Appeal Details
Counselvise Citation
[2021] 107 COUNSELVISE.COM (IT) 4221 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
4 month(s) 9 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
06-10-2021
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB-A
Next Hearing Date
20-07-2021
Assessment Year
2016-2017
Appeal Filed On
27-05-2021
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD (THROUGH VIDEO CONFERENCE) BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER I.T.A-TP. NO. 198/HYD/2021 ASSESSMENT YEAR: 2016-17 INFOR (INDIA) PRIVATE LIMITED, HYDERABAD [PAN: AAACB6197Q] VS THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : DR.SUNIL MOTI LALA, AR FOR REVENUE : SHRI D.SRINIVAS, DR DATE OF HEARING : 20-07-2021 DATE OF PRONOUNCEMENT : 06-10-2021 O R D E R PER S.S.GODARA, J.M. : THIS ASSESSEES APPEAL FOR AY.2016-17 ARISES AGAINS T THE NATIONAL E-ASSESSMENT CENTRE, DELHIS ASSESSMENT, DATED 31-03-2021 FRAMED IN FURTHERANCE TO THE DISPUTE RESOLUTI ON PANEL (DRP)-1, BENGALURUS DIRECTIONS DT.09-02-2021 IN F.NO.55/DRP-1/BNG/2019-20, INVOLVING PROCEEDINGS U/S.143(3) R.W.S.144C(13) R.W.S.143(3A) & 143(3B) O F THE INCOME TAX ACT, 1961 [IN SHORT, THE ACT]. HEARD BOTH THE PARTIES. CASE FILE PERUSED. 2. THE ASSESSEE HAS RAISED THE FOLLOWING SUBSTANTIVE GROUNDS IN THE INSTANT CASE: ITA-TP NO.198/HYD/2021 :- 2 -: TRANSFER PRICING (TP) GROUNDS GENERAL 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. TRANSFER PRICING OFFICER I.E. THE DEPUTY COMMIS SIONER OF INCOME- TAX - TRANSFER PRICING OFFICER - 2, HYDERABAD (HERE INAFTER REFERRED TO AS 'THE LD.TPO') AND THE LD.AO UNDER THE DIRECTIONS ISSUED BY HON'BLE DRP, ERRED IN MAKING AN ADDITION TO THE APPELLANT'S TOTAL INCOME OF INR 26,07,96,022 (BASED ON THE PROVISIONS OF CHAPTE R X OF THE INCOME-TAX ACT, ('THE ACT') AND THE SAID ADDITIONS [I.E RS. 13,18,72,422 BEING THE ADJUSTMENT QUA THE SOFTWARE DEVELOPMENT S ERVICE, RS 3,89,08,530 BEING THE ADJUSTMENT QUA THE ITES SEGME NT, RS. 40,487,821 BEING ADDITIONS IN RESPECT OF INTEREST O N AE RECEIVABLES AND RS. 3,95,25,970 & RS. 1,00,0 1,279 BEING ADDITI ONS IN RESPECT OF MANAGEMENT FEES/ CONSULTANCY FEE PAID/REIMBURSED BY THE APPELLANT] BEING WHOLLY UNJUSTIFIED ARE LIABLE TO B E DELETED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. TPO ERRED AND THE HON'BLE DRP FURTHER ERRED IN UPHOLDING / CONFIRMING THE ACTION OF THE LD. TPO IN REJECTING T HE TRANSFER PRICING ANALYSIS/ STUDY PREPARED BY THE APPELLANT AND CONDU CTING FRESH BENCHMARKING, WITHOUT APPRECIATING THAT NONE OF THE CONDITIONS MENTIONED IN CLAUSES (A) TO (D) OF SECTION 92C(3) O F THE ACT WERE SATISFIED. SOFTWARE DEVELOPMENT SERVICES (SDS) SEGMENT 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.TPO ERRED AND THE HON'BLE DRP FURTHER ERRED IN U PHOLDING / CONFIRMING THE ACTION OF THE LD.TPO IN INCORRECTLY SELECTING THE FOLLOWING COMPANIES AS COM PARABLES WHILE BENCHMARK ING THE SOFTWARE DEVELOPMENT SEGMENT OF THE APPELLANT, WITH OUT APPRECIATING THAT THE SAID COMPANIES WERE NOT COMPARABLE/FUNCTIO NALLY DISSIMILAR TO THE APPELLANT, WHICH OUGHT TO HAVE BEEN EXCLUDED FROM THE FINAL SET OF COM PARABLES: I) INFOSYS LIMITED II) LARSEN & TOUBRO INFOTECH LIMITED III) TATA ELXSI LIMITED (SEG) IV) PERSISTENT SYSTEMS LIMITED V) THIRDWARE SOLUTION LIMITED VI) CYBAGE SOFTWARE PRIVATE LIMITED / VII) ASPIRE SYSTEMS (INDIA) PRIVATE LIMITED VIII) NIHILENT LIMITED IX) INTEQ SOFTWARE PRIVATE LIMITED X) R S SOFTWARE (INDIA) LIMITED XI) INFOBEANS TECHNOLOGIES LIMITED XII) CIGNITI TECHNOLOGIES LIMITED ITA-TP NO.198/HYD/2021 :- 3 -: 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN UPHOLDING / CONFIRMING THE ACTION OF THE LD.TPO IN INCORRECTLY REJECTING THE FOLLOWING COMPANIES WHILE BENCHMARKING THE SOFTWARE DEVELOPMENT SEGMENT OF THE APPELLANT WHICH OUGHT TO HAVE BEEN I NCLUDED AS A COM PARABLES AS THEY WERE ENGAGED IN SOFTWARE DEVELOPME NT SERVICES, WITHOUT APPRECIATING THAT THE SAID COMPANIES WERE C OMPARABLE TO THE APPELLANT: I) EVOKE TECHNOLOGIES PRIVATE LIMITED II) INFOMILE TECHNOLOGIES LIMITED III) ACE SOFTWARE EXPORTS LIMITED IV) SASKEN COMMUNICATION TECHNOLOGIES LIMITED V) NUCLEUS SOFTWARE EXPORTS LIMITED VI) MELSTAR INFORMATION TECHNOLOGIES LIMITED VII) SAGAR SOFT INDIA LIMITED VIII) GOLDSTONE TECHNOLOGIES LIMITED IX) AKSHAY SOFTWARE TECHNOLOGIES LIMITED X) SANKHYA INFOTECH LIMITED (SEG) XI) DCM LTD XII) E-ZEST SOLUTION LTD XIII) HARBINGER SYSTEMS LIMITED ITES SEGMENT 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. TPO ERRED AND THE HON'BLE DRP FURTHER ERRED IN UPHOLDING / CONFIRMING THE ACTION OF THE LD. TPO IN INCORRECTLY SELECTING THE FOLLOWING COMPANIES AS COMPARABLES WHILE BENCHMARKI NG THE ITES SERVICES (ITES) OF THE APPELLANT, WITHOUT APPRECIAT ING THAT THE SAID COMPANIES WERE NOT COMPARABLE/ FUNCTIONALLY DISSIMI LAR TO THE APPELLANT, WHICH OUGHT TO HAVE BEEN EXCLUDED FROM T HE FINAL SET OF COM PARABLES: I) INFOSYS BPO II) ECLERX SERVICES LIMITED III) CROSS DOMAIN IV) TECH MAHINDRA V) SPI TECHNOLOGIES INDIA PRIVATE LIMITED VI) MPS LIMITED 6. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN UPHOLDING / CONFIRMING THE ACTION OF THE LD. TPO IN INCORRECTLY REJECTING THE FOLLOWING COMPANIES WHILE BENCHMARKING THE ITES SER VICES (ITES) OF THE APPELLANT WHICH OUGHT TO HAVE BEEN INCLUDED AS A COM PARABLES AS THEY WERE ENGAGED IN THE ITES SERVICES (ITES), W ITHOUT APPRECIATING THAT THE SAID COMPANIES WERE COMPARABL E TO THE APPELLANT: ITA-TP NO.198/HYD/2021 :- 4 -: I) INFORMED TECHNOLOGIES LIMITED II) ACE BPO SERVICES LIMITED III) JINDAL INTELLICOM LIMITED IV) ALLSEC TECHNOLOGIES LIMITED V) TATA BUSINESS SUPPORT SERVICES LIMITED VI) KARVY DATA MANGEMENT SERVICES VII) SUPRAWIN TECHNOLOGIES LIMITED VIII) SUNDARAM BUSINESS SERVICES PVT LIMITED IX) TATA CONSULTING ENGINEERS LIMITED X) TATA ELXSI LIMITED XI) COSMIC GLOBAL LIMITED XII) BNR UDYOG LIMITED 7. WITHOUT PREJUDICE TO THE ABOVE GROUNDS ON INCORR ECT SELECTION OF FUNCTIONALLY DISSIMILAR COMPARABLE COMPANIES WHILE BENCHMARKING THE ITES SERVICES (ITES) SEGMENT OF THE APPELLANT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. T PO ERRED IN INCORRECTLY COMPUTING THE MARGIN OF THE FOLLOWING C OMPARABLE COMPANIES I.E. (I) MICROLAND LIMITED, (II) SPI TECH NOLOGIES INDIA PRIVATE LIMITED (III) MPS LIMITED (IV) INFOSYS BPO. SDS AND ITES SEGMENT 8. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED I N UPHOLDING / CONFIRMING THE ACTION OF THE LD TPO IN NOT ALLOWING RISK ADJUSTMENT IN ACCORDANCE WITH THE PROVISIONS OF RULE 10B OF THE I NCOME-TAX RULES, 1962 TO ACCOUNT FOR DIFFERENCES BETWEEN THE INTERNA TIONAL TRANSACTIONS UNDERTAKEN BY THE APPELLANT, BEING A C APTIVE UNIT AND THOSE UNDERTAKEN BY THE COMPARABLES. 9. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED I N UPHOLDING/CONFIRMING THE ACTION OF THE LD.TPO IN CO NSIDERING BAD DEBTS AND PROVISION FOR BAD AND DOUBTFUL DEBTS AS N ON-OPERATING EXPENDITURE WHILE COMPUTING THE PLI OF THE COMPARAB LES. 10. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, WHILE BENCHMARKING THE INTERNATIONAL TRANSACTIONS, THE LD. TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN UPHOLDING / CONFIRMING THE ACTION OF THE LD. TPO IN APPLYING INAPPROPRIATE FIL TERS INCLUDING THE EXPORT FILTER TURNOVER FILTER OF >75% WHICH WERE ER RONEOUS AND LIABLE TO BE REJECTED. INTEREST ON AE RECEIVABLES 11. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED I N UPHOLDING / CONFIRMING THE ACTION OF THE LD.TPO IN : ITA-TP NO.198/HYD/2021 :- 5 -: (I) CONSIDERING THE RECEIVABLES FROM ASSOCIATED ENT ERPRISE (AE) AS A SEPARATE INTERNATIONAL TRANSACTION. (II) MAKING AN ADJUSTMENT WITH RESPECT TO INTEREST ON THE RECEIVABLES FROM AE. 12. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED I N UPHOLDING / CONFIRMING THE ACTION OF THE LD TPO IN MAKING AN AD JUSTMENT WITH RESPECT TO INTEREST ON THE RECEIVABLES FROM AE WITH OUT APPRECIATING THAT THE SAID ADJUSTMENT IS UNWARRANTED AND UNJUSTI FIED IN VIEW OF THE FOLLOWING GROUNDS WHICH ARE INDEPENDENT OF AND WITHOUT PREJUDICE TO ONE AND ANOTHER VIZ (I) THE APPELLANT IS A DEBT FREE COMPANY (II) THE INTERNATIONAL TRANSACTIONS (I.E. A E SALES) RESULTING IN THE SAID OUTSTANDINGS IS AT ALP. 13. WITHOUT PREJUDICE TO THE ABOVE, ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD TPO ER RED IN AND THE HON'BLE DRP FURTHER ERRED IN UPHOLDING / CONFIRMING THE ACTION OF THE LD TPO IN (I) CONSIDERING THE CREDIT PERIOD OF 30 D AYS AS AGAINST THE CREDIT PERIOD MUTUALLY AGREED BETWEEN THE APPELLANT AND ITS AE'S (II) CONSIDERING THE STATE BANK OF INDIA'S ('SBI') SHORT TERM DE 0 IT RATES AS THE COMPARABLE UNCONTROLLED PRICE (CUP) TO BENCHMAR K THE IMPUGNED INTEREST ON DELAY IN RECEIPT OF OUTSTANDING RECEIVA BLES INSTEAD OF LIBOR RATE. MANAGEMENT FEES 14. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED I N UPHOLDING / CONFIRMING THE ACTION OF THE LD. TPO IN COMPUTING T HE ALP OF THE MANAGEMENT FEE OF RS.3,95,25,970 PAID BY THE APPELL ANT TO ITS AE AT NIL RESULTING IN ADDITION OF RS. 3,95,25,970 WITHOU T APPRECIATING THE FOLLOWING WHICH ARE INDEPENDENT AND WITHOUT PREJUDI CE TO ONE ANOTHER: A) THAT THE ACTION OF THE TPO AND THE CONSEQUENT AD DITION OF RS. 3,95,25,970 IS WITHOUT JURISDICTION AND BAD IN LAW AND THUS LIABLE TO QUASHED/DELETED. B) THAT THE MANAGEMENT FEE PAYMENT WAS AT ARMS' LEN GTH AND CONSEQUENTLY THE SAID ADJUSTMENT/ADDITION OF RS. 3, 95,25,970 IS WHOLLY UNJUSTIFIED AND LIABLE TO DELETED. C) THAT THE SAID MANAGEMENT FEE WAS CLAIMED AS A CO ST QUA THE INTERNATIONAL TRANSACTION PERTAINING TO THE DISTRIB UTION SEGMENT WHICH HAVE BEEN ACCEPTED TO BE AT ALP AND CONSEQUENTLY TH E SAID MANAGEMENT FEE ALSO OUGHT TO HAVE BEEN ACCEPTED AT 'ALP, AS CONSISTENTLY ACCEPTED BY THE LD. TPO IN THE EARLIER YEARS. ITA-TP NO.198/HYD/2021 :- 6 -: D) THAT THE MARK UP OF S% ON COST CHARGED BY THE AE QUA THE MANAGEMENT FEE' AT ALP. ALTERNATIVELY AND WITHOUT P REJUDICE TO THE ABOVE, NO ADJUSTMENT OUGHT TO HAVE BEEN MADE QUA TH E COST OF THE MANAGEMENT FEE RECOVERED BY THE AE. CONSULTANCY FEES 15. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED I N UPHOLDING / CONFIRMING THE ACTION OF THE LD.TPO IN COMPUTING TH E ALP OF THE CONSULTANCY FEE OF RS. 1,00,01,279 PAID/REIMBURSED TO ITS AT NIL WITHOUT APPRECIATING THAT THE PAYMENT WAS AT ARMS' LENGTH AND CONSEQUENTLY THE SAID ADJUSTMENT/ADDITION OF RS. 1, 00,01,279 IS WHOLLY UNJUSTIFIED AND LIABLE TO DELETED. CORPORATE TAX (CT) GROUNDS 16. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD AO ERRED IN NOT GRANTING OF DEDUCTION UNDER SECT ION 80G OF THE ACT AMOUNTING TO RS. 7,91,500 WHILE COMPUTING ASSESSED TAXABLE INCOME IN THE COMPUTATION SHEET FORMING PART OF THE ASSESS MENT ORDER. 17. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD AO ERRED IN NOT GRANTING OF CREDIT OF TAX DEDUCT ED AT SOURCE ('TDS ') AMOUNTING TO RS. 3,01,408 ATTRIBUTABLE TO INFOR (BA NGALORE) PRIVATE LIMITED AND RS. 3,49,350 ATTRIBUTABLE TO APPROVA SY STEMS PRIVATE LIMITED ('TRANSFEROR COMPANIES') WHICH WERE AMALGAM ATED WITH APPELLANT WITH EFFECT FROM 01 APRIL 2015. 18. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD AO ERRED IN NOT GRANTING CREDIT OF ADVANCE TAX O F RS. 27,04,000 PAID BY INFOR(BANGALORE) PRIVATE LIMITED AND RS. 36 ,42,600 PAID BY APPROVA SYSTEMS PRIVATE LIMITED ('TRANSFEROR COMPAN IES') WHICH WERE AMALGAMATED WITH APPELLANT W.E.F APRIL 2015. 19. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD AO ERRED IN COMPUTING HIGHER BOOKS PROFITS UNDER SECTION 115JB OF THE ACT BY RS. 86,95,802(NET) CONSEQUENT TO DOUBLE DISALLOWANCE OF DEFERRED TAX AMOUNTING TO INR 89,50,830 AND NON-CON SIDERATION OF INTEREST ON DELAYED PAYMENT OF TDS/ADVANCE TAX AMOU NTING TO INR 2,55,028. 20. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD AO ERRED IN ERRONEOUSLY LEVYING INTEREST OF RS.1 9,60,250 UNDER SECTION 234A OF THE ACT ON THE ALLEGED DELAY IN FIL ING OF INCOME TAX RETURN WITHOUT APPRECIATING THAT THE APPELLANT HAD FURNISHED THE ORIGINAL ITR ON 30 NOVEMBER 2016 AND REVISED ITR ON 03 OCTOBER 2017 FOR THE RELEVANT AY WHICH WAS WITHIN THE STATU TORY TIMELINES PROVIDED UNDER SECTION 139(1) AND SECTION 139(5) OF THE ACT RESPECTIVELY. ITA-TP NO.198/HYD/2021 :- 7 -: 21. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE APPELLANT PRAYS FOR CONSEQUENTIAL RELIEF IN THE INT EREST LEVIED UNDER SECTION 234B OF THE ACT BASIS THE RELIEF ALLOWED IN THE AFORESAID GROUNDS OF APPEAL. 22. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE APPELLANT PRAYS THAT THE EDUCATION CESS PAID/ PAYAB LE ON THE INCOME TAX BE ALLOWED AS A TAX-DEDUCTIBLE EXPENDITURE IN V IEW OF THE FAVORABLE JUDICIAL PRECEDENTS AND OBLIGE. THE APPEL LANT MOST HUMBLY CRAVES LEAVE TO RAISE THE AFORESAID ADDITIONAL LEGA L GROUND & PRAYS TO YOUR HONOURS TO KINDLY ADMIT & ALLOW THE AFORESAID GROUND OF APPEAL. 23. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE APPELLANT PRAYS THAT THE UNCLAIMED FOREIGN TAX CRED IT (ON FOREIGN SOURCED INCOME) BE ALLOWED AS A TAX-DEDUCTIBLE EXPE NDITURE IN VIEW OF THE FAVORABLE JUDICIAL PRECEDENTS AND OBLIGE. TH E APPELLANT MOST HUMBLY CRAVES LEAVE TO RAISE THE AFORESAID ADDITION AL LEGAL GROUND & PRAYS TO YOUR HONOURS TO KINDLY ADMIT & ALLOW THE A FORESAID GROUND OF APPEAL. GENERAL GROUNDS (APPLICABLE TO BOTH TP AND CT) 24. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED I N ASSESSING TOTAL INCOME OF THE APPELLANT AT RS.52,34,22,610/ RS. 52, 42,14,110 (IN THE FINAL ASSESSMENT ORDER/COMPUTATION SHEET) AS AGAINS T RS.26,26,26,590, WHICH WAS CORRECTLY OFFERED BY APP ELLANT IN ITS REVISED RETURN OF INCOME. CONSEQUENTLY, THE LD AO E RRED IN RAISING A DEMAND OF RS. 15,08,17,460 (INSTEAD OF GRANTING REF UND OF RS. 74,77,860) AND THE SAID DEMAND APART FROM BEING INC ORRECTLY COMPUTED IS WHOLLY UNJUSTIFIED AND LIABLE TO BE DEL ETED. 25. