been granted to the Appellant firm for the taxes withheld in Japan. Further, it held that when the source jurisdiction has taken a reasonable and bonafide view, which is not manifestly erroneous, that taxes should be withheld at source, FTC should be provided by the resident jurisdiction even though the legal position in the residence jurisdiction may not be the same. Accordingly, the Hon’ble ITAT held that India should provide FTC for the taxes withheld in Japan.
