Case Law Details
Pritesh Rajesh Kotak Vs ITO (ITAT Hyderabad)
Conclusion:
Assessee was eligible to claim tax credit both federal as well as state taxes paid on the income earned during the year as section 91 did not discriminate between State and Federal taxes, and in effect provides for both the types of Income-taxes to be taken into account for the purpose of tax credits against Indian Income-tax liability.
Held:
Assessee was employed for a part of the year in USA and paid taxes in USA which included federal and state with holding taxes. Assessee claimed the same u/s 90. AO allowed the tax credit to the extent of federal taxes paid and did not allow the state tax paid. Following the decision in case of Tata Sons Ltd., wherein it was held that the provisions of section 91 were to be treated as general in application and these provisions could yield to the treaty provisions, only to the extent the provisions of the treaty were beneficial to assessee,’ that was not the case so far as question of tax credits in respect of State Income-taxes paid in USA were concerned. Accordingly, even though the assessee was covered by the scope of India US and Indio Canada tax treaties, so far as tax credits in respect of taxes paid in those countries were concerned, the provisions of section 91, being beneficial to the assessee, held the field. As section 91 did not discriminate between State and Federal taxes, and in effect provided for both the types of Income-taxes to be taken into account for the purpose of tax credits against Indian Income-tax liability, assessee was, in principle, entitled to tax credits in respect of the same. Of course; as was the scheme of tax credit envisaged in section 91, tax credit in respect of foreign Income-tax was restricted to actual Income-tax liability in India, in respect of income on which taxes had been so paid abroad. It was clear that assessee was eligible to claim tax credit both federal as well as state taxes paid on the income earned during the year. AO was directed to allow the credit to the extent of state taxes paid by the assessee along with the federal taxes paid. The Medicare and Disability taxes were not in the nature of income-tax, hence, this might be disallowed.
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