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD AO, LD TPO AND THE HON'BLE DRP ERRED IN PASSING IMPUGNED ORDERS WITHOUT PROVIDING THE APPELLANT WITH SUFFICI ENT AN ADEQUATE OPPORTUNITY AND IN BREACH OF THE PRINCIPLES OF NATU RAL JUSTICE AND IN ARRIVING AT CONCLUSION THEREIN BASED ON INCORRECT F ACTUAL AVERMENTS / ALLEGATIONS / LEGAL INFERENCES WITHOUT CONSIDERING APPRECIATING THE FACTS OF THE CASE AND THE SUBMISSIONS MADE BY THE A PPELLANT AND THEREFORE, THE SAID IMPUGNED ORDERS, BEING BAD IN L AW ARE LIABLE TO BE QUASHED OR ALTERNATIVELY SET ASIDE THE APPELLANT CRAVES LEAVE TO ADD, ALTER, VARY, OMI T, SUBSTITUTE AND OR AMEND THE ABOVE GROUNDS OF APPEAL (WHICH ARE WITHOU T PREJUDICE TO ONE ANOTHER) AT ANY TIME BEFORE OR AT THE TIME OF H EARING OF THE APPEAL SO AS TO ENABLE THE HONORABLE MEMBERS TO DECIDE THI S APPEAL ACCORDING TO LAW. ITA-TP NO.198/HYD/2021 :- 8 -: 3. LEARNED COUNSEL STATES AT THE OUTSET THAT THE ASSESSEES 1 ST , 2 ND , 24 TH AND 25 TH SUBSTANTIVE GROUNDS ARE GENERAL/CONSEQUENTIAL IN NATURE. REJECTED ACCORDINGLY . 4. WE COME TO THE ASSESSEES 3 RD SUBSTANTIVE GROUND ALLEGING THAT THE LEARNED LOWER AUTHORITIES HAVE ERRE D IN LAW AND ON FACTS WHILST SELECTING NO.(I) TO (XII) COMPANIE S AS COMPARABLES IN SOFTWARE DEVELOPMENT SERVICES (SDS) SEGMENT. COMING TO THE ASSESSEES GROUND NOS.3(I) TO 3(VI), WE NOTE THAT THIS TRIBUNALS CO-ORDINATE BENCHS ORDER(S) IN ITS CA SES FOR AYS.2014-15 AND 2016-17; AS THE CASE MAY BE, HAVE AL READY DECIDED THE ISSUE(S) WHILST DIRECTING EXCLUSION OF M/ S.INFOSYS LIMITED, M/S.LARSEN & TOUBRO INFOTECH LIMITED ON THE GR OUND THAT THEY HAD BEEN HAVING HUGE TURNOVERS. THE FACTUAL P OSITION IS STATED TO BE NO DIFFERENT IN THE IMPUGNED ASSESSMENT Y EAR AS WELL. WE THEREFORE ADOPT JUDICIAL CONSISTENCY IN A BSENCE OF ANY DISTINCTION ON FACTS HEREIN AS WELL. THESE TWIN E NTITIES INFOSYS LIMITED AND LARSEN & TOUBRO INFOTECH LIMITED SHALL STAND EXCLUDED BY THE TRANSFER PRICING OFFICER (TPO) THEREFORE. 4.1. COMING TO M/S.TATA ELXSI LIMITED, WE NOTE THAT THE TRIBUNALS FOREGOING EARLIER ORDER(S) HAVE DIRECTED E XCLUSION OF THE INSTANT THIRD ENTITY AS WELL WHILST HOLDING THAT THIS COMPANY IS ENGAGED IN VARIOUS ACTIVITIES INCLUDING PR ODUCT DESIGN SERVICES AND TRADING WHEREIN NO SEGMENTAL INFO RMATION WAS AVAILABLE. LEARNED DEPARTMENTAL REPRESENTATIVE FAIL S TO PIN POINT ANY DISTINCTION REGARDING AVAILABILITY OF THE CORRESPONDING SEGMENTAL DATA IN THE IMPUGNED ASSESSMEN T YEAR AS WELL. WE THEREFORE DIRECT THE TPO TO EXCLUDE M/S.TATA ELXSI LIMITED (SEG) IN VERY TERMS. ITA-TP NO.198/HYD/2021 :- 9 -: 4.2. THE NEXT ENTITY HEREIN IS M/S.PERSISTENT SYSTEMS LI MITED, WHICH HAS BEEN EXCLUDED IN THE TRIBUNALS ORDER (SUPR A) IN AYS.2014-15 AND 2015-16 ON THE GROUND THAT IT IS ENGAG ED IN PRODUCT DEVELOPMENT AS WELL AS ON ACCOUNT OF LACK OF SEGMENTAL DETAILS. 4.3. NEXT COME M/S.THIRDWARE SOLUTION LIMITED AND M/S.CYBAGE SOFTWARE PRIVATE LIMITED WHICH HAVE ALREAD Y HAVE BEEN ORDERED TO BE EXCLUDED BY THE TRIBUNAL AFTER HOLD ING THE SAME TO BE FUNCTIONALLY DIFFERENT THAN SOFTWARE DEVELOP MENT SERVICES AND HAVING ABNORMALLY AVERAGE HIGH MARGIN; RESPECTIVELY. 4.4. COMING TO M/S.ASPIRE SYSTEMS (INDIA) PRIVATE LIMI TED, WE NOTE FROM A PERUSAL OF THE DRPS DIRECTIONS IN PG.56 PARA 2.17.4 THAT AN AMALGAMATION HAD TOOK PLACE W.E.F.01-04- 2015 AND THEREFORE, THE LEARNED LOWER AUTHORITIES HAVE ERRE D IN INCLUDING IT AS A COMPARABLE IN LIGHT OF PCIT VS. J. P.MORGAN INDIA (P) LTD., (2019) 102 TAXMANN.COM 335 (BOMBAY). 4.5. LEARNED COUNSEL DOES NOT PRESS FOR THE ASSESSEE S GROUND NOS.3(VIII) AND 3(IX) PERTAINING TO M/S.NIHILENT LIMIT ED AND M/S.INTEQ SOFTWARE PRIVATE LIMITED. REJECTED ACCORDI NGLY. 4.6. WE NOW ADVERT TO ASSESSEES GROUND NO.3(X) SEEKI NG TO EXCLUDE M/S.R.S.SOFTWARE (INDIA) LIMITED. THIS TRIBU NALS CO- ORDINATE BENCHS ORDER IN AY.2014-15 HAS ADMITTEDLY I NCLUDED THE SAME. THE ASSESSEES CASE BEFORE US IS THAT THIS E NTITY IS ENGAGED IN LIFE CYCLE MANAGEMENT AS WELL AS PROVIDES QUALITY ASSURANCE SERVICES INCLUDE TESTING SERVICES ALONG W ITH MAINTENANCE AND SUPPORTING STATISTICAL DATA ANALYSIS. L EARNED COUNSEL FAILS TO DISPUTE THAT THE TRIBUNALS FOREGOING BENCH HAS ITA-TP NO.198/HYD/2021 :- 10 -: ALREADY HELD IT TO BE A COMPARABLE ENTITY. SO FAR AS THE ASSESSEES OBJECTION THAT M/S.R.S.SOFTWARE (INDIA) LIM ITED ALSO PROVIDES DIFFERENT SERVICES, WE DIRECT THE TPO TO VERI FY THE SAME IN PRINCIPLE AND IF IT IS FOUND THAT THE RELEVANT SEGME NTAL DETAILS PERTAINING TO SOFTWARE DEVELOPMENT SERVICES ARE AVAILABLE, THE CORRESPONDING PLI OF THE VERY FILED ON LY WOULD BE TAKEN IN NECESSARY COMPUTATION. THIS GROUND NO.3(X) IS PARTLY ACCEPTED FOR STATISTICAL PURPOSES. 4.7. NEXT ENTITY BEFORE US IS, M/S.INFOBEANS TECHNOLO GIES LIMITED WHICH ALREADY STANDS INCLUDED IN TRIBUNALS OR DER FOR AY.2014-15. THE ASSESSEES PLEA BEFORE IS THAT THIS E NTITY IS ENGAGED IN DIVERSIFIED ACTIVITIES. WE FOLLOW OUR REA SONING IN THE PRECEDING PARAGRAPH TO REMIT THE INSTANT ISSUE BACK TO THE TPO FOR HIS AFRESH ADJUDICATION IN VERY TERMS. 4.8. THE ASSESSEES NEXT SUBSTANTIVE GRIEVANCE SEEKS TO EXCLUDE M/S.CIGNITI TECHNOLOGIES LIMITED FROM THE ARRA Y OF COMPARABLES ON THE GROUND THAT THIS ENTITY IS ENGAGE D IN SOFTWARE TESTING SEGMENT. LEARNED DEPARTMENTAL REPRESEN TATIVE STRONGLY OPPOSES ASSESSEES STAND ON THE GROUND THAT I T HAD ITSELF INCLUDED THE INSTANT COMPANY IN THE LIST OF COMPAR ABLES AND THEREFORE IT IS ESTOPPED FROM CONTESTING M/S.CIGNITY TECHNOLOGIES LIMITEDS INCLUSION HEREIN. WE FIND NO MERIT IN EITHER PARTIES SUBMISSIONS IN ENTIRETY AT THIS STAGE. THIS IS PRIMARILY FOR THE REASON THAT WE ARE DEALING WITH CHAPT ER-X OF THE ACT IN THE NATURE OF A SPECIAL PROVISION SO AS TO DETERMINE ARMS LENGTH PRICE (ALP) OF THE SPECIFIED INTERNATIONAL TRANSACTION. HON'BLE APEX COURTS RECENT DECISION IN (2019) 416 ITR 613, PCIT VS. MARUTI SUZUKI LTD (SC ) HOLDS THAT INCOME TAX PROCEEDINGS ARE NOT HIT BY THE PRINCIPLE S OF ITA-TP NO.198/HYD/2021 :- 11 -: ESTOPPEL. THE FACT ALSO REMAINS THAT THE INSTANT ENTITYS SEGMENTAL DETAILS DESERVE TO BE VERIFIED AS TO WHETHER IT IS PROVIDING SOFTWARE DEVELOPMENT SERVICES OR NOT? WE TH EREFORE RESTORE THIS INSTANT GROUND BACK TO THE TPO FOR HIS AFRE SH FACTUAL VERIFICATION. THE ASSESSEES GROUND NOS.3(I) TO (XII) ARE PARTLY ACCEPTED IN FOREGOING TERMS. 5. THE ASSESSEES 4 TH SUBSTANTIVE GROUND (HAVING SUB- GROUNDS (I) TO (XIII) CHALLENGES CORRECTNESS OF LEARN ED LOWER AUTHORITIES ACTION REJECTING ITS COMPARABLES. BOTH TH E PARTIES ARE AD IDEM DURING THE COURSE OF HEARING THAT THIS TRIBUNALS CO-ORDINATE BENCHS ORDER(S) FOR AY.2014-15 AND 2015 -16 (SUPRA) HAVE ALREADY INCLUDED M/S.EVOKE TECHNOLOGIE S PRIVATE LIMITED AND M/S.SASKEN COMMUNICATION TECHNOLOGIES LIMTIED; RESPECTIVELY. THE ASSESSEES GROUND NOS.4(I ) AND 4(IV) ARE ACCEPTED THEREFORE. 5.1. NEXT ENTITY BEFORE US IN GROUND NO.4(II) IS M/S. INFOMILE TECHNOLOGIES LIMITED WHICH STANDS EXCLUDED IN LEARNE D LOWER AUTHORITIES RESPECTIVE ORDER(S) DUE TO THE ALLEGED NON - AVAILABILITY OF THE SEGMENTAL DATA. LEARNED COUNSELS CASE BEFORE US AS PER THE CORRESPONDING DETAILS IN PGS.113 TO 116 IS THAT THE INSTANT ENTITYS RELEVANT FINANCIALS ARE INDEED A VAILABLE NOW. WE THEREFORE ACCEPT THE ASSESSEES INSTANT GROUND NO.4(II) FOR STATISTICAL PURPOSES AND DIRECT THE LEARNED TPO TO EX AMINE THE RELEVANT DETAILS SUBJECT TO CONDITION THAT IT SHALL BE ASSESSEES ONUS ONLY; AT ITS OWN RISK AND RESPONSIBI LITY, TO PLACE ON RECORD THE SAME WITHIN THREE EFFECTIVE OPPORTUN ITIES OF HEARING. ITA-TP NO.198/HYD/2021 :- 12 -: 5.2. LEARNED COUNSEL DOES NOT PRESS FOR THE ASSESSEE S GROUND NO.4(III) & (VI) TO (XIII) AT THIS STAGE IN VIEW OF OUR DETAILED DISCUSSION QUA OTHER SUB-GROUNDS HEREIN. ORDERED ACCORDINGLY. 5.3. NEXT COMES THE ASSESSEES GROUND NO.4(V) SEEKING TO INCLUDE M/S.NUCLEUS SOFTWARE EXPORTS LIMITED. LEARN ED LOWER AUTHORITIES HAVE DIRECTED EXCLUSION THEREOF IN VIEW OF THE FACT THAT IT FAILED TO SATISFY 75% EXPORT CRITERIA. MR.LALA VEH EMENTLY SUBMITTED BEFORE US THAT THE INSTANT ENTITY HAS MISSED THE FOREIGN EXPORT FILTER BY A WHISKER ONLY SINCE THE SAME COMES TO 74.2% AS AGAINST 75% ADOPTED BY THE LOWER AUTHORITIES. WE FIND NO MERIT IN THE ASSESSEES ARGUMENTS SINCE CHAPTER -X IS A SPECIAL PROVISION WHEREIN THERE IS NO SCOPE FOR AN Y KIND OF GRACE MARKETING AND MORE PARTICULARLY WHEN OTHER SEG MENTAL COMPANIES ARE ALREADY THERE. WE FURTHER QUOTE HON'BLE APEX COURTS DECISION IN COMMISSIONER OF CUSTOMS VS. DILIP KUMAR (2018) 9 SCC 1 (FB)(SC) THAT PROVISIONS OF THE ACT HAVE TO BE STRICTLY INTERPRETED ONLY . THE ASSESSEE FAILS IN ITS INSTANT GROUND NO.4(V). THIS GROUND NO.4 (WITH ALL SUB-GROUNDS) IS PARTLY ACCEPTED IN FOREGOING TERMS. 6. WE NOW ADVERT TO THE ASSESSEES 5 TH SUBSTANTIVE GROUND INVOLVING SUB-GROUND NOS.(I) TO (VI) SEEKING TO EXCLU DE THE ALLEGEDLY IMPROPERLY SELECTED COMPARABLES IN THE LO WER PROCEEDINGS. IT TRANSPIRES DURING THE COURSE OF HEARIN G THAT THIS TRIBUNALS EARLIER ORDERS; RIGHT FROM AYS.2011-12 TO 2015- 16, HAVE EXCLUDED M/S.INFOSYS BPO, ECLERX SERVICES LIMITED AND M/S.CROSS DOMAIN SOLUTIONS PRIVATE LIMITED INTER ALIA ON THE GROUND THAT THE SAME HAD BEEN HAVING DIVERSIFIED AC TIVITIES WITH HUGE BROAD VALUE AND TURNOVER IN FORMER FIRST A ND KPO ITA-TP NO.198/HYD/2021 :- 13 -: SERVICES PROVIDERS, IN LATTER TWIN ENTITIES CASES; RESP ECTIVELY. THESE SUB-GROUNDS STAND ACCEPTED THEREFORE. 6.1. THE ASSESSEES SUB-GROUNDS NO.5(IV) TO (V) INVO LVING M/S.TECH MAHINDRA BUSINESS SERVICES LTD., M/S.SPI TECHNOLOGIES INDIA PRIVATE LIMITED ARE FOUND TO BE DE SERVES ACCEPTANCE SINCE THEIR RESPECTIVE TURNOVERS OF RS.70 3.2 CRORES AND RS.336.21 CRORES ARE FOUND TO BE MORE THAN THE FIL TER LIMIT OF RS.200 CRORES TAKEN BY THE TPO. WE THEREFORE ADOPT O UR PRECIOUS STRICTER INTERPRETATION REASONING DIRECT EXCLUS ION OF THESE TWIN ENTITIES. 6.2. COMING TO M/S.MPS LIMITED IN GROUND NO.5(VI), WE NOTE THAT THE TRIBUNALS ORDER IN AY.2014-15 (SUPRA) HAS ALR EADY DIRECTED INCLUSION THEREOF. THIS SUB-GROUND IS ACCOR DINGLY REJECTED. THE ASSESSEES INSTANT 5 TH SUBSTANTIVE GROUND (WITH ALL SUB-GROUNDS) IS PARTLY ACCEPTED IN PRECEDING TERMS. 7. WE NOTE AT THIS STAGE THAT SO FAR ASSESSEES 7 TH SUBSTANTIVE GROUND INVOLVING BENCH MARKING OF IT ENA BLED SERVICES; SO FAR AS THE THREE COMPARABLE COMPANIES M/S.MICROLAND MPS LTD, M/S.SPI TECHNOLOGIES INDIA PR IVATE LIMITED AND M/S.INFOSYS BPO IS CONCERNED, THE SAME AR E CONSEQUENTIAL TO ITS 5 TH SUBSTANTIVE GROUND ONLY REQUIRING FACTUAL VERIFICATION THE RELEVANT FACTS AND FIGURES. WE THEREFORE ACCEPT THE SAME FOR STATISTICAL PURPOSES AND LEAVE IT OPE N FOR THE TPO TO FINALISE CONSEQUENTIAL COMPUTATION. 8. WE NOW COME TO THE ASSESSEES GROUND NO.6(I) TO (XI I). IT EMERGES AT THE OUTSET THAT THIS TRIBUNALS ORDER IN AY.201 2-13 HAS ACCEPTED M/S.INFORMED TECHNOLOGIES LIMITED AS A V ALID ITA-TP NO.198/HYD/2021 :- 14 -: COMPARABLE. WE THUS DECIDE THE ASSESSEES GROUND NO. 6(I) IN ITS FAVOUR. 8.1. THE ASSESSEES SUB-GROUNDS NO.6(II) AND (VIII) SEEK TO INCLUDE M/S.ACC BPO SERVICES LIMITED & M/S.SUNDARAM BUSINESS SERVICES PVT LIMITED AS VALID COMPARABLES. T HE TPO HAS ALLEGEDLY REJECTED THE SAME AS SINCE INCURRING PE RSISTENT LOSSES FOLLOWED BY THE LATTER ENTITY HAVING DERIVED ON LY 1.56% PROFIT FOR AY.2016-17. THE ASSESSEES ONLY ARGUMENT BEFORE US IN LIGHT OF TPOS DISCUSSION IN PG.48 TO THIS EFFECT IS THAT THESE TWIN ENTITIES HAD DERIVED LOSSES ONLY IN ONE YEAR THA N ON PERSISTENT BASIS. FACED WITH THIS SITUATION, WE DEEM I T APPROPRIATE TO RESTORE THE INSTANT TWIN COMPARABLE ENTITIE S CORRESPONDING FINANCIALS RE-EXAMINATION/VERIFICATIO N BACK TO THE TPO FOR HIS NECESSARY VERIFICATION. ORDERED ACCOR DINGLY. 8.2. THE ASSESSEES SUB-GROUND NOS.6(III), (IV), (V ), (XI) AND (XII) SEEKING TO INCLUDE M/S.JINDAL INTELLICOM LIMITED, M/S .ALLSEC TECHNOLOGIES LTD, M/S.TATA BUSINESS SUPPORT SERVICES LIMITED, M/S.COSMIC GLOBAL LIMITED AND M/S.BNR UDYOG LIMITED; RESPECTIVELY ON THE GROUND THAT THE CORRESPONDIN G EXPORT FILTER LIMIT OF 75% OUGHT NOT TO BE APPLIED TO REJ ECT FUNCTIONALLY COMPARABLE COMPANIES IN LIGHT OF A CATEN A OF CASE LAW, ARE FOUND TO BE CARRYING NO SUBSTANCE AS PER STR ICTER INTERPRETATION (SUPRA) IN PRECEDING PARAGRAPHS. THES E SUB- GROUNDS ARE REJECTED THEREFORE. 8.3. LEARNED COUNSEL DOES NOT PRESS FOR THE ASSESSEE S SUB- GROUND NO.6(VI) DURING THE COURSE OF HEARING. 8.4. COMING TO THE ASSESSEES SUB-GROUND NOS.6(VII), (IX) AND (X) ALLEGING CHERRY PICKING AT THE LOWER AUTHORITIES B EHEST QUA ITA-TP NO.198/HYD/2021 :- 15 -: M/S.SUPRAWIN TECHNOLOGIES LIMITED, M/S.TATA CONSULTING ENGINEERS LIMITED AND M/S.TATA ELXSI LIMITED, LEARNED COUNSEL FIRST OF ALL SUBMITTED THAT THE CORRESPONDING DATA IS VER Y MUCH AVAILABLE NOW. WE THEREFORE RESTORE ALL THESE SUB-GROU NDS BACK TO THE TPO REGARDING THESE REMAINING COMPARABLES. WE A LSO MAKE IT CLEAR THAT THE LEARNED COUNSEL HAD MADE A SUBMI SSION BEFORE US THAT IN CASE WE ACCEPT THE ASSESSEES GROUND NOS.(I), (II), (VII) AND (VIII), ALL THE REMAINING EIGHT COMP ARABLES ENTITIES WOULD BE RENDERED ACADEMIC. WE THEREFORE DIRECT THE TP O TO CONSIDER THE ASSESSEES INSTANT CONCESSION AS WELL IN CONSEQUENTIAL PROCEEDINGS. THIS 6 TH SUBSTANTIVE GROUND IS PARTLY ACCEPTED IN FOREGOING TERMS. 9. LEARNED COUNSEL NEXT STATED THAT THE ASSESSEES 8 TH TO 10 TH SUBSTANTIVE GROUNDS ARE CONSEQUENTIAL IN NATURE. THE SAME ARE ACCORDINGLY DISPOSED IN LIGHT IN FOREGOING DETAILED DISCUSSION. 