Wipro Limited Vs ACIT (Karnataka High Court)
Summary: The Karnataka High Court allowed Wipro Limited’s appeal and remitted to the ITAT the issue of whether taxes paid to foreign Governments and authorities, for which credit was not available under Sections 90 and 91 of the Income Tax Act read with the applicable DTAAs, could be claimed as deduction from business income under Section 37(1). Wipro, an Indian resident taxable on its global income for AYs 2009-10 to 2014-15, had earned income outside India and paid taxes in the respective foreign jurisdictions. It claimed deduction of such foreign taxes under Section 37(1), but the AO and DRP rejected the claim. The High Court noted that the ITAT had not considered this specific ground and had subsequently rejected Wipro’s miscellaneous petition seeking reconsideration. Wipro relied upon the Bombay High Court ruling in Reliance Infrastructure Ltd. Vs Commissioner of Income Tax, where relief concerning foreign taxes was granted, and submitted that the ruling had subsequently been followed by the ITAT in Wipro’s own cases for AYs 2015-16 to 2017-18. The Revenue did not dispute the request for reconsideration, subject to keeping its contentions open. Accordingly, the High Court set aside the ITAT order dated 05.10.2020 in IT(TP)A No.222/Bang/2016 and remitted the matter to the Tribunal for fresh consideration in accordance with law, expressly keeping all contentions of both parties open. Thus, the High Court did not finally decide that the foreign taxes were deductible under Section 37(1); it directed the ITAT to reconsider the claim.
List of Cases Discussed / Relied Upon
- Reliance Infrastructure Ltd. Vs Commissioner of Income Tax – 2016 SCC OnLine Bom 10018 – Bombay High Court ruling relied upon by the assessee in support of its claim concerning deduction of foreign taxes where corresponding double-taxation relief was unavailable.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
This appeal by the assessee challenging the order dated 05.10.2020 in IT (TP) A No.222/Bang/2016 passed by the ITAT, 8C9 Bench, Bengaluru, has been admitted to consider the following question of law:
”Whether, on the facts and circumstances of the case and on the grounds raised, the taxes paid by the Appellant to foreign Governments and authorities, in respect of which credit has not been given under Sections 90 and 91 of the Act read with the Applicable DTAAs, should be allowed as a deduction from the business income of the Appellant given that is unquestionable expenditure which has been incurred by the Appellant wholly and exclusively for the purposes of its business and is, therefore, eligible for deduction under Section 37 of the Act?
2. Heard Shri Sandeep Huilgol, learned advocate for the appellant and Shri E.I.Sanmathi, learned Standing Counsel for the Revenue.
3. Undisputed facts of the case are, appellant is a resident of India and liable to pay tax on the global income 1 for the A.Ys. 2009-10 to 2014-15. Assessee had received certain income outside the Country and paid tax on the same as per the existing law in that country. According to the assessee, the same is not taxable in India. Consequently, he has claimed deduction of tax paid in 2 foreign countries under Section 37(1) of the Act. 34 The A.O. and the DRP have rejected the same. On appeal, the ITAT has not considered this question. Assessee filed a Misc. Petition for reconsideration of this ground and the same has also been rejected. Hence, this appeal.
4. Shri Huilgol submitted that the income in the relevant A.Y. was taxable in foreign countries and said tax has been paid. The A.O, DRT as also ITAT have not considered this aspect and the Misc. Petition filed before the ITAT has also been dismissed. Shri Huilgol further submitted that the Bombay High Court, in identical circumstances, in Reliance Infrastructure Ltd. Vs. 5 Commissioner of Income Tax, City-VI, Mumbai, has granted the relief and the said order has been accepted by the Department and followed by the ITAT in assessee9s own case for the A.Ys. 2015-16 to 2017-18. Therefore, assessee is entitled for reconsideration of the matter in the hands of the ITAT.
5. Shri Sanmathi, in his usual fairness, does not dispute the said submission and submitted that the ITAT may be directed to reconsider the matter and all questions may be kept open for the Revenue to urge.
6. In view of the above, the following:
ORDER
i) Appeal is allowed;
ii) Order dated 05.10.2020 in IT(TP)A No.222/Bang/2016 passed by the ITAT, 8C9 Bench, Bengaluru, is set aside and the matter is remitted to the file of ITAT for reconsideration in accordance with law; and
iii) All contentions of both parties are kept open. No costs.
Notes:
1 Assessment Year
2 Income Tax Act, 1961
3 Assessing Officer
4 Dispute Resolution Panel
5 2016 SCC OnLine Bom10018
