Case Law Details
Due consideration of the provisions of s.37 and s.40(a)(ii) of the Act as well, it emerges that u/s 37, all taxes and rates are allowable irrespective of the place where they are lived i.e., whether on Indian soil or offshore, whereas u/s 40(a)(ii) of the Act, income-tax which is a tax leviable on the profits and gains chargeable under the Act is deductible.
On the other hand, all other taxes levied in foreign countries whether on profits or gains or other wise are deductible under the provisions of s. 37 of the Act and payment of such taxes does not amount to application of income.
Let us now have a glimpse at the judicial views on a similar issue.
(i) South East Asia Shipping Co. ITA No.123 of 1976 – Mumbai Tribunal: The Tribunal observed that the term ‘tax’ is defined in relation to the AY commencing on the 1st day of April, 1965 and in subsequent assessment years as meaning tax chargeable under the provisions of the Act and that this amendment was effected by the Finance Act 1965. taking cognizance of it, the Hon’ble Tribunal had held that ‘any sum paid on account of any rate or income tax and super-tax chargeable under the provisions of the Income-tax Act’ is expressly disallowed by this clause (ii) of s. 40(a).
Accordingly, the Hon’ble Tribunal observed with regard to the allow-ability of foreign taxes u/s 37 of the Act as under:
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