10. THE ASSESSEES 11 TH TO 13 TH SUBSTANTIVE GROUNDS CHALLENGE CORRECTNESS OF THE LOWER AUTHORITIES ACTION MAKING ALP ADJUSTMENT PERTAINING TO INTEREST ON RECEIVABLES AMOUNTING TO RS.2,80,004/-. LEARNED COUNSEL STATED IN LIGHT OF THE TR IBUNALS EARLIER ORDERS, AND MORE PARTICULARLY IN AY.2014-15 HAVE DIRECTED THE TPO TO ALLOW CREDIT PERIOD AS PER AGREEME NT BETWEEN ASSESSEE AND ITS AES. AND ALSO THAT IF IT TURN ED OUT THAT NO SUCH PERIOD WAS SPECIFIED, THE CREDIT PERIOD WO ULD BE 90 DAYS ONLY. 10.1. LEARNED DEPARTMENTAL REPRESENTATIVE HAS STRONGLY SUPPORTED THE IMPUGNED ALP ADJUSTMENT PERTAINING TO INTE REST ON OUTSTANDING RECEIVABLES. HE HAS ALSO SOUGHT TO BUTTRES S THE ITA-TP NO.198/HYD/2021 :- 16 -: POINT THAT THIS TRIBUNAL HAS ALREADY ADJUDICATED THE I NSTANT ISSUE. 10.2. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIV AL CONTENTIONS QUA CORRECTNESS OF THE IMPUGNED ADDITION. THERE IS HARDLY ANY DISPUTE THAT THE LEARNED LOWER AUTHORITIES HAVE GONE BY SBI SHORT TERM DEPOSIT RATES WHICH IS IN THE NAT URE OF A LOAN OR CASH TRANSACTION INVOLVING DOMESTIC DEPOSITS RATHER THAN LIBOR RATE IN INTERNATIONAL TRANSACTIONS, INVOLVIN G THE VERY BUSINESS SEGMENT. COMING TO THE REVENUES ARGUMENT THAT THIS TRIBUNAL HAS ALREADY DIRECTED THE TPO TO GO BY THE AGREEMENT BETWEEN AN ASSESSEE AND ITS AES, WE QUOTE TECHNIMONT ICB PVT. LTD., VS. ADDL.CIT [138 ITD 23] (ITAT, MUM) (TM) AND SABIC IN NOVATIVE PLASTIC INDIA LTD. VS. DCIT (2013) 59 SOT 138 (AHD) TH AT AN AE COULD NOT BE ADOPTED AS A TESTED PARTY SINCE LACKING UNCONTROLLED COMPARABLE TRANSACTIONS. HON'BLE JURISDIC TIONAL HIGH COURTS DECISION IN CIT VS B R CONSTRUCTIONS [(19 92) 222 ITR 202 AP FULL COURT] HOLDS THAT A CO-ORDINATE BENCH DECISION NOT TAKING INTO CONSIDERATION THE RELEVANT LAW AND FACTS; AS THE CASE MAY BE, IS NOT A BINDING PRECEDENT . WE THEREFORE ACCEPT THE ASSESSEES INSTANT 13 TH SUBSTANTIVE GROUND FOR THIS PRECISE REASON ALONE AND DELETE THE IMPUGNED ALP ADJUSTMENT O F RS.2,80,004/-. 11. NEXT COMES ASSESSEES IDENTICAL SUBSTANTIVE GROUNDS NO.14 TH AND 15 TH SEEKING TO ALLOW MANAGEMENT AND CONSULTANCY FEE INVOLVING ALP ADJUSTMENTS OF RS.3,95 ,25,970/- AND RS.1,00,01,279/-; RESPECTIVELY. LEARNED COUNSEL VEHEMENT CONTENDED BEFORE US THAT THE LOWER AUTHORITIES HAVE ERR ED IN LAW AND ON FACTS IN MAKING BOTH THE IMPUGNED ADJUSTMEN TS ITA-TP NO.198/HYD/2021 :- 17 -: THEREBY TAKING NIL PRICE AS THEIR MARKET RATE(S) IN IS SUE. AND ALSO THAT THEY HAVE WRONGLY APPLIED BENEFIT TEST AS WELL WHICH IS NOT SUSTAINABLE IN LIGHT OF CIT VS. CUSHMAN & WAKEF IELD (INDIA) PVT. LTD., [269 CTR 16] (DEL) AND CIT VS. EKL APPLIANCES LTD. (2012) [345 ITR 241] (DEL) THAT IT IS NOT WITHIN THE TPOS DOMAIN TO ASCERTAIN OR APPLY THE BENEFIT TEST SINCE THE SAME HAS TO BE ASCERTAINED FROM THE POINT OF VIEW OF AN ASSESSEE THAN QUESTIONING ITS WISDOM BY DEPARTMENTAL AUTHORITIES. HIS NEXT ARGUMENT IS THAT IT IS THE ASSESSEES AE HAD I N FACT MADE THE IMPUGNED PAYMENTS TO M/S.KPMG ON COST TO COST BASIS ONLY WITHOUT INVOLVING ANY PROFIT ELEMENT TH EREIN. LEARNED COUNSEL HAS QUOTED A CATENA OF CASE LAW THAT SUCH COST TO COST ARRANGEMENT ITSELF FORMS A VALID MARKET COMPARABLE WHICH COULD NOT BE DIS-REGARDED WHILST ADD ING THE ENTIRE PRICE AS ALP ADJUSTMENT. THE REVENUE IN TURN HAS STRONGLY SUPPORTED BOTH THE IMPUGNED ADJUSTMENT. 11.1. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIV AL CONTENTIONS. WE ARE OF THE VIEW THAT THE LEARNED TPO NEE DS TO RE-EXAMINE THE ENTIRE ISSUE IN LIGHT OF THE ASSESSEE S FOREGOING SUBMISSIONS ACCORDINGLY PIN-POINTING; PRIMA-FACIE, A COST TO COST REIMBURSEMENT ARRANGEMENT BETWEEN ITSELF, ITS AE A ND THE ULTIMATE PAYEE M/S.KPMG QUA THE SERVICES IN ISSUE. WE FURTHER WISH TO QUOTE HERE THE FOREGOING JUDICIAL PROCE DENTS (SUPRA) DECISION THAT THE BENEFIT TEST ALSO NOT TO BE APP LIED WHILST DETERMINING NIL ARMS LENGTH PRICE ON THE GR OUND THAT THE TAXPAYER HAD NOT IN FACT DERIVED ANY BENEFIT FROM THE INTERNATIONAL TRANSACTIONS IN ISSUE. THE ASSESSEE SHA LL ALSO BE ITA-TP NO.198/HYD/2021 :- 18 -: AT LIBERTY TO FILE ITS ADDITIONAL EVIDENCE; IF ANY, IN CONSEQUENTIAL PROCEEDINGS AS WELL. THE ASSESSEES INSTANT 14 TH AND 15 TH SUBSTANTIVE GROUNDS ARE ACCEPTED FOR STATISTICAL PURPOSES IN ABOVE TERMS THER EFORE. 12. LEARNED COUNSEL NEXT STATED AT THE BAR THAT THE ASSESSE E IS NOT PRESSING FOR ITS 16 TH TO 21 ST SUBSTANTIVE GROUNDS FORMING SUBJECT MATTER OF SECTION 154 RECTIFICATION PETITION FILED/PENDING BEFORE THE ASSESSING OFFICER. REJECTED ACCORDINGLY. 13. THE ASSESSEES 22 ND SUBSTANTIVE GROUND SEEKS TO ALLOW EDUCATION CESS PAID AS A DEDUCTION INVOLVING AN AMOU NT OF RS.52,84,078/- IN ISSUE. THE REVENUE ON THE OTHER HAN D QUOTES SECTION 40(A)(II) OF THE ACT THAT A CESS VERY M UCH FORMS PART OF THE CLINCHING STATUTORY EXPRESSION TAX E MPLOYED THEREIN. AND THAT IT IS TOO LATE NOW FOR THE ASSESSEE TO MAKE THE IMPUGNED CLAIM ONCE THE SAME HAD NOT BEEN RECORDED IN THE CORRESPONDING BOOKS OF ACCOUNT AS WELL. WE FIND NO MERIT IN THE REVENUES FOREGOING ARGUMENTS IN LIGHT OF SES A GOA LTD, VS. JCIT (2020) [117 TAXMANN.COM 96] (BOM), CHAMBAL FERTILIZERS AND CHEMICALS LTD, VS. CIT, ITA NO.52/201 8 (RAJ) HOLDING THE IMPUGNED CESS AS AN ALLOWABLE DEDUCTION IN LIGHT OF CBDTS CIRCULAR DT.18-05-1967 THAT EDUCATION CESS I S NOT INCLUDED IN TAX U/S.40(A)(II) OF THE ACT. WE THEREFO RE DIRECT THE ASSESSING OFFICER TO FRAME CONSEQUENTIAL COMPUTATION AS PER LAW. 14. THE ASSESSEES 23 RD SUBSTANTIVE GROUND SEEKS TO ALLOW ITS FOREIGN TAX PAYMENT AS A DEDUCTION. MR.LALA VEHEMENTL Y CONTENDED THAT THE INSTANT ISSUE ALLOWABILITY OF FOREIGN TAX PAID AS A DEDUCTION IN THE NATURE OF AN EXPENDITURE INCUR RED WHOLLY ITA-TP NO.198/HYD/2021 :- 19 -: AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS IS NO MORE RES INTEGRA IN LIGHT OF HON'BLE BOMBAY HIGH COURTS DECISION IN RELIANCE INFRASTRUCTURE LTD. VS. CIT (2017) 390 ITR 27 1 (BOM) WHEREIN THEIR LORDSHIPS HOLD IN VERY CLEAR TERMS THAT SECTION 40(A)(II) DOES NOT COVER THE SAME. WE FIND IN THIS FACTUAL BACKDROP THAT THIS TRIBUNALS C O- ORDINATE BENCH DECISION IN DCIT VS. ELITECORE TECHNOL OGIES PRIVATE LTD. (2017) 165 ITD 153 (AHD) HAS DISTINGUISHE D THE FOREGOING JUDICIAL PRECEDENT TO CONCLUDE THAT THE SAME I S NOT A BINDING PRECEDENT SINCE COMING FROM THE HON'BLE NON- JURISDICTIONAL HIGH COURT AS UNDER: 27. IN GROUND NO. 3, THE ASSESSEE HAS RAISED THE F OLLOWING GRIEVANCE 3.1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO IN NOT ALLO WING ENTIRE FOREIGN TAX CREDIT AMOUNTING TO RS.55,61,306. 3.2 ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE LEARNED A O IN DISREGARDING THE FACT THAT TAX CREDIT HAS BEEN CLAIMED ON THE INCOME WHIC H HAS BEEN TAXED IN BOTH THE COUNTRIES, I.E. SOURCE COUNTRY AND RESIDENT COUNTRY . 3.3 ALTERNATIVELY, ON THE FACTS AND CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION O F THE AO IN NOT CONSIDERING ACTUAL PROFITABILITY OF FOREIGN INCOME AND TAX THER EON WHILE COMPUTING THE TAX ON DOUBLY TAXED INCOME AT THE TIME OF ALLOWING THE TAX CREDIT IN RESPECT OF TAXES PAID IN INDONESIA, MALAYSIA AND RWANDA 28. IN A CONNECTED GROUND OF APPEAL, I.E. GROUND NO . 3 WHICH WE MUST TAKE UP ALONGWITH THE ABOVE STATED INTERRELATED GRIEVANCE O F THE ASSESSEE, THE ASSESSING OFFICER HAS ALSO RAISED THE FOLLOWING GRIEVANCE IN ITS APPEAL: 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE OF FOREIGN TAX CREDIT TO RS.3,10,799 AND THE BALANC E UNALLOWED CREDIT OF RS.52,50,507 ALLOWED U/S.37(1) OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECOR D. 29. THE RELEVANT MATERIAL FACTS ARE AS FOLLOWS. THE ASSESSEE BEFORE US, A WHOLLY OWNED SUBSIDIARY OF A US BASED COMPANY BY THE NAME OF ELITECORE TECHNOLOGIES INC, IS A COMPANY ENGAGED IN THE BUSIN ESS OF SOFTWARE ITA-TP NO.198/HYD/2021 :- 20 -: DEVELOPMENTS AND PRODUCTS. DURING THE RELEVANT PREV IOUS YEAR, THE ASSESSEE EARNED FOREIGN INCOME AMOUNTING TO RS 2,72,96,723 F ROM INDONESIA, RS 66,53,562 FROM MALAYSIA AND RS 3,51,570 FROM RWANDA . IT WAS IN RESPECT OF THESE INCOMES THAT THE TAXES WERE WITHHELD IN THE R ESPECTIVE SOURCE COUNTRIES, AND THE TAXES SO WITHHELD AGGREGATED TO RS 55,61,30 6. THE ASSESSE CLAIMED A TAX CREDIT IN RESPECT OF THE TAXES SO WITHHELD ABRO AD. THERE IS NO DISPUTE THAT THE ASSESSEE SHOULD GET FOREIGN TAX CREDIT FOR THE TAXE S SO PAID ABROAD- UNDER SECTION 90 READ WITH THE RELEVANT TREATY PROV ISIONS IN CASES IN WHICH THE INCOME IS SOURCED FROM TAX TREATY PARTNER JURISDICT IONS, I.E. MALAYSIA AND INDONESIA IN THIS CASE, AND UNDER SECTION 91 FROM T HE JURISDICTIONS WITH WHICH INDIA HAS NOT ENTERED INTO A TAX TREATY. THE DISPUT E IS CONFINED TO THE OF TAX CREDIT. WHILE THE ASSESSEE HAS CLAIMED A TAX CREDIT OF RS 55,61,306, THE ASSESSING OFFICER HAS GRANTED THE TAX CREDIT OF ONL Y RS 3,10,799. WHEN THE MATTER TRAVELLED IN APPEAL, THE FIRST APPELLATE AUT HORITY, I.E. LEARNED CIT(A) SIMPLY FOLLOWED HIS PREDECESSOR'S ORDER ON THIS ISS UE, IN ASSESSEE'S OWN CASE FOR THE 2009-10, AND CONFIRMED THE QUANTIFICATION OF EL IGIBLE TAX CREDIT AT RS 3,10,799. AS FOR THE BALANCE AMOUNT OF RS 52,50,507 (I.E. TAX WITHHELD ABROAD AT RS 55,61,306 MINUS TAX CREDIT ALLOWED OF RS 3,10 ,799), THE CIT(A) HELD THAT IT SHOULD BE ALLOWED AS DEDUCTION UNDER SECTION 37(1)- A CLAIM WHICH WAS NEGATIVED, OR RATHER SIMPLY BRUSHED ASIDE, BY THE A SSESSING OFFICER WITHOUT ANY DISCUSSION AT ALL. AGGRIEVED BY LEARNED CIT(A) UPHO LDING THE ELIGIBLE TAX CREDIT AT RS 3,10,799, THE ASSESSEE IS IN APPEAL BEFORE US . IN THE MEANTIME, HOWEVER, THE ORDER SO FOLLOWED BY THE CIT(A) ALSO CAME UP FO R EXAMINATION BEFORE US. VIDE ORDER DATED 3RD JANUARY 2017 ON ASSESSEE'S APP EAL FOR THE ASSESSMENT YEAR 2009-10, THE STAND OF THE CIT(A) ON QUANTIFICA TION OF TAX CREDIT WAS REVERSED, CLAIM OF THE ASSESSEE ON QUANTIFICATION, TO A VERY LARGE EXTENT, WAS UPHELD, AND, IN THE PROCESS, SOME OBSERVATIONS ON P RINCIPLES GOVERNING THE QUANTIFICATION OF SUCH TAX CREDIT WERE MADE. LEARNE D COUNSEL FOR THE ASSESSEE SUGGESTS THAT MATTER DESERVES TO BE REMITTED TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION, ON QUANTIFICATION ASPECT, IN THE LIGH T OF THE ORDER SO PASSED BY THE TRIBUNAL, AND LEARNED DEPARTMENTAL REPRESENTATIVE D OES NOT OPPOSE THIS PRAYER. ON THE QUANTIFICATION ASPECT, THEREFORE, WE REMIT THE MATTER THE FILE OF THE CIT(A) FOR ADJUDICATION DE NOVO IN ACCORDANCE W ITH THE LAW, IN THE LIGHT OF THE OBSERVATIONS MADE BY THE TRIBUNAL FOR THE ASSES SMENT YEAR 2009-10 IN ASSESSEE'S OWN CASE, BY WAY OF A SPEAKING ORDER AND AFTER GIVING A REASONABLE OPPORTUNITY OF HEARING TO THE PARTIES. FOR THE SAKE OF COMPLETENESS, WE REPRODUCE THESE OBSERVATIONS AS BELOW: 8. SO FAR AS THE FIRST ISSUE THAT WE HAVE IDENTIFIE D FOR ADJUDICATION, I.E. THE MANNER IN WHICH THE QUANTUM OF INCOME ELIGIBLE WHIC H IS REQUIRED TO BE TREATED AS TAXED IN BOTH THE COUNTRIES ,IS CONCERNED, THERE IS NO GUIDANCE AVAILABLE IN THE TREATIES. ALL THAT BOTH THE TREATIES STATE IS T HAT THE FOREIGN TAX CREDIT SHALL NOT EXCEED THE PART OF THE INCOME TAX AS COMPUTED BEFOR E THE DEDUCTION IS GIVEN, 'WHICH IS ATTRIBUTABLE AS THE CASE MAY BE, TO THE I NCOME WHICH MAY BE TAXED IN THAT OTHER STATE' BUT THERE IS LITTLE GUIDANCE ON H OW TO COMPUTE SUCH INCOME. HOWEVER, QUITE CLEARLY, AS THE EXPRESSION USED IS ' INCOME', WHICH ESSENTIALLY ITA-TP NO.198/HYD/2021 :- 21 -: IMPLIED 'INCOME' EMBEDDED IN THE GROSS RECEIPT, AND NOT THE 'GROSS RECEIPT' ITSELF. THIS APPROACH IS REFLECTED IN THE UN MODEL CONVENTI ON COMMENTARY AS WELL, WHICH, IN TURN, FOLLOWS THE APPROACH IN OECD MODEL CONVENTION COMMENTARY IN THIS REGARD. UN MODEL ITA NO.197 AND 508/AHD/201 6 ASSESSMENT YEAR: 2012-13 CONVENTION COMMENTARY (2011 UPDATE @ PAGE 3 33) STATES THAT 'NORMALLY THE BASIS OF CALCULATION OF INCOME TAX IS TOTAL NET INCOME, I.E. GROSS INCOME LESS ALLOWABLE DEDUCTIONS. THEREFORE, IT IS THE GROSS INCOME DERIVED FROM THE SOURCE STATE LESS ANY ALLOWABLE DEDUCTIONS (SPECIFIC OR PROPORTIONAL) CONNECTED WITH SUCH INCOME WHICH IS TO BE EXEMPTED' . IT IS, THEREFORE, NOT REALLY THE RIGHT APPROACH TO TAKE INTO ACCOUNT THE GROSS R ECEIPTS, AS WAS CONTENDED BY THE ASSESSEE, FOR THE PURPOSE OF COMPUTING ADMISSIB LE TAX CREDIT. THE CASE BEFORE US IS, HOWEVER, SOMEWHAT UNIQUE IN THE SENSE THAT THE MAIN BUSINESS IS CARRIED ON IN INDIA AND ONLY SOME ISOLATED TRANSACT IONS HAVE TAKEN PLACE IN SINGAPORE AND INDONESIA. SO FAR AS THE FIRST TWO TR ANSACTIONS ARE CONCERNED, THESE ARE ONLY FOR RELEASE OF MARGIN MONEY AND ADDI TION OF A SEPARATE USER- THINGS WHICH DONOT REQUIRE ANY ACTIVITY ON THE PART OF THE ASSESSEE. IN A WAY, THEREFORE, THESE EARNINGS ARE, SO FAR AS THE PRESEN T YEAR IS CONCERNED, ARE PASSIVE EARNINGS, AND NO PART OF THE COSTS INCURRED IN INDIA CAN BE ALLOCATED TO EARNINGS FROM SINGAPORE AND INDONESIA. AS REGARDS E ARNINGS FROM MAINTENANCE CONTRACT, THE ASSESSEE HAS ALLOCATED THE COSTS ON A PROPORTIONATE BASIS AND NO DEFECTS ARE POINTED OUT IN THE ALLOCATION SO MADE B Y THE ASSESSEE. HOWEVER, THERE SEEMS TO BE NO LOGIC IN ALLOCATING A SHARE, I N PROPORTION OF TURNOVER, OF ALL THE COSTS BORNE BY THE ASSESSEE TO THESE EARNINGS- AS HAS BEEN DONE BY THE ASSESSING OFFICER. WHEN THE INCOME IN RESPECT OF SU CH FOREIGN OPERATIONS IS NOT SEPARATELY COMPUTED, IT IS TO BE DONE ON A REASONAB LE BASIS, AND WHAT WOULD CONSTITUTE REASONABLE BASIS WILL BE THE BASIS WHICH IS BASED ON SOUND REASONING. THE CONCEPT OF AVERAGING ON THE BASIS OF OVERALL RE VENUES AND PROFITS OF THE ASSESSEE, OR ON THE BASIS OF SOME OTHER RATIO ANALY SIS, CAN ONLY COME INTO PLAY WHEN THE INCOME ELEMENT CANNOT BE WORKED OUT ON SOM E OTHER REASONABLE BASIS ON THE FACTS OF A PARTICULAR CASE SO FAR AS THE FAC TS OF THE PRESENT CASE ARE CONCERNED, WE HAVE ALSO NOTED THAT THE ASSESSEE HAS , DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, GIVEN THE WORKING ON THE CO MPUTATION OF INCOME- A COPY OF WHICH IS PLACED AT PAGE 79 OF THE PAPER-BOO K FILED BEFORE US.. ....... 