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Case Law Details

Case Name : Bank of India Vs ACIT (ITAT Mumbai)
Appeal Number : ITA No. 869/Mum/2018
Date of Judgement/Order : 04/03/2021
Related Assessment Year : 2012-13
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Bank of India Vs ACIT (ITAT Mumbai)

To sum up, the assessee is declined the foreign tax credits for Rs 182,64,22,948, and, accordingly, we hold that the assessee is not entitled to seek a refund of that money from the Indian tax exchequer. As we hold so, we may add that in the present case, our entire focus was on whether these foreign tax credits could be allowed even when such tax credits lead to a situation in which taxes paid abroad could be refunded in India, but that must not be construed to mean that, as a corollary to our decision, these foreign tax credits would have been allowed, even if there is no domestic tax liability in respect of the related income in India if it was not to result in such a refund situation. At the cost of repetition, we may add that, for the detailed reasons set out earlier, we have our reservations on the applicability of the Wipro decision (supra) on this bench, being situated outside of the jurisdiction of Hon’ble Karnataka High Court, and we are of the considered view that full tax credit for source taxation cannot, as such and to that extent, be extended in the residence jurisdiction when a tax treaty sanctions only proportionate credit, and does not, in any case, specifically provide for the full foreign tax credit. A full tax credit, which goes beyond eliminating double taxation of an income, actually ends up subsidizing the foreign exchequer, to the extent that the taxes paid to the foreign exchequer are allowed to discharge exclusive domestic tax liability, rather than eliminating double taxation of an income, and that is the reason that even in the solitary full credit situation visualized in the Indian tax treaties, in the Indo Namibia tax treaty (supra), it’s one-way traffic inasmuch as while India, as a relatively developed nation, offers, under article 23(2), full credit for taxes paid in Namibia, whereas, in contrast, Namibia, as a developing nation, offers, under article 23(1), proportionate credit for taxes paid in India. It reinforces our understanding that the full foreign tax credits cannot be inferred to be permissible as a matter of course and normal practice. Just because the coordinate benches have subconsciously taken a stand that seems to be condoning, and in a way legitimizing, a contrary perception, even if that be so, we cannot, particularly after taking a closer look at the situation, follow the same course. When such huge national revenues, involving thousands of crores, are involved in this macro issue, we cannot afford to be superficial, or perfunctory, in our approach. On a separate note, nevertheless, we do uphold the claim of the assessee that these taxes paid abroad will be allowed as a deduction in the computation of the business income of the assessee.


1. One of the interesting questions that have come up for our adjudication, in this case, is whether an Indian taxpayer can claim refunds from the Government of India of taxes paid by the said taxpayer outside India, i.e., the foreign Governments, in respect of the income taxes paid abroad on income earned in the respective tax jurisdictions. It’s like someone making a contribution to, say, the US Exchequer because an income was earned there, and claiming that the Indian Treasury refunds the said tax because the aggregate of overall taxable income, from all the operations worldwide- including India, is in negative, i.e., a loss figure. In effect, one pays tax, for example, to the US and seeks its refund from the Indian Exchequer.

2. Such issues are more of an interest to the Indian business houses operating abroad rather than a typical Indian public sector undertaking, and yet ironically, it has come up for adjudication in this case of a public sector undertaking. Be that as it may, whatever we decide in this case will be equally applicable to all similarly situated taxpayers and thus affect a large number of Indian taxpayers. The order impugned in this appeal is the order dated 30th November, 2017, passed by the learned Commissioner (Appeals) in the matter of order under section 250 r.w.s. 143(3) of the Income Tax Act, 1961, for the assessment year 2012-13.

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