Case Law Details
Court :Mumbai Income Tax Appellate Tribunal
Citation [ITA No. 4776/Mum/04] in the case of Tata Sons Ltd.
Brief :The ITAT held that the taxes paid on profits, whether on presumptive basis or on the basis of actual profits earned, represent application of income and are not allowed as deduction in computation of taxable profits. In terms of applicable provisions of the Indian Tax Laws (ITL), read with the applicable tax treaty, such taxes qualify for tax credit relief so as to avoid double taxation.
Background and facts- Under the ITL, income which has suffered overseas taxes is entitled to relief from double taxation in India by allowing tax credit in respect of the overseas taxes against the tax payable on such doubly taxed income (Tax Credit). Furthermore, a specific provision in the ITL denies deduction in respect of tax levied on profits of the business. A clarificatory amendment was made to provide that the amount eligible for double taxation avoidance relief would always be deemed to be part of tax on profits and, hence, disallowable (restriction provision).
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