9. WE SEE NO INFIRMITIES IN THIS COMPUTATION SHOWIN G THE ELEMENT OF INCOME EMBEDDED IN THE RECEIPTS WHICH HAVE BEEN TAXED ABRO AD AS WELL. THESE DETAILS WERE DULY FURNISHED TO THE ASSESSING OFFICER VIDE L ETTER DATED 20TH MARCH 2013, A COPY OF WHICH WAS ALSO PLACED BEFORE US AT PAGES 69 ONWARD OF THE PAPER- BOOK. ON A PERUSAL OF THESE DETAILS, WE FIND THAT A S FAR AS RELEASE OF RETENTION MONEY OF RS 53,23,085, RELEASED AFTER VALIDATION OF SOFTWARE BY IBM SINGAPORE, IS CONCERNED, WE FIND THAT IT IS UNCONTROVERTED CLA IM OF THE ASSESSEE THAT ENTIRE RELATED EXPENSES HAVE BEEN INCURRED IN THE EARLIER YEARS AS THE SOFTWARE SUPPLY WAS COMPLETED IN FINANCIAL YEAR 2006-07. THERE CANN OT OBVIOUSLY BE ANY INCREMENTAL COST AT THE POINT OF TIME WHEN RETENTIO N MONEY OF 15% OF TOTAL CONTRACT VALUE IS RELEASED. THE SAME IS THE POSITIO N IN RESPECT OF RECEIPT OF RS 31,61,369 FROM PT TECH MAHINDRA IS CONCERNED, WHICH IS ONLY FOR ADDITIONAL ITA-TP NO.198/HYD/2021 :- 22 -: USER OF SOFTWARE ALREADY SUPPLIED TO THE CUSTOMER. WHEN AN ADDITIONAL USER IS ADDED BY THE CUSTOMER, IT DOES RESULT IN REVENUE TO THE SELLER BUT IT DOES NOT AT ALL ADD TO HIS COSTS. THERE IS THUS MERIT IN THE PL EA THAT ENTIRE RECEIPT, AS IN THE CASE OF RELEASE OF RETENTION MONEY, IS IN THE NATUR E OF INCOME IN THIS YEAR. AS REGARDS RECEIPT OF RS 5,74,060, THIS IS IN RESPECT OF ANNUAL MAINTENANCE FEES BUT THEN THERE IS A DEDICATED TEAM FOR THIS PURPOSE AND THE COSTS RELATABLE TO THIS PARTICULAR RECEIPT HAVE BEEN COMPUTED BY APPORTIONI NG THESE COSTS. WE SEE NO INFIRMITY IN THIS COMPUTATION EITHER. IN OUR CONSID ERED VIEW, THEREFORE, THE COMPUTATION OF INCOME ELEMENT, AS GIVEN BY THE ASSE SSE, IS FAIR AND REASONABLE AND, IN ANY EVENT, THE ASSESSING OFFICER HAS NOT PO INTED OUT ANY SPECIFIC INFIRMITIES IN THE SAME. GIVEN THIS ANALYSIS, WE SE E NO NEED TO COMPUTE THE PROFIT ELEMENT BY TAKING INTO ACCOUNT THE RATIO OF ENTIRE INCOME TO ENTIRE TURNOVER OF THE ASSESSEE. SUCH A COURSE, IF AT ALL, COULD HAVE BEEN RELEVANT IF THE ASSESSEE HAD NOT FURNISHED A REASONABLE COMPUTATION OF INCOM E EMBEDDED IN THE RELATED RECEIPTS OF THE ASSESSEE. THAT IS NOT THE CASE BEFO RE US. WE, THEREFORE, APPROVE THE STAND OF THE ASSESSEE ON THIS POINT. HAVING SAI D THAT, WE MAY ADD THAT THIS DECISION CANNOT BE THE AUTHORITY FOR THE GENERAL PR OPOSITION THAT ONLY MARGINAL OR INCREMENTAL COSTS INCURRED IN RESPECT OF FOREIGN INCOME SHOULD BE TAKEN INTO ACCOUNT AND THE OVERHEADS CANNOT BE ALLOCATED THERE TO. AS WE HAVE NOTED EARLIER, THE ALLOCATION OF PROPORTIONAL DEDUCTIONS CAN BE JUSTIFIED IN SOME SITUATIONS, SUCH AS WHEN BUSINESS OPERATIONS ARE SO MEWHAT EVENLY OR EVEN IN A SIGNIFICANT MANNER, SPREAD OVER THE RESIDENCE AND S OURCE JURISDICTION, BUT THAT'S NOT THE CASE HERE. RIGHT NOW, WE ARE DEALING WITH A SITUATION IN WHICH A MAJOR PORTION OF INCOME, BY RELEASE OF RETENTION MONEY AS ALSO BY ADDITION OF AN ADDITIONAL USER BY THE CUSTOMER, IS A SOMEWHAT PASS IVE INCOME, EVEN THOUGH IN THE NATURE OF BUSINESS RECEIPT, AND AS SUCH, TO THA T EXTENT, ALLOCATION OF ALL THE EXPENSES INCURRED BY THE ASSESSEE, IN RESPECT OF SU CH EARNINGS, WILL NOT BE JUSTIFIED. AS REGARDS THE INCOME FROM MAINTENANCE C ONTRACTS, THE RELATES COSTS HAVE ALREADY BEEN ALLOCATED AND THE ASSESSING OFFIC ER HAS NOT POINTED OUT ANY INFIRMITY IN THE SAME. IN THIS VIEW OF THE MATTER, QUANTIFICATION OF INCOME FOR THE PURPOSE OF COMPUTING ADMISSIBLE TAX CREDIT, AS DONE BY THE ASSESSEE AND AS REPRODUCED EARLIER, IS ACCEPTED. 10. WE HAVE NOTED THAT THE TAX CREDIT FOR BOTH THE JURISDICTIONS IS TO BE COMPUTED SEPARATELY BUT IN A SIMILAR MANNER, AS IS PROVIDED IN THE RESPECTIVE TREATIES. SO FAR AS THE TAX CREDIT IN RESPECT OF INDONESIAN RECE IPTS IS CONCERNED, AS NOTED ABOVE AND IN VIEW OF ARTICLE 23(1) OF THE APPLICABL E TAX TREATY, IT CANNOT 'EXCEED THE PART OF THE INCOME TAX AS COMPUTED BEFORE THE D EDUCTION IS GIVEN, WHICH IS ATTRIBUTABLE AS THE CASE MAY BE, TO THE INCOME WHIC H MAY BE TAXED IN THAT OTHER STATE'. THE INCOME TAX IS, THEREFORE, REQUIRED TO B E COMPUTED ON PROPORTIONATE BASIS. WHAT IS, THEREFORE, TO BE COMPUTED NEXT IS T HE TAX ATTRIBUTABLE TO THE INCOME WHICH IS SO TAXED IN BOTH THE TAX JURISDICTI ONS. THE TAX HAS BEEN PAID, IN THIS CASE, ON BOOK PROFITS. TO THE BEST OF OUR UNDE RSTANDING, AND PARTICULARLY IN THE ABSENCE OF ANY OTHER METHOD HAVING BEEN POINTED OUT TO US, ONLY WAY IN WHICH BE SO DONE IS BY APPORTIONING THE ACTUAL TAX PAID UNDER MAT PROVISIONS (I.E. RS 54,13,417), IN THE SAME RATIO AS DOUBLE TA XED PROFIT TO THE OVERALL PROFITS ITA-TP NO.198/HYD/2021 :- 23 -: I.E. 35,86,178:4,77,79,403. THE AMOUNT OF TAX CREDI T IN RESPECT OF THIS INCOME THUS COMES TO RS 4,06,315, AS AGAINST THE ACTUAL DE DUCTION OF TAX AGGREGATING TO RS 5,71,878. THE TAX CREDIT CLAIM IS THUS ADMISSIBL E TO THIS EXTENT. AS FOR THE TAX CREDIT IN RESPECT OF SINGAPOREAN RECEIPTS, WHILE TH E FORMULAE FOR LIMITATION UNDER ARTICLE 25(2) OF THE INDO SINGAPORE TAX TREAT Y REMAINS BROADLY THE SAME AS IT IS PROVIDED THAT THE CREDIT SHALL NOT EXCEED TAX 'WHICH IS ATTRIBUTABLE TO THE INCOME WHICH MAY BE TAXED IN SINGAPORE' BUT THE FIR ST VARIABLE I.E. INCOME TAXED IN BOTH THE COUNTRIES WOULD CHANGE. THE FIGUR E OF INCOME TAXED IN SINGAPORE AS ALSO INDIA IS 53,23,085. THE MAT PAID, RELATABLE TO THIS INCOME, WILL BE ARRIVED AT BY DIVIDING THE SAME IN THE RATI O 53,23,085:4,77,79,403 THE AMOUNT OF TAX PAYABLE IN RESPECT OF SINGAPORE INCOM E, BY THE SAME FORMULAE, WORKS OUT TO RS 6,03,107 WHICH IS CLEARLY LESS THAN RS 5,41,029 WHICH WAS DEDUCTED AT SOURCE IN SINGAPORE. THE TAX CREDIT OF RS 5,41,029 IN RESPECT OF SINGAPOREAN RECEIPTS IS THUS CLEARLY ADMISSIBLE. AS AGAINST TAX CREDIT CLAIM OF RS 11,12,907, THE TAX CREDIT OF RS 9,47,344 IS THUS INDEED ADMISSIBLE. TO THIS EXTENT, THE CLAIM OF THE ASSESSEE IS UPHELD. THE CA SE OF THE ASSESSEE, IN ANY EVENT, WAS NOT PRESSED BEYOND THIS POINT. 30. THERE IS, HOWEVER, ONE MORE ASPECT TO THE CONT ROVERSY REGARDING TREATMENT OF INCOME TAXES PAID ABROAD BY THE ASSESSEE, AND TH AT IS WITH RESPECT TO DEDUCTIBILITY OF TAXES SO PAID ABROAD, EXCEPT TO TH E EXTENT OF TAX CREDIT BEING GRANTED IN RESPECT OF THE SAME UNDER SECTION 90 OR 91, UNDER SECTION 37(1). AGGRIEVED BY DEDUCTION BEING GRANTED BY THE CIT(A) IN RESPECT OF THE BALANCE AMOUNT OF INCOME TAX PAID ABROAD ITA NO.197 AND 508 /AHD/2016 ASSESSMENT YEAR: 2012-13 (I.E. INCOME TAX WITHHELD ABROAD MINU S THE TAX CREDIT HELD ADMISSIBLE IN SUCH RESPECT OF SUCH INCOME TAX PAID ABROAD), THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 31. SO FAR AS THIS ASPECT OF THE MATTER IS CONCERNE D, THE STAND OF THE ASSESSEE, AT THE ASSESSMENT STAGE, HAS BEEN THAT IN CASE ANY PAR T OF THE AMOUNT OF INCOME TAX WITHHELD ABROAD IS NOT ALLOWED AS TAX CREDIT AGAINS T THE INDIAN TAX LIABILITY, A DEDUCTION UNDER SECTION 37(1) BE ALLOWED IN RESPECT OF THE SAME. IT WAS POINTED THAT THOUGH THERE IS A BAR, UNDER SECTION 40(A)(II) , ON DEDUCTION IN RESPECT OF 'TAX' ON THE PROFITS AND GAINS OF THE BUSINESS, SUC H A BAR DOES NOT APPLY ON THE TAXES PAID OUTSIDE INDIA, AS, IN TERMS OF DEFINITIO N OF TAX UNDER SECTION 2(43), 'INCOME-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT, AND IN RELATION TO ANY OTHER ASSESSMENT YEAR INCOME-TAX AND SUPER-TAX CHAR GEABLE UNDER THE PROVISIONS OF THIS ACT PRIOR TO THE AFORESAID DATE AND IN RELATION TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2006, AND ANY SUBSEQUENT ASSESSMENT YEAR INCLUDES THE FRINGE BENEFIT TAX PAY ABLE UNDER SECTION 115WA'. RELIANCE WAS PLACED ON A COORDINATE BENCH DECISION IN THE CASE OF DCIT VS MASTEK LIMITED [(2013) 36 TAXMANN.COM 384 (AHMEDABA D - TRIB.)] AS ALSO SOME OTHER JUDICIAL PRECEDENTS WHICH HAVE BEEN NOTE D AND RELIED UPON IN THIS COORDINATE BENCH DECISION. WHILE THE ASSESSING OFFI CER DID NOT DEAL WITH THESE ARGUMENTS AT ALL AND SIMPLY BRUSHED ASIDE THE CLAIM OF THE ASSESSEE, LEARNED CIT(A) UPHELD THIS CLAIM AND DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION ITA-TP NO.198/HYD/2021 :- 24 -: UNDER SECTION 37(1) IN RESPECT OF AMOUNT OF DIFFERE NCE BETWEEN THE INCOME TAX WITHHELD ABROAD AND THE FOREIGN TAX CREDIT GRANTED TO THE ASSESSEE IN RESPECT OF THE SAME. AGGRIEVED, THE ASSESSING OFFICER IS IN AP PEAL BEFORE US. 32. LEARNED COUNSEL FOR THE ASSESSEE HAD STATED THI S MATTER TO BE A COVERED MATTER BY MASTEK DECISION (SUPRA), BUT WHEN HE WAS ASKED TO ARGUE THE MATTER ON MERITS, HE PAINSTAKINGLY TOOK US THROUGH SECTION 40(A)(II) AND REITERATED THE ARGUMENTS WHICH WERE TAKEN BEFORE THE AUTHORITIES B ELOW. HIS BROAD CONTENTION WAS THAT IN TERMS OF THE EXPLANATION 1 TO SECTION 4 0(A)(II), IT IS CLEAR THAT THE BAR ON DEDUCTION UNDER SECTION 40(A)(II) IS CONFINE D TO ONLY SUCH INCOME TAX PAID ABROAD IN RESPECT OF WHICH TAX CREDIT IS GRANT ED UNDER SECTION 90 OR 91. SO FAR AS THE FOREIGN TAX IN RESPECT OF WHICH NO TAX C REDIT IS AVAILABLE, ACCORDING TO THE LEARNED COUNSEL, THERE IS NO BAR ON DEDUCTION U NDER SECTION 40(A)(II). THE EXPRESSION 'TAX', AS LEARNED COUNSEL CONTENDS, IS A DEFINED EXPRESSION UNDER THE INCOME TAX ACT, AND ITS CONNOTATIONS ARE CONFIN ED TO ONLY SUCH TAX AS IS PAID UNDER THE INCOME TAX ACT. LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUBMITTED THAT IN TERMS OF SECTION 40(A )(II), NO DEDUCTION CAN BE ALLOWED IN RESPECT OF TAXES ON INCOME, AND THERE IS NO REASON TO ASSUME THAT SUCH A RESTRICTION IS CONFINED TO TAXES PAID IN IND IA. AS FOR THE CONTENTION THAT THE EXPRESSION 'TAX' APPEARING IN SECTION 40(A)(II) IS A DEFINED EXPRESSION RESTRICTING THE SCOPE OF THIS EXPRESSION TO TAXES P AID UNDER THE INCOME TAX ACT, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THIS IS A HYPER TECHNICAL ARGUMENT CONTRARY TO THE SCHEME OF THE STATUTORY PR OVISION. HE, HOWEVER, LEFT THE MATTER TO US. WE HAVE HEARD THE RIVAL CONTENTIO NS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF APPLICABLE LEGAL POSITION. IF WE ARE TO UPHOLD THE CONTENTIONS OF TH E ASSESSEE AND THE IMPUGNED ORDER OF THE CIT(A). THE SCHEME OF BENEFIT AVAILABL E TO THE ASSESSEE IN RESPECT OF TAXES PAID OR WITHHELD OUTSIDE INDIA, BY WAY OF AN EXAMPLE, IS AS FOLLOWS: ASSUMING THAT THE ASSESSEE EARNED AN INCOME OF RS 1 00 FROM OUTSIDE INDIA, AND THE TAXES WITHHELD ABROAD ARE RS 60 AND THE ADMISSI BLE TAX CREDIT AVAILABLE TO THE ASSESSEE UNDER SECTION 90 AND/OR 91, IN RESPECT OF THESE TAXES WITHHELD, IS RS 40 AS THE EFFECTIVE TAX RATE IN INDIA IN RESPECT OF THE SAID INCOME IS 40%, THE BENEFIT AVAILABLE TO THE ASSESSEE SHOULD BE AS FOLL OWS: TAX CREDIT TO BE ADJUSTED AGAINST TAX LIABILITY UND ER THE INCOME TAX ACT, 1961 RS 40 DEDUCTION UNDER SECTION 37(1) IN RESPECT OF T AXES PAID OR WITHHELD OUTSIDE INDIA RS 20 IN EFFECT THUS, THE ASSESSEE GE TS A TAX BENEFIT OF RS 48 (I.E. RS 40 PLUS 40% OF RS 20 WHICH IS ALLOWED AS DEDUCTION) AS AGAINST A RELATED TAX LIABILITY OF RS 40 33. THE STAND OF THE REVENUE AUTHORITIES, ON THE OT HER HAND, IS THAT IN THE ABOVE EXAMPLE, NO AMOUNT OF TAX PAID OR WITHHELD OUTSIDE INDIA CAN BE ALLOWED AS DEDUCTION UNDER SECTION 37(1). IT IS UNDISPUTED POS ITION THAT BUT FOR THE RESTRICTION PLACED UNDER SECTION 40(A)(II) INCOME T AX PAID BY AN ASSESSEE WOULD BE DEDUCTIBLE EXPENSE, AND, THEREFORE, THE CONTROVE RSY REQUIRING OUR ADJUDICATION IS CONFINED TO THE QUESTION AS TO WHET HER OR NOT THIS RESTRICTION ITA-TP NO.198/HYD/2021 :- 25 -: COMES INTO PLAY IN RESPECT OF THE INCOME TAX PAID A BROAD. THE CASE OF THE ASSESSEE IS THAT TAXES PAID ABROAD ARE PAID FOR THE PURPOSES OF BUSINESS, AND AS SUCH DEDUCTIBLE UNDER S. 37(1) WHICH PROVIDES THAT, 'ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SS. 30 TO 36 AND NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASS ESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER TH E HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. IT IS CONTENDED THAT TH E TAXES PAID ARE INHERENTLY IN THE NATURE OF EXPENSES INCURRED FOR THE PURPOSES OF BUSINESS BUT THESE ARE NOT ALLOWABLE AS DEDUCTION BECAUSE OF THE SPECIFIC BAR PLACED UNDER S. 40(A)(II). HOWEVER, ACCORDING TO THE ASSESSEE, THE RESTRICTION PLACED UNDER S. 40(A)(II), IN COMPUTATION OF INCOME FROM BUSINESS AND PROFESSION, REFERS TO ONLY 'TAX' BUT THE SAID EXPRESSION, IN VIEW OF DEFINITION OF THE EXPRE SSION 'TAX' UNDER S. 2(43), COVERS ONLY 'INCOME-TAX CHARGEABLE UNDER THE PROVIS IONS OF THIS ACT (I.E. IT ACT, 1961)', AND, AS A COROLLARY THERETO, THIS LIMITATIO N ON DEDUCTION OF TAX DOES NOT EXTEND ITS SCOPE TO TAXES PAID OTHER THAN UNDER INC OME TAX ACT, 1961. THIS PLEA, HOWEVER, STANDS CATEGORICALLY REJECTED BY HON'BLE B OMBAY HIGH COURT AS FAR BACK AS OVER A QUARTER CENTURY IN 1990, IN THE CASE OF LUBRIZOL INDIA LIMITED VS CIT [(1991) 187 ITR 25 (BOM)]. THE PLEA WAS REJECTE D IN THE CONTEXT OF SECTION 40(A)(II) ITSELF, THOUGH WITH REFERENCE TO SURTAX, BUT PRINCIPLE UNAMBIGUOUSLY WAS THE SAME AND IT DEALT WITH THE SAME EXPRESSION IN THE SAME CLAUSE OF THE SUB SECTION. THE ARGUMENT OF THE ASSESSEE WAS THAT FOR THE PURPOSE OF SECTION 40(A)(II), WHICH SETS OUT RESTRICTION IN DEDUCTION OF 'TAX', THE DEFINITION OF TAX UNDER SECTION 2(43) MUST COME INTO PLAY, AND THIS D EFINITION IS CONFINED TO A TAX LEVIED UNDER THE INDIAN INCOME TAX ACT, 1961. HON'B LE BOMBAY HIGH COURT HAD, REJECTING THIS PLEA IN NO UNCERTAIN TERMS THOU GH IN THE CONTEXT OF SURTAX, OBSERVED AS FOLLOWS: ITA NO.197 AND 508/AHD/2016 ASSESSMENT YEAR: 2012-1 3 WITH RESPECT, THIS ARGUMENT DOES NOT APPEAL TO US. IT IS SIGNIFICANT T O NOTE THAT THE WORD 'TAX'; IS USED IN CONJUNCTION WITH THE WORDS 'ANY RATE OR TAX ', THE WORD 'ANY' GOES BOTH WITH THE RATE AND TAX. THE EXPRESSION IS FURTHER QU ALIFIED AS A RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSI ON OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS. IF THE WORD 'TAX' IS TO BE GIVEN THE MEANING ASSIGNED TO IT BY S. 2(43) OF THE ACT, THE WORD 'ANY' USED BEFORE IT WILL BE OTIOSE AND THE FURTHER QUALIFICAT ION AS TO THE NATURE OF LEVY WILL ALSO BECOME MEANINGLESS. FURTHERMORE, THE WORD 'TAX ' AS DEFINED IN S. 2(43) OF THE ACT IS SUBJECT TO 'UNLESS THE CONTEXT OTHERWISE REQUIRES'. IN VIEW OF THE DISCUSSION ABOVE, WE HOLD THAT THE WORDS 'ANY TAX' HEREIN REFERS TO ANY KIND OF TAX LEVIED OR LEVIABLE ON THE PROFITS OR GAINS OF A NY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BA SIS OF, ANY SUCH PROFITS OR GAINS. [EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW] ITA-TP NO.198/HYD/2021 :- 26 -: 34. THE VIEWS SO EXPRESSED BY HON'BLE BOMBAY HIGH C OURT, IN LUBRIZOL'S CASE (SUPRA), WERE APPROVED BY HON'BLE SUPREME COURT IN THE CASE OF SMITHKLINE & FRENCH INDIA LTD VS CIT [(1996) 219 ITR 581 (SC)]. WE ARE UNABLE TO SEE AS TO HOW THESE OBSERVATIONS H ELP THE ASSESSEES HEREIN. FIRSTLY, IT MAY BE MENTIONED, S. 10(4) OF THE 1922 ACT OR S. 40(A)(II) OF THE PRESENT ACT DO NOT CONTAIN ANY WORDS INDICATING THA T THE PROFITS AND GAINS SPOKEN OF BY THEM SHOULD BE DETERMINED IN ACCORDANC E WITH THE PROVISIONS OF THE IT ACT. ALL THEY SAY IS THAT IT MUST BE A RATE OR TAX LEVIED ON THE PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE OBSERVATIONS R ELIED UPON MUST BE READ IN THE SAID CONTEXT AND NOT LITERALLY OR AS THE PROVIS IONS IN A STATUTE. BUT SO FAR AS THE ISSUE HEREIN IS CONCERNED, EVEN THIS LITERAL RE ADING OF THE SAID OBSERVATIONS DOES NOT HELP THE ASSESSEE. AS WE HAVE POINTED OUT HEREINABOVE THE SURTAX IS ESSENTIALLY LEVIED ON THE BUSINESS PROFITS OF THE C OMPANY COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE IT ACT. MEREL Y BECAUSE CERTAIN FURTHER DEDUCTIONS [ADJUSTMENTS] ARE PROVIDED BY THE SURTAX ACT FROM THE SAID PROFITS, IT CANNOT BE SAID THAT THE SURTAX IS NOT LEVIED UPON T HE PROFITS DETERMINED OR COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE I T ACT. SEC. 4 OF THE SURTAX ACT READ WITH THE DEFINITION OF 'CHARGEABLE PROFITS ' AND THE FIRST SCHEDULE MAKE THE POSITION ABUNDANTLY CLEAR. 7. WE MAY MENTION THAT ALL THE HIGH COURTS IN THE C OUNTRY EXCEPT THE GAUHATI HIGH COURT HAVE TAKEN THE VIEW WHICH WE HAVE TAKEN HEREIN. ONLY THE GAUHATI HIGH COURT HAS TAKEN A CONTRARY VIEW IN THE DECISIO NS IN MAKUM TEA CO. (INDIA) LTD. & ANR. VS. CIT (1989) 178 ITR 453 (GAU ) AND DOOM DOOMA TEA CO. LTD. VS. CIT (1989) 180 ITR 126 (GAU) . THE DEC ISION OF THE GAUHATI HIGH COURT IN MAKUM TEA CO. (INDIA) LTD. IS UNDER APPEAL BEFORE US IN CIVIL APPEAL NOS. 3976-77 OF 1995. SIMILARLY CIVIL APPEAL NO. 32 46 OF 1995 IS PREFERRED AGAINST THE DECISION OF THE GAUHATI HIGH COURT FOLL OWING THE DECISION IN DOOM DOOMA TEA CO. LTD.. (ON ENQUIRY, THE OFFICE HAS INF ORMED THAT NO SPECIAL LEAVE PETITION/CIVIL APPEAL HAS BEEN FILED AGAINST THE DE CISION IN DOOM DOOMA TEA CO. (LTD.). FOR THE AFORESAID REASONS, WE CANNOT AG REE WITH THE VIEW TAKEN BY THE GAUHATI HIGH COURT IN THE AFORESAID DECISIONS. WE AGREE WITH THE VIEW TAKEN BY THE HIGH COURTS OF CALCUTTA [MOLINS (INDIA) LTD. VS. CIT (1983) 144 ITR 317 (CAL) AND BROOKE BO ND (INDIA) LTD. VS. CIT (1992) 193 ITR 390 (CAL) : TC 15R.590], BOMBAY (IN) LUBRIZOL (INDIA) LTD. VS. CIT (1991) 187 ITR 25 (BOM) FOLLOWED IN SEVERAL OTHER DECISIONS OF THAT COURT], KARNATAKA [CIT ITA NO.197 AND 508/AHD/2016 ASSESSMENT YEAR: 2012- 13 VS. INTERNATIONAL INSTRUMENTS PVT. LTD. (1983) 1 44 ITR 936 (KAR), MADRAS [SUNDARAM INDUSTRIES LTD. VS. CIT (1986) 159 ITR 64 6 (MAD), ANDHRA PRADESH [VAZIR SULTAN TOBACCO CO. LTD. VS. CIT (1988) 169 I TR 35 (AP)], RAJASTHAN [ASSOCIATED STONE INDUSTRIES CO. LTD. VS. CIT (1988 ) 170 ITR 653 (RAJ)], GUJARAT [S.L.M. MANEKLAL INDUSTRIES LTD. VS. CIT (1 988) 172 ITR 176 (GUJ) FOLLOWED IN SEVERAL CASES THEREAFTER], ALLAHABAD [H IMALAYAN DRUG CO. PVT. LTD. VS. CIT (1996) 218 ITR 346 (ALL)] AND PUNJAB & HARY ANA HIGH COURT ITA-TP NO.198/HYD/2021 :- 27 -: [HIGHWAY CYCLE INDUSTRIES LTD. VS. CIT (1989) 178 I TR 601 (P&H) : TC 17R.807]. 35. A COORDINATE BENCH OF THIS TRIBUNAL, WHILE DEAL ING WITH THE SAME QUESTION OF DEDUCTIBILITY OF INCOME TAX PAID ABROAD AND IN THE CASE OF DCIT VS TATA SONS LTD [(1991) 9 ITR (TRIB) 154 (BOM)] AND SPEAKING TH ROUGH ONE OF US, ELABORATELY SET OUT THE BROAD PRINCIPLES GOVERNING THE ISSUE AND OBSERVED AS FOLLOWS: 7. LET US DEAL WITH SOME FUNDAMENTALS FIRST. THE PA YMENT OF INCOME-TAX IN OVERSEAS TAX JURISDICTIONS, IN ADDITION TO TAXABILI TY IN THE HOME JURISDICTION, IS AN INEVITABLE COROLLARY OF INHERENT CONFLICT BETWEE N THE SOURCE RULE AND RESIDENCE RULE. THIS CONFLICT DEVELOPS WHEN A PERSO N RESIDENT IN ONE OF THE TAX JURISDICTIONS EARNS INCOME WHICH IS SOURCED FROM AN OTHER TAX JURISDICTION. AS PER THE RESIDENCE RULE, IRRESPECTIVE OF THE GEOGRAP HICAL LOCATION OF A PLACE WHERE A PERSON EARNS INCOME, THE INCOME IS TAXABLE IN THE TAX JURISDICTION IN WHICH A PERSON IS RESIDENT. THE SOURCE RULE, HOWEVE R, LAYS DOWN THAT AN INCOME EARNED IN A TAX JURISDICTION, IRRESPECTIVE OF THE R ESIDENTIAL STATUS OF THE PERSON EARNING THE SAID INCOME, IS LIABLE TO BE TAXED IN T HE TAX JURISDICTION WHERE THE INCOME IS EARNED. THEREFORE, A TAX OBJECT, I.E., TH E INCOME WHICH IS TO BE TAXED, AS A RULE ATTRACTS TAXABILITY IN THE SOURCE JURISDI CTION, AND A TAX SUBJECT, I.E. THE PERSON WHO IS TO BE TAXED IS TAXED IN THE RESIDENCE JURISDICTION. THESE COMPETING CLAIMS PUT THE TAXPAYER TO RISK OF BEING TAXED MORE THAN ONCE IN RESPECT OF THE SAME INCOME, AND A SOLUTION TO AVOID SUCH DOUBLE TAXATION IS THUS TO BE FOUND WITHIN THE FOUR CORNERS OF TAX SYSTEMS. WHILE SOURCE RULE AS ALSO THE RESIDENCE RULE CONTINUE TO BE INTEGRAL PART OF MOST OF THE TAX SYSTEMS, A MECHANISM IS PROVIDED IN THE DOMESTIC TAX LEGISLATI ONS TO RELIEVE A TAXPAYER OF SUCH DOUBLE TAXATION. IN 'TAX LAW DESIGN AND DRAFTI NG', AN INTERNATIONAL MONETARY FUND PUBLICATION (ISBN 90-411-9784-2), PRO F. RICHARD VANN, AT P. 756 OF VOLUME II, DEALS WITH THIS ISSUE BY OBSERVIN G AS FOLLOWS : 'IT IS NECESSARY TO DISTINGUISH AMONG FOUR BASIC ME THODS IN THIS AREA. THE FIRST IS FOR A COUNTRY NOT TO ASSERT JURISDICTION TO TAX FOREIGN SOURCE INCOME OF RESIDENTS (EITHER AT ALL OR FOR SELECTED TYPES OF I NCOME). THIS TERRITORIAL APPROACH TO TAXATION (TAXING ONLY INCOME SOURCED IN THE COUNTRY) MEANS THAT THE COUNTRY IS NOT FOLLOWING THE USUAL INTERNATIONA L NORM OF WORLDWIDE TAXATION OF RESIDENTS AND SO IS NOT STRICTLY A METHOD FOR RE LIEVING DOUBLE TAXATION AS RESIDENCE SOURCE DOUBLE TAXATION WILL SIMPLY NOT AR ISE FOR ITS RESIDENTS. THE SECOND METHOD IS THE EXEMPTION SYSTEM, UNDER WH ICH FOREIGN SOURCE INCOME IS EXEMPTED IN THE COUNTRY OF RESIDENCE. IF THE EXE MPTION IS UNCONDITIONAL AND THE EXEMPTED INCOME DOES NOT AFFECT IN ANY WAY THE TAXATION OF OTHER INCOME, THEN IN SUBSTANCE THE RESULT IS THE SAME AS A PUREL Y TERRITORIAL SYSTEM. MOST EXEMPTION SYSTEMS ARE NOT OF THIS KIND AND SO ARE T O BE DISTINGUISHED FROM TERRITORIAL SYSTEMS. MOST COUNTRIES USING AN EXEMPT ION SYSTEM ADOPT EXEMPTION WITH PROGRESSION, UNDER WHICH THE TOTAL TAX ON ALL INCOME OF A RESIDENT IS CALCULATED, AND THEN THE AVERAGE RATE OF TAX IS APP LIED TO THE INCOME THAT DOES NOT ENJOY THE EXEMPTION. EXEMPTION SYSTEMS ARE ALSO INCREASINGLY SUBJECT TO ITA-TP NO.198/HYD/2021 :- 28 -: VARIOUS CONDITIONS TO ENSURE SATISFACTION OF THE AS SUMPTION UNDERLYING THE SYSTEM (THAT THE INCOME HAS BEEN TAXED IN THE ITA N O.197 AND 508/AHD/2016 ASSESSMENT YEAR: 2012-13 SOURCE COUNTRY AT ITS ORDI NARY RATES).THESE CONDITIONS CAN CONSIST OF SUBJECT- TO-TAX TESTS (IN CLUDING THE SPECIFICATION OF TAX RATES) OR SELECTIVE APPLICATION OF EXEMPTION TO FOR EIGN COUNTRIES UNDER DOMESTIC LAW OR TAX TREATIES. IN PARTICULAR, THE EXEMPTION I S USUALLY NOT GIVEN WHERE THE SOURCE TAX HAS BEEN REDUCED OR ELIMINATED BY A TAX TREATY. THE RESULT IS THAT THERE ARE NO COUNTRIES ASSERTING JURISDICTION TO TA X WORLDWIDE INCOME THAT GIVE AN EXEMPTION FOR ALL KINDS OF FOREIGN INCOME; WHERE A COUNTRY IS REFERRED TO AS AN EXEMPTION COUNTRY, THIS GENERALLY MEANS THAT IT PROVIDES SOME FORM OF EXEMPTION TO BUSINESS INCOME, DIVIDENDS RECEIVED FR OM DIRECT INVESTMENTS IN FOREIGN COMPANIES, AND OFTEN EMPLOYMENT INCOME, WIT H A CREDIT BEING USED IN OTHER CASES. THE THIRD SYSTEM IS THE FOREIGN TAX CREDIT SYSTEM U NDER WHICH A CREDIT AGAINST TOTAL TAX ON WORLDWIDE INCOME IS GIVEN FOR FOREIGN TAXES PAID ON FOREIGN INCOME BY A RESIDENT UPTO THE AMOUNT OF DOMESTIC TAX ON TH AT INCOME. THIS LIMIT IS DESIGNED TO ENSURE THAT FOREIGN TAXES DO NOT REDUCE THE TAX ON THE DOMESTIC INCOME OF RESIDENTS AND IS CALCULATED BY APPLYING T HE AVERAGE RATE OF TAX ON THE WORLDWIDE INCOME BEFORE THE CREDIT TO THE FOREIGN-S OURCE INCOME. IN ITS SIMPLEST FORM, THIS LIMIT IS APPLIED TO FOREIGN INCOME IN IT S ENTIRETY, WITHOUT DISTINGUISHING THE TYPE OF INCOME AND THE COUNTRY W HERE IT IS SOURCED. THE FOURTH SYSTEM IS TO GIVE A DEDUCTION FOR FOREIG N INCOME-TAXES IN THE CALCULATION OF TAXABLE INCOME. WHILE THIS SYSTEM IS USED IN SOME COUNTRIES, OFTEN AS A FALL BACK FROM A FOREIGN TAX CREDIT WHERE THE CREDIT MAY NOT BE OF USE TO THE TAXPAYER, IT IS NOT WIDELY ACCEPTED AS A METHOD FOR USE ON ITS OWN AND, MORE SPECIFICALLY IS NOT USED IN TAX TREATIES. IT CAN BE ARGUED THAT RELIEF OF DOUBLE TAXATION IN EITHER CREDIT OR EXEMPTION FORM INVOLVES A NUMBER OF COMPLEXITIES THAT ARE BEST AVO IDED BY DEVELOPING OR TRANSITION COUNTRIES. PURE TERRITORIAL TAXATION, HO WEVER, SIMPLY INVITES TAX AVOIDANCE THROUGH THE MOVING OF INCOME OFFSHORE, AN D ONCE QUALIFICATIONS ON THE PURE TERRITORIAL PRINCIPLE ARE ADMITTED, SUCH A S LIMITING IT TO CERTAIN KINDS OF INCOME, IT IS HARD TO SEE THAT ANY GREAT SIMPLICITY IS ACHIEVED AS PROBLEMS OF CHARACTERIZATION OF INCOME ARISE, AS WELL AS INCENT IVES TO CONVERT INCOME FROM ONE FORM TO ANOTHER. SIMILAR DIFFICULTIES ARISE WHE N A CONDITIONAL EXEMPTION SYSTEM IS USED. FOR THIS REASON, A SIMPLE FOREIGN T AX CREDIT SYSTEM IS PROBABLY SUITABLE FOR MOST SUCH COUNTRIES--IT ASSERTS THE WO RLDWIDE JURISDICTION TO TAX INCOME OF RESIDENTS AND DOES NOT REQUIRE SIGNIFICAN T REFINEMENTS OF CALCULATION. IT LEAVES OPEN THE GREATEST SCOPE FOR ELABORATION O F THE SYSTEM BY DOMESTIC LAW AND TAX TREATIES IN THE FUTURE WITHOUT HAVING TO RE PEAL OR MODIFY ANY EXEMPTION (OFTEN A DIFFICULT PROCESS POLITICALLY BECAUSE OF E NTRENCHED INTERESTS). GIVEN THAT TAX TREATIES ARE PREMISED ON AN ITEM-BY-ITEM FOREIG N TAX CREDIT LIMIT, RATHER THAN ON A WORLDWIDE LIMIT AGGREGATING ALL FOREIGN INCOME OF THE TAXPAYER, THE ITEM- BY-ITEM LIMIT IS PROBABLY EASIEST TO USE IN DOMESTI C LAW. WHICHEVER DOUBLE TAX RELIEF SYSTEM IS ADOPTED, SOME METHOD OF APPORTIONING DEDUCTIONS BETWEEN DOMESTIC AND FOREIGN INCOME WILL BE NECESSARY. WHERE ITA-TP NO.198/HYD/2021 :- 29 -: DEDUCTIONS ALLOCATED TO FOREIGN INCOME EXCEED THAT INCOME, THE LOSS SHOULD NOT BE AVAILABLE FOR USE AGAINST DOMESTIC INCOME.' 8. THERE ARE THUS FOUR METHODS IN WHICH RELIEF CAN BE GRANTED TO A TAXPAYER IN THE RESIDENCE COUNTRY IN RESPECT OF INCOME-TAX PAID ABROAD. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FACT THAT THESE FOUR METHODS AR E MUTUALLY EXCLUSIVE METHODS IN THE SENSE ITA NO.197 AND 508/AHD/2016 ASSESSMENT YEAR: 2012-13 THAT EACH ONE OF THESE METHODS, ON STANDALONE BASIS, IS MEANT TO GRANT REQUISITE RELIEF FROM DOUBLE TAXATION OF AN INCOME. APPLICATION OF M ORE THAN ONE OF THESE METHODS, IN A PARTICULAR SITUATION CAN THUS ONLY RE SULT IN GRANTING RELIEF GREATER THAN THE DOUBLE TAXATION ITSELF. TO SUM UP EVEN AT THE COST OF AN ELEMENT OF REPETITION, THESE METHODS ARE AS FOLLOWS : IN THE FIRST METHOD, RESIDENCE COUNTRY FOLLOWS PU RE TERRITORIAL METHOD OF TAXATION AND BRINGS TO TAX ONLY SUCH INCOMES AS ARE SOURCED IN THE RESIDENCE JURISDICTION ITSELF. THERE IS THEN NO CONFLICT BETW EEN THE SOURCE RULE AND THE RESIDENCE RULE IN AS MUCH AS THE RESIDENCE RULE IS NOT STRICTLY FOLLOWED. GLOBALLY, HOWEVER, THERE ARE NOT MANY TAKERS FOR TH IS SYSTEM, AND QUITE REASONABLY SO, BECAUSE, AS PROF. VANN RIGHTLY PUTS IT, IT SIMPLY INVITES SHIFTING OF INCOME OFFSHORE TO EVADE TAXES COMPLETELY. THE SECOND METHOD IS TO GRANT TAX EXEMPTION TO TH E INCOME TAXED ABROAD. THE EXEMPTION METHOD IS USUALLY CONDITIONAL IN THE SENS E IT PROVIDES PROGRESSIVE RELIEF, ON AVERAGE RATE BASIS, AND IS CONTINGENT UP ON THE RELATED INCOME NOT BEING EXEMPTED FROM TAX, OR SUBJECTED TO TAX AT A L ESS THAN ORDINARY TAX RATE, UNDER A TAX TREATY ARRANGEMENT. EFFECTIVELY THUS IT IS NOT A SIMPLICITER EXEMPTION OF INCOME TAXED ABROAD, BUT AN EXEMPTION OF INCOME SUBJECT TO SEVERAL RIDERS. IN THAT SENSE, IT IS DISTINCT FROM THE PURE TERRITO RIAL METHOD OF TAXATION. IN THE THIRD METHOD, TAX CREDIT IS GIVEN, IN COMP UTATION OF TAX LIABILITY OF THE TAXPAYER IN RESPECT OF HIS WORLDWIDE INCOME, IN RES PECT OF TAXES PAID ABROAD. HOWEVER, THE CREDIT SO GIVEN, IN RESPECT OF TAXES P AID ABROAD, DOES NOT EXCEED THE DOMESTIC TAX LIABILITY IN RESPECT OF THE INCOME EARNED ABROAD. IN PRINCIPLE, THUS, EVEN INCOME-TAX PAID ABROAD IS SEEN AS APPROP RIATION OF INCOME TOWARDS STATE'S SHARE IN INCOME OF A TAXPAYER AND THE CREDI T IS GRANTED, IN COMPUTATION OF DOMESTIC TAXES, IN RESPECT THEREOF. IN THE FOURTH METHOD, DEDUCTION IS ALLOWED IN RES PECT OF THE INCOME-TAXES PAID ABROAD. IT IS THUS SEEN AS A CHARGE OF INCOME, RATH ER THAN APPROPRIATION OF INCOME AND IS SEEN AS AN EXPENSE INCURRED IN EARNIN G THE INCOME ABROAD. THAT IS IN SHARP CONTRAST WITH ALL OTHER METHODS WHERE I NCOME-TAX PAID ABROAD IS SEEN AS AN APPLICATION OF INCOME TOWARDS SOVEREIGN' S SHARE IN INCOME EARNED BY A TAXPAYER. 9. LET US NOW DEAL WITH THE LEGAL PROVISIONS IN THE INDIAN IT ACT, 1961, DEALING WITH DOUBLE TAXATION RELIEF, AND EXAMINE THE MANNER IN WHICH THE INDIAN IT ACT PROVIDES RELIEF FROM TAXATION OF AN INCOME IN M ORE THAN ONE TAX JURISDICTION. THESE PROVISIONS ARE SET OUT IN CHAPTER IX OF THE A CT, AND ARE REPRODUCED BELOW FOR READY REFERENCE : ITA-TP NO.198/HYD/2021 :- 30 -: 'CHAPTER IX : DOUBLE TAXATION RELIEF 90. AGREEMENT WITH FOREIGN COUNTRIES OR SPECIFIED T ERRITORIES.--(1) THE CENTRAL GOVERNMENT MAY ENTER INTO AN AGREEMENT WITH THE GOV ERNMENT OF ANY COUNTRY OUTSIDE INDIA OR SPECIFIED TERRITORY OUTSIDE INDIA, -- (A) FOR THE GRANTING OF RELIEF IN RESPECT OF-- (I) INCOME ON WHICH TAXES HAVE BEEN PAID BOTH INCOM E-TAX UNDER THIS ACT AND INCOME-TAX IN THAT COUNTRY OR SPECIFIED TERRITORY, AS THE CASE MAY BE, OR ITA NO.197 AND 508/AHD/2016 ASSESSMENT YEAR: 2012-13 (II) INCOME-TAX CHARGEABLE UNDER THIS ACT AND UNDER THE CORRESPONDING LAW IN FORCE IN THAT COUNTRY OR SPECIFIED TERRITORY, AS TH E CASE MAY BE, TO PROMOTE MUTUAL ECONOMIC RELATIONS, TRADE AND INVESTMENT, OR (B) FOR THE AVOIDANCE OF DOUBLE TAXATION OF INCOME UNDER THIS ACT AND UNDER THE CORRESPONDING LAW IN FORCE IN THAT COUNTRY OR SPECI FIED TERRITORY, AS THE CASE MAY BE, OR (C) FOR EXCHANGE OF INFORMATION FOR THE PREVENTION OF EVASION OR AVOIDANCE OF INCOME-TAX CHARGEABLE UNDER THIS ACT OR UNDER THE C ORRESPONDING LAW IN FORCE IN THAT COUNTRY OR SPECIFIED TERRITORY, AS THE CASE MAY BE, OR INVESTIGATION OF CASES OF SUCH EVASION OR AVOIDANCE, OR (D) FOR RECOVERY OF INCOME-TAX UNDER THIS ACT AND U NDER THE CORRESPONDING LAW IN FORCE IN THAT COUNTRY OR SPECIFIED TERRITORY, AS THE CASE MAY BE, AND MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, MAKE SUCH PRO VISIONS AS MAY BE NECESSARY FOR IMPLEMENTING THE AGREEMENT. (2) WHERE THE CENTRAL GOVERNMENT HAS ENTERED INTO A N AGREEMENT WITH THE GOVERNMENT OF ANY COUNTRY OUTSIDE INDIA OR SPECIFIE D TERRITORY OUTSIDE INDIA, AS THE CASE MAY BE, UNDER SUB-S. (1) FOR GRANTING RELI EF OF TAX, OR AS THE CASE MAY BE, AVOIDANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PROVISIONS OF THIS ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THAT ASSESSEE. (3) ANY TERM USED BUT NOT DEFINED IN THIS ACT OR IN THE AGREEMENT REFERRED TO IN SUB-S. (1) SHALL, UNLESS THE CONTEXT OTHERWISE REQU IRES, AND IS NOT INCONSISTENT WITH THE PROVISIONS OF THIS ACT OR THE AGREEMENT, H AVE THE SAME MEANING AS ASSIGNED TO IT IN THE NOTIFICATION ISSUED BY THE CE NTRAL GOVERNMENT IN THE OFFICIAL GAZETTE IN THIS BEHALF. EXPLANATION 1 : FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT THE CHARGE OF TAX IN RESPECT OF A FOREIGN COMPANY AT A RATE HI GHER THAN THE RATE AT WHICH A DOMESTIC COMPANY IS CHARGEABLE, SHALL NOT BE REGARD ED AS LESS FAVOURABLE CHARGE OR LEVY OF TAX IN RESPECT OF SUCH FOREIGN CO MPANY. ITA-TP NO.198/HYD/2021 :- 31 -: EXPLANATION 2 : FOR THE PURPOSES OF THIS SECTION, ' SPECIFIED TERRITORY' MEANS ANY AREA OUTSIDE INDIA WHICH MAY BE NOTIFIED AS SUCH BY THE CENTRAL GOVERNMENT. *90A. ADOPTION BY CENTRAL GOVERNMENT OF AGREEMENT B ETWEEN SPECIFIED ASSOCIATIONS FOR DOUBLE TAXATION RELIEF.--(1) ANY S PECIFIED ASSOCIATION IN INDIA MAY ENTER INTO AN AGREEMENT WITH ANY SPECIFIED ASSO CIATION IN THE SPECIFIED TERRITORY OUTSIDE INDIA AND THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, MAKE SUCH PROVISIONS AS MAY BE NE CESSARY FOR ADOPTING AND IMPLEMENTING SUCH AGREEMENT-- (A) FOR THE GRANTING OF RELIEF IN RESPECT OF-- (I) INCOME ON WHICH TAXES HAVE BEEN PAID BOTH INCOM E-TAX UNDER THIS ACT AND INCOME-TAX IN ANY SPECIFIED TERRITORY OUTSIDE INDIA ; OR ITA NO.197 AND 508/AHD/2016 ASSESSMENT YEAR: 2012-13 (II) INCOME-TAX CHARGEABLE UNDER THIS ACT AND UNDER THE CORRESPONDING LAW IN FORCE IN THAT SPECIFIED TERRITORY OUTSIDE INDIA TO PROMOTE MUTUAL ECONOMIC RELATIONS, TRADE AND INVESTMENT, OR (B) FOR THE AVOIDANCE OF DOUBLE TAXATION OF INCOME UNDER THIS ACT AND UNDER THE CORRESPONDING LAW IN FORCE IN THAT SPECIFIED TERRIT ORY OUTSIDE INDIA, OR (C) FOR EXCHANGE OF INFORMATION FOR THE PREVENTION OF EVASION OR AVOIDANCE OF INCOME-TAX CHARGEABLE UNDER THIS ACT OR UNDER THE C ORRESPONDING LAW IN FORCE IN THAT SPECIFIED TERRITORY OUTSIDE INDIA, OR INVES TIGATION OF CASES OF SUCH EVASION OR AVOIDANCE, OR (D) FOR RECOVERY OF INCOME-TAX UNDER THIS ACT AND U NDER THE CORRESPONDING LAW IN FORCE IN THAT SPECIFIED TERRITORY OUTSIDE INDIA. (2) WHERE A SPECIFIED ASSOCIATION IN INDIA HAS ENTE RED INTO AN AGREEMENT WITH A SPECIFIED ASSOCIATION OF ANY SPECIFIED TERRITORY OU TSIDE INDIA UNDER SUB-S. (1) AND SUCH AGREEMENT HAS BEEN NOTIFIED UNDER THAT SUB -SECTION, FOR GRANTING RELIEF OF TAX, OR AS THE CASE MAY BE, AVOIDANCE OF DOUBLE TAXATION, THEN, IN RELATION TO THE ASSESSEE TO WHOM SUCH AGREEMENT APPLIES, THE PR OVISIONS OF THIS ACT SHALL APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THA T ASSESSEE. (3) ANY TERM USED BUT NOT DEFINED IN THIS ACT OR IN THE AGREEMENT REFERRED TO IN SUB-S. (1) SHALL, UNLESS THE CONTEXT OTHERWISE REQU IRES, AND IS NOT INCONSISTENT WITH THE PROVISIONS OF THIS ACT OR THE AGREEMENT, H AVE THE SAME MEANING AS ASSIGNED TO IT IN THE NOTIFICATION ISSUED BY THE CE NTRAL GOVERNMENT IN THE OFFICIAL GAZETTE IN THIS BEHALF. EXPLANATION 1 : FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT THE CHARGE OF TAX IN RESPECT OF A COMPANY INCORPORATED IN THE SPECIFIED TERRITORY OUTSIDE ITA-TP NO.198/HYD/2021 :- 32 -: INDIA AT A RATE HIGHER THAN THE RATE AT WHICH A DOM ESTIC COMPANY IS CHARGEABLE, SHALL NOT BE REGARDED AS LESS FAVOURABLE CHARGE OR LEVY OF TAX IN RESPECT OF SUCH COMPANY. EXPLANATION 2 : FOR THE PURPOSES OF THIS SECTION, T HE EXPRESSIONS-- (A) 'SPECIFIED ASSOCIATION' MEANS ANY INSTITUTION, ASSOCIATION OR BODY, WHETHER INCORPORATED OR NOT, FUNCTIONING UNDER ANY LAW FOR THE TIME BEING IN FORCE IN INDIA OR THE LAWS OF THE SPECIFIED TERRITORY OUTSID E INDIA AND WHICH MAY BE NOTIFIED AS SUCH BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF THIS SECTION; (B) 'SPECIFIED TERRITORY' MEANS ANY AREA OUTSIDE IN DIA WHICH MAY BE NOTIFIED AS SUCH BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF THIS SECTION. *THIS SECTION WAS NOT IN FORCE IN THE RELEVANT ASSE SSMENT YEAR AS IT WAS ALSO INTRODUCED W.E.F. 1ST APRIL, 2006 VIDE FINANCE ACT, 2006, BUT IT IS REPRODUCED NEVERTHELESS FOR THE SAKE OF COMPLETENESS. SIMILARL Y, THERE ARE CERTAIN OTHER VARIATIONS IN THE STATUTORY PROVISIONS AS PREVAILIN G IN THE ASST. YR. 2000-01 VIS- A-VIS THE STATUTORY PROVISIONS AS ON NOW, BUT THESE VARIATIONS ARE NOT RELEVANT IN THE CONTEXT OF ISSUE UNDER CONSIDERATION IN THIS AP PEAL. 91. COUNTRIES WITH WHICH NO AGREEMENT EXISTS.--(1) IF ANY PERSON WHO IS RESIDENT IN INDIA IN ANY PREVIOUS YEAR PROVES THAT, IN RESPE CT OF HIS INCOME WHICH ACCRUED OR AROSE DURING THAT PREVIOUS YEAR OUTSIDE INDIA (AND WHICH IS NOT DEEMED TO ACCRUE OR ARISE IN INDIA), HE HAS PAID IN ANY COUNTRY WITH WHICH THERE IS NO AGREEMENT UNDER S. 90 FOR THE RELIEF OR AVOIDANCE OF DOUBLE TAXATION, INCOME-TAX, BY DEDUCTION OR OTHERWISE, UNDER THE LA W IN FORCE IN THAT COUNTRY, HE SHALL BE ENTITLED TO THE DEDUCTION FROM THE INDI AN INCOME-TAX PAYABLE BY HIM OF A SUM CALCULATED ON SUCH DOUBLY TAXED INCOME AT THE INDIAN RATE OF TAX OR THE RATE OF TAX OF THE SAID COUNTRY, WHICHEVER IS THE L OWER, OR AT THE INDIAN RATE OF TAX IF BOTH THE RATES ARE EQUAL. (2) IF ANY PERSON WHO IS RESIDENT IN INDIA IN ANY P REVIOUS YEAR PROVES THAT IN RESPECT OF HIS INCOME WHICH ACCRUED OR AROSE TO HIM DURING THAT PREVIOUS YEAR IN PAKISTAN HE HAS PAID IN THAT COUNTRY, BY DEDUCTI ON OR OTHERWISE, TAX PAYABLE TO THE GOVERNMENT UNDER ANY LAW FOR THE TIME BEING IN FORCE IN THAT COUNTRY RELATING TO TAXATION OF AGRICULTURAL INCOME, HE SHA LL BE ENTITLED TO A DEDUCTION FROM THE INDIAN INCOME-TAX PAYABLE BY HIM-- (A) OF THE AMOUNT OF THE TAX PAID IN PAKISTAN UNDER ANY LAW AFORESAID ON SUCH INCOME WHICH IS LIABLE TO TAX UNDER THIS ACT ALSO; OR (B) OF A SUM CALCULATED ON THAT INCOME AT THE INDIA N RATE OF TAX; WHICHEVER IS LESS. ITA-TP NO.198/HYD/2021 :- 33 -: (3) IF ANY NON-RESIDENT PERSON IS ASSESSED ON HIS S HARE IN THE INCOME OF A REGISTERED FIRM ASSESSED AS RESIDENT IN INDIA IN AN Y PREVIOUS YEAR AND SUCH SHARE INCLUDES ANY INCOME ACCRUING OR ARISING OUTSI DE INDIA DURING THAT PREVIOUS YEAR (AND WHICH IS NOT DEEMED TO ACCRUE OR ARISE IN INDIA) IN A COUNTRY WITH WHICH THERE IS NO AGREEMENT UNDER S. 90 FOR TH E RELIEF OR AVOIDANCE OF DOUBLE TAXATION AND HE PROVES THAT HE HAS PAID INCO ME-TAX BY DEDUCTION OR OTHERWISE UNDER THE LAW IN FORCE IN THAT COUNTRY IN RESPECT OF THE INCOME SO INCLUDED HE SHALL BE ENTITLED TO A DEDUCTION FROM T HE INDIAN INCOME-TAX PAYABLE BY HIM OF A SUM CALCULATED ON SUCH DOUBLY TAXED INC OME SO INCLUDED AT THE INDIAN RATE OF TAX OR THE RATE OF TAX OF THE SAID C OUNTRY, WHICHEVER IS THE LOWER, OR AT THE INDIAN RATE OF TAX IF BOTH THE RATES ARE EQUAL. EXPLANATION : IN THIS SECTION,-- (I) THE EXPRESSION 'INDIAN INCOME-TAX' MEANS INCOME -TAX CHARGED IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT; (II) THE EXPRESSION 'INDIAN RATE OF TAX' MEANS THE RATE DETERMINED BY DIVIDING THE AMOUNT OF INDIAN INCOME-TAX AFTER DEDUCTION OF ANY RELIEF DUE UNDER THE PROVISIONS OF THIS ACT BUT BEFORE DEDUCTION OF ANY RELIEF DUE UNDER THIS CHAPTER, BY THE TOTAL INCOME; (III) THE EXPRESSION 'RATE OF TAX OF THE SAID COUNT RY' MEANS INCOME-TAX AND SUPER- TAX ACTUALLY PAID IN THE SAID COUNTRY IN ACCORDANCE WITH THE CORRESPONDING LAWS IN FORCE IN THE SAID COUNTRY AFTER DEDUCTION OF ALL RELIEF DUE, BUT BEFORE DEDUCTION OF ANY RELIEF DUE IN THE SAID COUNTRY IN RESPECT OF DOUBLE TAXATION, DIVIDED BY THE WHOLE AMOUNT OF THE INCOME AS ASSESS ED IN THE SAID COUNTRY; ITA NO.197 AND 508/AHD/2016 ASSESSMENT YEAR: 2012-1 3 (IV) THE EXPRESSION 'INCOME-TAX' IN RELATION TO ANY COUNTRY INCLUDES ANY EXCESS PROFITS TAX OR BUSINESS PROFITS TAX CHARGED ON THE PROFITS BY THE GOVERNMENT OF ANY PART OF THAT COUNTRY OR A LOCAL AUTHORITY IN TH AT COUNTRY.' 10. THE SCHEME OF RELIEF FROM DOUBLE TAXATION OF AN INCOME, AS EVIDENT FROM A PLAIN READING OF THE ABOVE PROVISIONS, IS LIKE THIS . UNDER S. 91 OF THE ACT, WHEN A PERSON RESIDENT IN INDIA EARNS ANY INCOME OUTSIDE I NDIA, WHICH IS NOT DEEMED TO ACCRUE OR ARISE IN INDIA, AND HE SUFFERS INCOME-TAX THEREON IN SUCH SOURCE COUNTRY, THAT PERSON IS ENTITLED TO DEDUCTION FROM HIS DOMESTIC INCOME-TAX LIABILITY TO THE EXTENT OF DOMESTIC TAX LIABILITY I N RESPECT OF SUCH FOREIGN INCOME OR TAXES ACTUALLY PAID ABROAD IN RESPECT OF SUCH IN COME--WHICHEVER IS LESS. IN OTHER WORDS THUS, IF AT ALL A TAXPAYER IS ALSO TAXE D IN INDIA IN RESPECT OF THE INCOME TAXED ABROAD, IT IS ONLY TO THE EXTENT THE T AX RATE ABROAD FALLS SHORT OF INDIAN TAX RATE. EACH FOREIGN SOURCED INCOME IS THU S TREATED AS A SEPARATE BASKET OF INCOME, AND FOREIGN TAX RELIEF IN RESPECT OF THAT BASKET OF INCOME IS RESTRICTED TO THE INDIAN INCOME-TAX ACTUALLY LEVIED ON THE SAME. THIS ACTION ALSO PROVIDES RELIEF IN THE CONTEXT OF AGRICULTURAL INCO ME-TAX IN PAKISTAN AND ALSO IN ITA-TP NO.198/HYD/2021 :- 34 -: THE CONTEXT OF TAXATION OF A NON-RESIDENT'S SHARE O F INCOME FROM A RESIDENT INDIAN PARTNERSHIP FIRM, WHICH INCLUDES INCOME EARN ED OUTSIDE INDIA, EXCEPT INCOME DEEMED TO ACCRUE OR ARISE IN INDIA, WHICH HA S SUFFERED TAX IN SUCH SOURCE JURISDICTION. SEC. 90 AND S. 90A PROVIDE THA T WHEN INDIA HAS ENTERED INTO A DTAA WITH A FOREIGN COUNTRY, OR A SPECIFIED ASSOC IATION OUTSIDE INDIA, THE PROVISIONS OF SUCH AGREEMENTS WILL OVERRIDE THE PRO VISIONS OF THE INDIAN IT ACT-- EXCEPT TO THE EXTENT THE PROVISIONS OF THE INDIAN I T ACT ARE BENEFICIAL TO THE ASSESSEE. UNDER THE TAX CREDIT SCHEME ENVISAGED IN THE SCHEMES OF TAX TREATIES, ONCE AGAIN EACH INCOME SOURCED IN THE TREATY PARTNE R COUNTRY IS PRACTICALLY TREATED AS A SEPARATE BASKET OF INCOME AND THE DOUB LE TAXATION RELIEF, IN RESPECT OF TAXES PAID IN THAT TREATY PARTNER COUNTRY, IS RE STRICTED TO THE TAXES ACTUALLY LEVIED IN THE HOME COUNTRY IN RESPECT OF THE SAID I NCOME. IT THUS FOLLOWS THAT THE LEAST RELIEF AVAILABLE IN RESPECT OF INCOME-TAX PAI D ABROAD IS IF AT ALL AN ASSESSEE IS ALSO TAXED IN INDIA IN RESPECT OF THE I NCOME-TAXED ABROAD, IT IS ONLY TO THE EXTENT THE TAX RATE ABROAD FALLS SHORT OF IN DIAN TAX RATE. THERE IS NO DISPUTE THAT THE ASSESSEE HAS CLAIMED DOUBLE TAXATI ON RELIEF UNDER THE SCHEME OF THE ACT--AS SET OUT IN S. 90 AND S. 91 OF THE ACT. 11. THE ASSESSEE, HOWEVER, WAS NOT SATISFIED WITH T HE RELIEF SO GRANTED BY THE AO. HE ALSO CLAIMED DEDUCTION, IN COMPUTATION OF IN COME FROM 'PROFITS AND GAINS FROM BUSINESS AND PROFESSION', IN RESPECT OF TAXES PAID ABROAD. IT IS THE CASE OF THE ASSESSEE THAT THE TAXES SO PAID ABROAD CONSTITUTED EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSES OF THE BUSINESS OR PROFESSION, AND, THEREFORE, DEDUCTIBLE UNDER S. 37( 1) OF THE ACT. IT IS THIS DEDUCTION WHICH IS NOW SUBJECT-MATTER OF CORE DISPU TE BEFORE US. INTERESTINGLY, WHILE THE ASSESSEE HAS CLAIMED DEDUCTION OF OVERSEA S INCOME-TAXES UNDER S. 37(1), THE ASSESSEE HAS ALSO CLAIMED TAX CREDITS, I N RESPECT OF TAXES SO PAID ABROAD, UNDER S. 90 OR UNDER S. 91--AS APPLICABLE. THE SAME AMOUNT HAS BEEN TREATED AS A CHARGE ON INCOME, BY CLAIMING THE SAME AS DEDUCTION AS EXPENDITURE INCURRED TO EARN AN INCOME, AS ALSO AN APPLICATION OF INCOME, BY CLAIMING THE SAME AS APPROPRIATION OF INCOME BEING TAX LEVIED ON PROFITS AND CLAIMING INCOME-TAX CREDIT IN RESPECT THEREOF. THER E IS NO MEETING GROUND BETWEEN THESE TWO DIAMETRICALLY OPPOSED APPROACHES, AND, IN OUR HUMBLE UNDERSTANDING, THERE CANNOT BE ANY JUSTIFICATION FO R MAKING THESE CONTRADICTORY CLAIMS. THIS WOULD ALSO RESULT IN A DOUBLE UNINTEND ED BENEFIT TO THE ASSESSEE. TO ILLUSTRATE, THE ASSESSEE HAS PAID US FEDERAL INCOME -TAX @ 35 PER CENT AMOUNTING TO RS. 35,01,71,283. ON THE ONE HAND, THE ASSESSEE HAS CLAIMED DEDUCTION IN RESPECT OF THESE TAXES WHICH GIVES ASS ESSEE A TAX ADVANTAGE OF RS. 13,48,15,940, BEING 38.5 PER CENT OF THIS AMOUNT, A ND THE ASSESSEE HAS ALSO CLAIMED TAX CREDIT OF RS. 35,01,71,283 IN RESPECT O F US FEDERAL INCOME-TAX, IN COMPUTATION OF INDIAN INCOME- TAX LIABILITY. THUS, FOR A PAYMENT OF US FEDERAL INCOME-TAX AMOUNTING TO RS. 35.01 CRORES, THE ASSES SEE HAS CLAIMED TAX RELIEF OF RS. 48.49 CRORES IN INDIA. TO CAP IT ALL, THE INCOM E WHICH IS SO SUBJECTED TO US FEDERAL TAX HAS NOT BEEN TAXED IN INDIA AT ALL, DUE TO DEDUCTION UNDER S. 80HHE BEING AVAILABLE IN RESPECT OF THE SAME, AND E FFECTIVELY THUS THE US FEDERAL TAXES PAID BY THE ASSESSEE ARE SOUGHT TO BE OFFSET, ON 1.38 TIMES ITA-TP NO.198/HYD/2021 :- 35 -: WEIGHTED BASIS, AGAINST TAXES ON ASSESSEE'S DOMESTI C INCOMES TAXABLE IN INDIA. WHILE HOLDING THAT THE ASSESSEE IS ENTITLED TO DEDU CTION UNDER S. 80HHE, THE CIT(A) HAS DECLINED THE CLAIM OF TAX CREDIT IN RESP ECT OF TAXES PAID IN USA AS THERE IS NO INDIAN TAX LIABILITY IN RESPECT OF THE SAID INCOME TAXED IN USA. THAT HAS AT LEAST RESTRICTED SOME INTENDED DOUBLE BENEFI T TO THE ASSESSEE, BUT EVEN IN A SITUATION IN WHICH TAX RELIEF IS CONFINED TO A SI TUATION IN WHICH THE SAME HAS BEEN ACTUALLY TAXED IN INDIA, THE RELIEF WILL BE AV AILABLE AGAINST TAX LIABILITY IN RESPECT OF OTHER INCOMES TO THE EXTENT OF APPLICABL E TAX RATE ON TAXES ACTUALLY PAID ABROAD. THE NET EFFECT IS THAT EVEN WHEN THERE IS ADMITTEDLY NO DOUBLE TAXATION OF AN INCOME, THE ASSESSEE IS ABLE TO REDU CE HIS INDIAN INCOME-TAX LIABILITY, IN RESPECT OF OTHER INCOMES, BY BEING AL LOWED DEDUCTION IN RESPECT OF TAXES PAID ABROAD. SUCH A CLAIM BEING ACCEPTED WILL LEAD TO QUITE AN INCONGRUOUS RESULT BY ANY STANDARD. 12. IT IS IN THE BACKDROP OF THE ABOVE CLAIM FOR DE DUCTION THAT ONE HAS TO TAKE A LOOK AT S. 40(A)(II) AND S. 2(43) WHICH ARE REPRODU CED BELOW FOR READY REFERENCE : 'SEC. 40(A)(II)--NOTWITHSTANDING ANYTHING TO THE CO NTRARY IN SS. 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PR OFESSION',-- (II) ANY SUM PAID ON ACCOUNT OF ANY RATE OF TAX LEV IED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORT ION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS. **EXPLANATION 1 : FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT FOR THE PURPOSES OF THIS SUB-CLAUSE, ANY SUM PAID ON ACCOUN T OF ANY RATE OF TAX LEVIED INCLUDES AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDE D ANY SUM ELIGIBLE FOR RELIEF OF TAX UNDER S. 90 OR, AS THE CASE MAY BE, D EDUCTION FROM THE INDIAN INCOME-TAX PAYABLE UNDER S. 91. **EXPLANATION 2 : FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT FOR THE PURPOSES OF THIS SUB-CLAUSE, ANY SUM PAID ON ACCOUN T OF ANY RATE OF TAX LEVIED INCLUDES ANY SUM ELIGIBLE FOR RELIEF OF TAX UNDER S . 90A. **INSERTED W.E.F. 1ST APRIL, 2006, VIDE FINANCE ACT , 2006 SEC. 2(43)--IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES-- 'TAX' IN RELATION TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1965, AND ANY SUBSEQUENT ASSESSMENT YEAR MEANS INCO ME-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT, AND IN RELATION TO ANY OTHER ASSESSMENT YEAR INCOME- TAX AND SUPER-TAX CHARGEABLE UNDER THE PROVISIONS O F THIS ACT PRIOR TO THE AFORESAID DATE;' 13. LET US NOW ADDRESS OURSELVES TO THE WEB OF LEGA L ARGUMENTS IN SUPPORT OF THIS CLAIM OF DEDUCTION, IN RESPECT OF TAXES PAID A BROAD, MADE BY THE ASSESSEE. THE CASE ITA NO.197 AND 508/AHD/2016 ASSESSMENT YEA R: 2012-13 OF THE ASSESSEE IS THAT TAXES PAID ABROAD ARE PAID FOR THE PURPOSES OF BUSINESS, AND AS SUCH DEDUCTIBLE UNDER S. 37(1) WHICH PROVIDES THAT, 'ANY EXPENDITURE (NOT BEING EXPENDITURE OF THE NATURE DESCRIBED IN SS. 30 TO 36 AND NOT BEING IN THE NATURE OF ITA-TP NO.198/HYD/2021 :- 36 -: CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASS ESSEE), LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSI NESS OR PROFESSION SHALL BE ALLOWED IN COMPUTING THE INCOME CHARGEABLE UNDER TH E HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. IT IS CONTENDED THAT TH E TAXES PAID ARE INHERENTLY IN THE NATURE OF EXPENSES INCURRED FOR THE PURPOSES OF BUSINESS BUT THESE ARE NOT ALLOWABLE AS DEDUCTION BECAUSE OF THE SPECIFIC BAR PLACED UNDER S. 40(A)(II). HOWEVER, ACCORDING TO THE ASSESSEE, THE RESTRICTION PLACED UNDER S. 40(A)(II), IN COMPUTATION OF INCOME FROM BUSINESS AND PROFESSION, REFERS TO ONLY 'TAX' BUT THE SAID EXPRESSION, IN VIEW OF DEFINITION OF THE EXPRE SSION 'TAX' UNDER S. 2(43), COVERS ONLY 'INCOME-TAX CHARGEABLE UNDER THE PROVIS IONS OF THIS ACT (I.E. IT ACT, 1961)', AND, AS A COROLLARY THERETO, THIS LIMITATIO N ON DEDUCTION OF TAX DOES NOT EXTEND ITS SCOPE TO TAXES PAID OTHER THAN UNDER IT ACT, 1961. 14. THE ABOVE CLAIM OF DEDUCTION HAS BEEN APPROVED BY THE CO-ORDINATE BENCHES, FOR THE FIRST TIME IN THE ASST. YR. 1976-7 7, AND WHICH HAS ALSO BEEN FOLLOWED BY ANOTHER CO-ORDINATE BENCH, VIDE ORDER D T. 23RD OCT., 1984--A COPY OF WHICH WAS ALSO FILED BEFORE US. THIS DECISION HA S BEEN FOLLOWED BY THE CO- ORDINATE BENCHES SINCE THEN. IT HAS BEEN NOTED IN T HIS ORDER THAT 'THERE IS NO FINDING THAT LOCAL TAXES (ABROAD) WERE ASSESSED ON A PROPORTION OF THE PROFITS I.E. CONSULTANCY FEES RECEIVED'. WHEN CIT SOUGHT A REFERENCE UNDER S. 256(1), FOR ESTEEMED VIEWS OF HON'BLE BOMBAY HIGH COURT AND AGAINST THIS ORDER ON THE QUESTION OF DEDUCTIBILITY OF LOCAL TAXES PAID ABROA D, THE TRIBUNAL DECLINED THE REFERENCE AND, INTER ALIA, OBSERVED THAT 'THE QUEST ION IS ONE OF THE FACTS', THAT 'THE TAX DEDUCTED IS A LOCAL TAX AND NOT A TAX ON P ROFITS' AND THAT 'FOREIGN TAX IS NOT COVERED BY THE PROVISIONS OF S. 40(A)(II)'. HON 'BLE HIGH COURT ALSO DECLINED CIT'S PRAYER FOR REFERENCE UNDER S. 256(2) AND THE ORDER OF THE TRIBUNAL THUS RECEIVED FINALITY. THIS DECISION HAS BEEN CONSISTEN TLY FOLLOWED OVER THE DECADES. HOWEVER, IN THE LEAD DECISION CITED BEFORE US, THER E IS A CATEGORICAL OBSERVATION TO THE EFFECT THAT 'THE TAX DEDUCTED IS A LOCAL TAX AND NOT A TAX ON PROFITS', WHEREAS IN THE PRESENT CASE IT IS AN UNDISPUTED POS ITION THAT THE TAX LEVIED ABROAD, BEING INCOME-TAX, IS A TAX ON PROFITS OF TH E ASSESSEE--WHETHER ON PRESUMPTIVE BASIS OR ON THE BASIS OF ACTUAL PROFITS EARNED BY THE ASSESSEE. OBVIOUSLY, THEREFORE, A DECISION IN THE CONTEXT OF 'LOCAL TAX' NOT IN THE NATURE OF TAX ON PROFITS WILL HAVE NO APPLICATION ON THESE FA CTS. IT IS ALSO IMPORTANT TO TAKE NOTE OF AMENDMENT IN LAW BY INSERTING EXPLN. 1 TO S . 40(A)(II) WHICH PROVIDES THAT, 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECL ARED THAT FOR THE PURPOSES OF THIS SUB-CLAUSE, ANY SUM PAID ON ACCOUNT OF ANY RAT E OR TAX LEVIED INCLUDES AND SHALL BE DEEMED ALWAYS TO HAVE INCLUDED ANY SUM ELI GIBLE FOR RELIEF OF TAX UNDER S. 90 OR, AS THE CASE MAY BE, DEDUCTION FROM THE INDIAN INCOME-TAX PAYABLE UNDER S. 91'. IT CANNOT, THEREFORE, BE SAID THAT A FOREIGN TAX, IN RESPECT OF WHICH RELIEF IS ELIGIBLE UNDER S. 90 OR S. 91, I S NOT COVERED BY THE SCOPE OF EXPRESSION 'TAX' IN S. 40(A)(II). 15. IN ANY EVENT, THE SCOPE OF EXPRESSION 'TAX' HAS TO BE CONSIDERED IN THE CONTEXT OF S. 40(A)(II), AND IN HARMONY WITH THE SC HEME OF THINGS AS ENVISAGED IN THE IT ACT. A LOT OF EMPHASIS HAS BEEN PLACED ON DE FINITION OF 'TAX' IN S. 2(43), ITA-TP NO.198/HYD/2021 :- 37 -: BUT, LIKE ANY OTHER DEFINITION CLAUSE IN THE ACT, A LL DEFINITIONS ARE SUBJECT TO THE RIDER THAT ONLY 'UNLESS THE CONTEXT OTHERWISE REQUI RES' THESE DEFINITIONS HOLD THE FIELD. IT THUS FOLLOWS THAT THESE DEFINITIONS CANNO T BE VIEWED ON STANDALONE BASIS IN ISOLATION WITH THE CONTEXT IN WHICH THE EXPRESSI ONS SO DEFINED ARE SET OUT. THE UNDERLYING PRINCIPLE OF THIS APPROACH IS THAT THE S TATUTORY DEFINITIONS CANNOT BE APPLIED EVERYWHERE, DE HORS THE CONTEXT IN WHICH TH ESE EXPRESSIONS ARE EMPLOYED, ON 'ONE SIZE FITS ALL' BASIS, EXALTING IT A NO.197 AND 508/AHD/2016 ASSESSMENT YEAR: 2012-13 THESE DEFINITIONS INTO A P RISON HOUSE OF OBDURACY, REGARDLESS OF THE VARYING CIRCUMSTANCES IN WHICH, A ND MYRIAD DEVELOPMENTS AROUND WHICH, THESE DEFINITIONS ARE USED. HON'BLE S UPREME COURT, IN THE CASE OF K.P. VARGHESE VS. ITO & ANR. (1981) 24 CTR (SC) 358 : (1981) 131 ITR 597 (SC), HAS HELD THAT THE TASK OF INTERPRETATION IS N OT A MECHANICAL TASK AND, QUOTED WITH APPROVAL, JUSTICE HAND'S OBSERVATION TH AT 'IT IS ONE OF THE SUREST INDEXES OF A MATURE AND DEVELOPED JURISPRUDENCE NOT TO MAKE A FORTRESS OUT OF THE DICTIONARY BUT TO REMEMBER THAT STATUTES ALWAYS HAVE SOME PURPOSE OR OBJECT TO ACCOMPLISH, WHOSE SYMPATHETIC AND IMAGINA TIVE DISCOVERY IS THE SUREST GUIDE TO THEIR MEANING'. THEIR LORDSHIPS FURTHER OB SERVED THAT, 'WE MUST NOT ADOPT A STRICTLY LITERAL INTERPRETATION OF ... BUT WE MUST CONSTRUE ITS LANGUAGE HAVING REGARD TO THE OBJECT AND PURPOSE WHICH THE L EGISLATURE HAD IN VIEW IN ENACTING THAT PROVISION AND IN THE CONTEXT OF THE S ETTING IN WHICH IT OCCURS' AND THAT 'WE CANNOT IGNORE THE CONTEXT AND THE COLLECTI ON OF THE PROVISIONS IN WHICH ......, APPEARS, BECAUSE, AS POINTED OUT BY JUDGE L EARNED HAND IN THE MOST FELICITOUS LANGUAGE : INTERPRET '. . .THE MEANING O F A SENTENCE MAY BE MORE THAN THAT OF THE SEPARATE WORDS, AS A MELODY IS MORE THA N THE NOTES, AND NO DEGREE OF PARTICULARITY CAN EVER OBVIATE RECOURSE TO THE SETT ING IN WHICH ALL APPEAR, AND WHICH ALL COLLECTIVELY CREATE . ..'' ONE OF THE THI NGS WHICH IS CLEARLY DISCERNIBLE FROM THE ABOVE OBSERVATIONS OF THEIR LORDSHIPS IS T HAT WHILE INTERPRETING THE STATUTES, ONE HAS TO ESSENTIALLY BEAR IN MIND THE C ONTEXT AND UNDERLYING SCHEME OF THE LEGISLATION IN WHICH THE WORDS ARE SET OUT. KEEPING THESE DISCUSSIONS IN MIND, LET US SEE THE CONTEXT IN WHICH EXPRESSION 'T AX' IS USED IN S. 40(A)(II) WHICH PROVIDES THAT 'ANY SUM PAID ON ACCOUNT OF ANY RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAIN S' CANNOT BE ALLOWED AS A DEDUCTION IN COMPUTATION OF INCOME FROM BUSINESS OR PROFESSION. THE UNDERLYING PRINCIPLE IN THIS PROVISION IS THAT A TA X WHICH IS LEVIED ON THE INCOME OF THE ASSESSEE IS AN APPROPRIATION OF INCOME, REPR ESENTING STATE'S SHARE IN THE INCOME OF THE ASSESSEE, AND NOT A CHARGE ON INCOME. IN THE CASE OF LUBRIZOL INDIA LTD. VS. CIT (1991) 93 CTR (BOM) 237 : (1991) 187 ITR 25 (BOM), HON'BLE BOMBAY HIGH COURT HAS OBSERVED THAT, 'AS HE LD IN A NUMBER OF DECISIONS INCOME-TAX IS A CROWN'S OR CENTRAL GOVERN MENT'S SHARE IN THE PROFITS OF A COMPANY'. IN OTHER WORDS THUS, INCOME-TAX REPR ESENTS STATE'S SHARE IN INCOME OF A SUBJECT. THE PRINCIPLE OF INCOME-TAX BE ING AN APPROPRIATION OF INCOME RATHER THAN A CHARGE ON INCOME IS ALSO IN HA RMONY WITH THE VIEWS EXPRESSED BY HON'BLE BOMBAY HIGH COURT, IN THE CASE OF S. INDER SINGH GILL VS. CIT (1963) 47 ITR 284 (BOM) WHEREIN THEIR LORDSHIPS TOOK NOTE OF THIS TRIBUNAL'S FINDINGS TO THE EFFECT THAT 'WE (THE TRI BUNAL) ARE NOT AWARE OF ANY ITA-TP NO.198/HYD/2021 :- 38 -: COMMERCIAL PRACTICE OR PRINCIPLE WHICH LAYS DOWN TH AT TAX PAID BY ONE ON ONE'S INCOME IS A PROPER DEDUCTION IN DETERMINING ONE'S I NCOME FOR THE PURPOSE OF TAXATION', AND APPROVED THE SAME BY OBSERVING THAT 'NO GOOD REASON HAS BEEN SHOWN TO US TO DIFFER FROM THE CONCLUSION TO WHICH THE TRIBUNAL HAS REACHED'. IT IS THUS CLEAR THAT IN THE ESTEEMED VIEWS OF HON'BLE JURISDICTIONAL HIGH COURT, TAXES PAID ABROAD DO NOT CONSTITUTE ADMISSIBLE DEDU CTION UNDER S. 37(1). INCIDENTALLY, THESE OBSERVATIONS WERE IN THE CONTEX T OF OVERSEAS INCOME-TAX PAID BY THE ASSESSEE, I.E. IN UGANDA IN THAT CASE. LEARN ED COUNSEL'S RELIANCE ON DEFINITION OF TAX UNDER S. 2(43), IN THE CONTEXT OF DISALLOWANCE UNDER S. 40(A)(II), IS THUS OF NO HELP TO THE ASSESSEE. IN LUBRIZOL'S C ASE (SUPRA), HON'BLE BOMBAY HIGH COURT TOOK NOTE OF THE WORDING OF S. 40(A)(II) AND DISAGREED WITH THE ASSESSEE'S CONTENTION THAT THE EXPRESSION 'TAX' IS RESTRICTED TO 'INCOME-TAX' AS DEFINED UNDER S. 2(43). WHILE DOING SO, THEIR LORDS HIPS, INTER ALIA, OBSERVED AS FOLLOWS : 'IT IS SIGNIFICANT TO NOTE THAT THE WORD 'TAX' IS U SED IN CONJUNCTION WITH THE WORDS 'ANY RATE OR TAX'. THE WORD 'ANY' GOES BOTH WITH TH E RATE AND TAX. THE EXPRESSION IS FURTHER QUALIFIED AS A RATE OF TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OT HERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS. IF THE WORD 'TAX' IS TO BE G IVEN THE MEANING ASSIGNED TO IT BY S. 2(43), THE WORD 'ANY' USED BEFORE IT WILL BE OTIOSE AND THE FURTHER QUALIFICATION AS TO THE NATURE OF LEVY WILL ALSO BE COME MEANINGLESS. FURTHERMORE, THE WORD 'TAX' AS DEFINED IN S. 2(43) OF THE ACT IS SUBJECT TO 'UNLESS THE CONTEXT OTHERWISE REQUIRES'. IN VIEW OF THE DIS CUSSION ABOVE WE HOLD THAT THE WORD 'ANY' TAX HEREIN REFERS TO ANY KIND OF TAX LEV IED OR LEVIABLE ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS.' 16. HON'BLE BOMBAY HIGH COURT'S JUDGMENT IN LUBRIZO L INDIA LTD. (SUPRA) WHICH HOLDS THAT THE MEANING OF EXPRESSION 'TAX' CA NNOT BE RESTRICTED TO THE DEFINITION OF 'TAX' WAS DELIVERED ON 11TH JULY, 199 0, AND, TO THAT EXTENT, TRIBUNAL'S DECISION DT. 23RD OCT., 1984, IN ASSESSE E'S OWN CASE FOR THE ASST. YR. 1976-77 AND WHICH HAS BEEN FOLLOWED IN ALL OTHER AS SESSMENT YEARS, IS NO LONGER GOOD LAW. NONE OF THE SUBSEQUENT DECISIONS O F THE TRIBUNAL, WHICH MERELY FOLLOWED THE SAID ORDER, HAD AN OCCASION TO DEAL WITH THE LAW SO LAID DOWN BY THEIR LORDSHIPS. IT NEEDS HARDLY BE STATED THAT MERE REJECTION OF REFERENCE BY THE HON'BLE HIGH COURT DOES NOT AMOUNT TO APPROVAL OF THE VIEWS OF THE TRIBUNAL. AS AGAINST THIS REJECTION OF REFER ENCE, WHICH IS SOUGHT TO BE CONSTRUED AS IMPLIED APPROVAL OF TRIBUNAL'S ANALYSI S, THERE IS A DIRECT DECISION BY THE HON'BLE HIGH COURT HOLDING THAT DEFINITION O F TAX UNDER S. 2(43) IS NOT RELEVANT FOR THE PURPOSE OF S. 40(A)(II). WITH RESP ECT, INSTEAD OF FOLLOWING THE CO-ORDINATE BENCH IN SUCH CIRCUMSTANCES, WE HAVE TO YIELD TO THE HIGHER WISDOM OF THE HON'BLE COURTS ABOVE. 17. THE SITUATION BEFORE US IS ALSO QUITE UNIQUE IN THE SENSE THAT IN NONE OF THE DECISIONS CITED BEFORE US, THE ASSESSEE HAS CLAIMED DOUBLE TAXATION RELIEF ITA-TP NO.198/HYD/2021 :- 39 -: UNDER S. 90 OR S. 91, AND, IN ADDITION TO SUCH A RE LIEF HAVING BEEN CLAIMED, THE ASSESSEE HAS ALSO CLAIMED DEDUCTION IN COMPUTATION OF BUSINESS INCOME IN RESPECT OF THE TAXES SO PAID. THIS IS CLEARLY DOUBL E 'DOUBLE TAXATION RELIEF' TO THE ASSESSEE WHEREAS IN FACT THERE IS NO DOUBLE TAXATIO N AT ALL TO THE EXTENT ASSESSEE'S INCOME FROM EXPORTS OF SOFTWARE WAS HELD TO BE ELIGIBLE FOR DEDUCTION UNDER S. 80HHE IN INDIA. WHAT DOES IT LEAD TO ? IT LEADS TO, FOR EXAMPLE, A SITUATION THAT THE TAXES PAID IN US ARE BEING SOUGH T TO BE OFFSET AGAINST ASSESSEE'S TAX LIABILITY IN RESPECT OF DOMESTIC INC OMES, AND IN ADDITION TO THE SAME, THE TAXES PAID IN USA ARE ALSO BEING SOUGHT T O BE DEDUCTED FROM ASSESSEE'S TAXABLE INCOME IN INDIA. THE NET RESULT OF THIS CLAIM IS THAT, AS WE HAVE SEEN IN PARA 11 ABOVE, THAT THE ASSESSEE IS CL AIMING A WEIGHTED DEDUCTION OF 1.38 TIMES THE TAX PAID IN USA FROM INCOME-TAX L IABILITY IN RESPECT OF OTHER INCOMES. EVEN IN A SITUATION IN WHICH TAX RELIEF IS CONFINED TO A SITUATION IN WHICH THE SAME HAS BEEN ACTUALLY TAXED IN INDIA, TH E RELIEF WILL BE AVAILABLE AGAINST TAX LIABILITY IN RESPECT OF OTHER INCOMES T O THE EXTENT OF 38.5 PER CENT OF TAXES PAID ABROAD. THE SCHEME OF THE ACT DOES NOT V ISUALIZE THIS KIND OF AN UNDUE RELIEF TO THE ASSESSEE WHICH PROVIDES MUCH GR EATER RELIEF THAN THE HARDSHIP CAUSED TO THE ASSESSEE. THE HARDSHIP IS OF DOUBLE TAXATION OF AN INCOME IN MORE THAN ONE TAX JURISDICTION, AND THE R ELIEF MUST NOT GO BEYOND MITIGATING THIS HARDSHIP; IT CANNOT BE TURNED INTO AN UNDUE ADVANTAGE, OR SOURCE OF INCOME, TO THE ASSESSEE. SEC. 91 RESTRICT S THE DOUBLE TAXATION RELIEF ONLY TO SUCH AMOUNT AS MAY HAVE BEEN PAID BY THE AS SESSEE IN EXCESS OF HIS INCOME-TAX OBLIGATIONS IN INDIA. SIMILARLY, IN TERM S OF THE PROVISIONS OF TAX TREATIES WHICH ARE ENTERED INTO UNDER S. 90, TAX CR EDITS, IN RESPECT OF TAXES PAID ABROAD, ARE RESTRICTED TO ASSESSEE'S DOMESTIC TAX L IABILITY IN RESPECT OF THE SUBJECT INCOME AS WAS HELD BY THIS TRIBUNAL IN THE CASE OF JT. CIT VS. DIGITAL EQUIPMENTS INDIA LTD. (2005) 93 TTJ (MUMBAI) 478 : (2005) 94 ITD 340 (MUMBAI). IF WE ARE TO HOLD THAT THE ASSESSEE IS EN TITLED TO DEDUCTION OF TAX PAID ABROAD, IN ADDITION TO ADMISSIBILITY OF TAX RELIEF UNDER S. 90 OR S. 91, IT WILL RESULT IN A SITUATION THAT ON ONE HAND DOUBLE TAXAT ION OF AN INCOME WILL BE ELIMINATED BY ENSURING THAT THE ASSESSEE'S TOTAL IN COME-TAX LIABILITY DOES NOT EXCEED INCOME-TAX LIABILITY IN INDIA OR INCOME-TAX LIABILITY ABROAD--WHICHEVER IS GREATER, AND, ON THE OTHER HAND, THE ASSESSEE'S DOM ESTIC TAX LIABILITY WILL ALSO BE REDUCED BY TAX LIABILITY IN RESPECT OF INCOME DECRE ASED DUE TO DEDUCTION OF TAXES. SUCH A BENEFIT TO THE ASSESSEE IS NOT ONLY C ONTRARY TO THE SCHEME OF THE ACT AND CONTRARY TO THE FUNDAMENTAL PRINCIPLES OF I NTERNATIONAL TAXATION, IT ALSO ENDS UP MAKING DOUBLE TAXATION RELIEF A MECHANISM T O REDUCE DOMESTIC TAX LIABILITY IN INDIA--SOMETHING WHICH IS MOST INCONGR UOUS. IN OUR CONSIDERED VIEW, AN INTERPRETATION WHICH LEADS TO SUCH GLARING ABSUR DITIES CANNOT BE ADOPTED. 18. LEARNED COUNSEL HAS ALSO SUBMITTED THAT IN THE EVENT OF OUR DECLINING THE DEDUCTION, WE SHOULD AT LEAST DIRECT THAT TAX CREDI T IN TERMS OF THE PROVISIONS OF S. 90 BE GRANTED IN RESPECT OF THE ENTIRE AMOUNT . LEARNED COUNSEL SUBMITS THAT THIS APPROACH IS JUSTIFIED IN AS MUCH AS WE MU ST TAKE INTO ACCOUNT RIGHT TO TAX, RATHER THAN THE ACTUAL LEVY OF TAX. IN OUR CON SIDERED VIEW, HOWEVER, THE RIGHT TO TAX IS RELEVANT ONLY FOR THE PURPOSE OF AL LOCATION OF TAXING RIGHTS, AS WAS ITA-TP NO.198/HYD/2021 :- 40 -: HELD BY THIS TRIBUNAL IN THE CASE OF ASSTT. DIRECTO R OF IT VS. GREEN EMIRATE SHIPPING & TRAVELS (2006) 99 TTJ (MUMBAI) 988 : (20 06) 100 ITD 203 (MUMBAI), AND NOT FOR THE PURPOSES OF GRANTING TAX CREDITS. BEING GRANTED TAX CREDITS IN EXCESS OF THE ACTUAL DOMESTIC TAX LIABIL ITY WOULD RESULT IN A SITUATION THAT EVEN WHEN ASSESSEE HAS NO TAX LIABILITY IN IND IA, HE IS TO BE ALLOWED CREDIT IN RESPECT OF ENTIRE TAXES PAID IN US, AND THUS PER HAPS EVEN ENTITLING HIM TO REFUND IN INDIA IN RESPECT OF TAXES PAID IN USA. TH AT IS CLEARLY CONTRARY TO THE SCHEME OF TAX CREDIT UNDER THE APPLICABLE TAX TREAT Y. IN ANY EVENT, THIS ISSUE IS, HOWEVER, COVERED AGAINST THE ASSESSEE BY TRIBUNAL'S DECISION IN THE CASE OF DIGITAL EQUIPMENT (SUPRA), WHEREIN THE CO-ORDINATE BENCH, SPEAKING THROUGH ONE OF US, HAS OBSERVED AS FOLLOWS : '4. WE CONSIDER IT USEFUL TO REPRODUCE THE TEXT OF ART. 25(2)(A) OF THE INDO-US DTAA WHICH IS AS FOLLOWS : 'WHERE A RESIDENT OF INDIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, MAY BE TAXED IN THE UNITED STATES, INDIA SHALL ALLOW A DEDUCTION FROM THE INCOME OF THAT RESIDENT AN AMOUNT EQUAL TO INCOME- TAX PAID IN THE UNITES STATES, WHETHER DIRECTLY OR BY WAY OF DEDUCTION. SUCH DEDUCTION SHALL HOWEVER NOT EXCEED THAT PART OF INC OME-TAX (AS COMPUTE BEFORE THE DEDUCTION IS GIVEN) WHICH IS ATTRIBUTABLE TO TH E INCOME WHICH IS TAXED IN THE UNITED STATES.' A PLAIN READING OF THE ABOVE PROVIS ION MAKES IT CLEAR THAT THE DEDUCTION ON ACCOUNT OF INCOME-TAX PAID IN THE US, FROM INCOME-TAX PAYABLE IN INDIA, CANNOT EXCEED INDIAN INCOME-TAX LIABILITY IN RESPECT OF SUCH AN INCOME. THIS RESTRICTION ON THE DEDUCTION IS UNAMBIGUOUS AN D BEYOND ANY CONTROVERSY, AS EVIDENT PARTICULARLY FROM THE LAST SENTENCE IN A RT. 25(2)(A) WHICH IS ITALICIZED AS ABOVE THE SUPPLY THE EMPHASIS ON THE SAME. AS A MATTER OF FACT, WE ARE UNABLE TO APPRECIATE ANY BASIS WHATSOEVER FOR THE C IT(A)'S CONCLUSION THAT THE TAXES PAID IN THE US, IN THE INSTANT CASE, ARE TO B E CREDITED TO THE ASSESSEE'S ACCOUNT AND ARE TO BE REFUNDED TO THE APPELLANT, IN CASE HE HAS NO INCOME-TAX LIABILITY IN RESPECT OF THAT INCOME IN INDIA. AS FO R THE CIT(A)'S OBSERVATION, REFERRING TO PAYMENT OF INCOME-TAX IN THE UNITED ST ATES ON AN INCOME AND RETURNING A LOSS IN RESPECT OF THAT INCOME IN INDIA , TO THE EFFECT THAT 'THIS IS AN ABSURD SITUATION AND WAS NOT VISUALIZED BY THE TREA TY', IT CANNOT BUT STEM FROM HIS INABILITY TO TAKE NOTE OF THE FACT THAT CERTAIN INCOMES (E.G., ROYALTIES, FEES FOR TECHNICAL OR INCLUDED SERVICES, INTEREST, DIVIDENDS ETC.), ARE TAXED ON GROSS BASIS IN THE SOURCE COUNTRY BUT ARE ONLY BE TAXED ON NET BASIS, AS IS THE INHERENT SCHEME OF INCOME-TAX LEGISLATION NORMALLY, IN THE C OUNTRY OF WHICH THE ASSESSEE IS RESIDENT. IN SUCH SITUATIONS, IT IS QUITE POSSIB LE THAT WHILE AN ASSESSEE PAYS TAX IN THE SOURCE COUNTRY WHICH IS ON GROSS BASIS, HE A CTUALLY ENDS UP INCURRING LOSS WHEN ALL THE ADMISSIBLE DEDUCTIONS, IN RESPECT OF T HAT EARNING, ARE TAKEN INTO ACCOUNT. THERE IS NOTHING ABSURD ABOUT IT. THE UNDE RLYING PHILOSOPHY OF THE SOURCE RULE ON GROSS BASIS, WHICH PRESCRIBES TAXATI ON OF CERTAIN INCOMES ON GROSS BASIS IN THE SOURCE COUNTRY, IS THAT IRRESPEC TIVE OF ACTUAL OVERALL PROFITS AND LOSSES IN EARNING THOSE INCOMES, THE ASSESSEE M UST PAY A CERTAIN AMOUNT OF TAX, AT A NEGOTIATED LOWER RATE THOUGH, IN THE COUN TRY IN WHICH THE INCOME IN QUESTION IS EARNED. IT IS ALSO NOTEWORTHY THAT THE HEADING OF ART. 25 IS ITA-TP NO.198/HYD/2021 :- 41 -: 'ELIMINATION OF DOUBLE TAXATION' BUT THEN THERE HAS TO BE DOUBLE TAXATION OF AN INCOME IN THE FIRST PLACE BEFORE THE QUESTION OF EL IMINATION OF THAT DOUBLE TAXATION CAN ARISE. IN THE CASE BEFORE US THE ASSES SEE COMPANY HAS PAID TAXES, IN RESPECT OF THAT EARNING, ONLY IN ONE COUNTRY, I. E., THE UNITED STATES, AND CLAIMED LOSSES, ON TAKING INTO ACCOUNT THE ADMISSIB LE DEDUCTIONS THEREFROM, IN THE OTHER COUNTRY I.E., INDIA. THIS IS SURELY NOT, BY ANY STRETCH OF LOGIC, A CASE OF DOUBLE TAXATION OF AN INCOME. ARTICLE 25 DOES NOT, THEREFORE, COME INTO PLAY AT ALL. TURNING TO THE CIT(A)'S OBSERVATION THAT 'THE TREATY NOWHERE STIPULATES THAT THE CREDIT FOR THE TAXES PAID IN THE USA HAS TO BE GIVEN ON PROPORTIONATE BASIS', ALL WE NEED TO SAY IS THAT THE INDO-US DTAA, AS IND EED OTHER DTAAS AS WELL, DOES STIPULATE THAT THE FOREIGN TAX CREDIT CANNOT E XCEED THE INCOME-TAX LEVIABLE IN RESPECT OF THAT INCOME IN THE COUNTRY OF WHICH T HE ASSESSEE IS RESIDENT. IT IS BECAUSE OF THIS LIMITATION THAT THE AO DECLINED THE REFUND IN RESPECT OF TAXES PAID BY THE ASSESSEE IN THE UNITED STATES. IN VIEW OF THIS LIMITATION ON THE FOREIGN TAX CREDIT, THE INNOVATIVE THEORY OF CREDIT ING THE ENTIRE TAX PAID IN THE US TO THE ASSESSEE AND GRANT OF REFUND TO HIM IN CA SE THERE IS NO TAX LIABILITY IN INDIA IN RESPECT OF THAT INCOME, AS ENUNCIATED AND ADOPTED BY THE CIT(A), IS WHOLLY UNSUSTAINABLE IN LAW. WHERE IS THE QUESTION OF REFUND OF TAXES PAID ABROAD WHEN FTD (I.E., FOREIGN TAX CREDIT), IN VIEW OF SPECIFIC PROVISIONS TO THAT EFFECT IN THE DTAAS, CANNOT EVEN EXCEED THE INDIAN INCOME-TAX LIABILITY ? IT IS NOT THE TAX PAYMENT ABROAD WHICH IS THE MATERIAL FI GURE FOR THE PURPOSE OF COMPUTING INDIAN INCOME-TAX LIABILITY, BUT IT IS TH E ADMISSIBLE FOREIGN TAX CREDIT IN RESPECT OF THE SAME WHICH AFFECTS SUCH AN INDIAN INCOME-TAX LIABILITY. THE FTD IN RESPECT OF INCOME-TAX PAID IN THE US CANNOT EXCEED THE INDIAN INCOME- TAX LIABILITY IN RESPECT OF THE INCOME ON WHICH INC OME-TAX IS PAID IN US.' 19. IN VIEW OF THE AFORESAID JUDICIAL PRECEDENT, AN D BEING IN CONSIDERED AGREEMENT WITH THE SAME, WE REJECT THIS ALTERNATE C LAIM OF THE ASSESSEE. 20. LEARNED COUNSEL HAS ALSO CONTENDED THAT IN ANY EVENT, WE MUST ALLOW DEDUCTION IN RESPECT OF STATE INCOME-TAXES PAID IN USA AND CANADA AS RELIEF IS NOT ADMISSIBLE IN RESPECT OF THE SAME IN RESPECTIVE TAX TREATIES. WE HAVE BEEN TAKEN THROUGH INDIA USA TAX TREATY TO POINT OUT THA T TAX CREDITS ARE ADMISSIBLE ONLY IN RESPECT OF INCOME- TAX LEVIED BY THE FEDERA L GOVERNMENT AND NOT BY THE STATE GOVERNMENTS. IT IS CONTENDED THAT SINCE NO RE LIEF IS ADMISSIBLE IN RESPECT OF STATE TAXES UNDER S. 90 OR S. 91, THESE TAXES WI LL CONTINUE TO BE TAX DEDUCTIBLE, AND TO THAT EXTENT, DECISIONS OF THE CO-ORDINATE BE NCHES WILL HOLD GOOD. WE ARE UNABLE TO SEE LEGALLY SUSTAINABLE MERITS IN THIS SU BMISSION EITHER. APART FROM THE FACT THAT SUCH A CLAIM OF DEDUCTION IS CLEARLY CONTRARY TO THE LAW LAID DOWN BY HON'BLE JURISDICTIONAL HIGH COURT IN LUBRIZOL'S CASE (SUPRA), THERE IS ANOTHER INDEPENDENT REASON TO REJECT THIS CLAIM AS WELL. TH E REASON IS THIS. IT IS ONLY ELEMENTARY THAT TAX TREATIES OVERRIDE THE PROVISION S OF THE IT ACT, 1961, ONLY TO THE EXTENT THE PROVISIONS OF THE TAX TREATIES ARE B ENEFICIAL TO THE ASSESSEE. IN OTHER WORDS, A PERSON CANNOT BE WORSE OFF VIS-A-VIS THE PROVISIONS OF THE IT ACT, EVEN WHEN A TAX TREATY APPLIES IN HIS CASE. SEC. 90 (2) STATES THAT EVEN IN RELATION TO THE ASSESSEE TO WHOM A TAX TREATY APPLIES 'THE P ROVISIONS OF THIS ACT SHALL ITA-TP NO.198/HYD/2021 :- 42 -: APPLY TO THE EXTENT THEY ARE MORE BENEFICIAL TO THA T ASSESSEE'. UNDOUBTEDLY, TITLE OF S. 91 AS ALSO REFERENCE TO THE COUNTRIES WITH WH ICH INDIA HAS ENTERED INTO AGREEMENT, SUGGESTS THAT IT IS APPLICABLE ONLY IN T HE CASES WHERE INDIA HAS NOT ENTERED INTO A DTAA WITH RESPECTIVE JURISDICTION, B UT THE SCHEME OF THE S. 91, READ ALONG WITH S. 90, DOES NOT REFLECT ANY SUCH LI MITATION, AND S. 91 IS THUS REQUIRED TO BE TREATED AS GENERAL IN APPLICATION. T HE SCHEME OF THE IT ACT IS TO BE CONSIDERED IN ENTIRETY IN A HOLISTIC MANNER AND EACH OF THE SECTION CANNOT BE CONSIDERED ON STANDALONE BASIS. IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT SO FAR AS S. 91 IS CONCERNED, IT DOES NOT DISCRIMINATE BETWEEN TAXES LEVIED BY THE FEDERAL GOVERNMENTS AND TAXES LEVIED BY THE STATE G OVERNMENT. THE INCOME- TAX LEVIED BY DIFFERENT STATES IN USA USUALLY RANGE S FROM 3 PER CENT TO 11 PER CENT, AND THE AGGREGATE INCOME-TAX PAID BY THE ASSE SSEE IN USA WILL RANGE FROM 38 PER CENT TO 46 PER CENT. THEREFORE, ON THE FACTS OF THE PRESENT CASE AND BEARING IN MIND THE FACT THAT THE FEDERAL INCOME-TA X IN USA AT THE RELEVANT POINT OF TIME WAS LESSER IN RATE AT 35 PER CENT VIS -A-VIS 38.5 PER CENT INCOME-TAX RATE APPLICABLE IN INDIA, THE ADMISSIBLE DOUBLE TAX ATION RELIEF UNDER S. 91 WILL BE HIGHER THAN RELIEF UNDER THE TAX TREATY. IT WILL BE SO FOR THE REASON THAT STATE INCOME-TAX WILL ALSO BE ADDED TO INCOME-TAX ABROAD, AND THE AGGREGATE OF TAXES SO PAID WILL BE ELIGIBLE FOR TAX RELIEF--OF COURSE SUBJECT TO TAX RATE ON WHICH SUCH INCOME IS ACTUALLY TAXED IN INDIA. THE TAX RELIEF U NDER S. 91 THUS WORKS OUT TO AT LEAST 38 PER CENT, AS AGAINST TAX CREDIT OF ONLY 35 PER CENT ADMISSIBLE UNDER THE TAX TREATY. IN SUCH A SITUATION, THE ASSESSEE WILL BE ENTITLED TO RELIEF UNDER S. 91 IN RESPECT OF FEDERAL AS WELL AS STATE TAXES, AN D THAT RELIEF BEING MORE BENEFICIAL TO THE ASSESSEE VIS--VIS TAX CREDIT UND ER THE APPLICABLE TAX TREATY, THE PROVISIONS OF S. 91 WILL APPLY TO STATE INCOME-TAXE S AS WELL. THE STATE INCOME- TAX IS ALSO, THEREFORE, COVERED BY EXPLN. 1 TO S. 4 0(A)(II), AND DEDUCTION CANNOT BE ALLOWED IN RESPECT OF THE SAME. FINALLY, IN VIEW OF HON'BLE BOMBAY HIGH COURT'S JUDGMENT IN GILL'S CASE (SUPRA), INCOME-TAX ABROAD CANNOT BE ALLOWED AS A DEDUCTION IN COMPUTATION OF INCOME AND THIS JU DGMENT DOES NOT DISCRIMINATE BETWEEN FEDERAL AND STATE TAXES EITHER . INTERESTINGLY, STATE INCOME- TAXES PAID IN USA, SUBJECT TO CERTAIN LIMIT ATIONS, ARE DEDUCTIBLE IN COMPUTATION OF INCOME FOR THE PURPOSES OF COMPUTING FEDERAL TAX LIABILITY IN USA, BUT THAT FACTOR CANNOT INFLUENCE DEDUCTIBILITY OF THESE TAXES, PARTICULARLY IN THE LIGHT OF THE PROVISIONS OF EXPLN. 1 TO S. 40(A) (II) AND IN THE LIGHT OF HON'BLE BOMBAY HIGH COURT'S JUDGMENT IN GILL'S CASE (SUPRA) , IN COMPUTATION OF BUSINESS INCOME UNDER INDIAN IT ACT. FOR ALL THESE REASONS, WE ARE UNABLE TO UPHOLD THE PLEA OF THE ASSESSEE SEEKING DEDUCTION O F AT LEAST STATE INCOME-TAX PAID IN USA. 21. IN VIEW OF THE ABOVE DISCUSSIONS AND FOR THE DE TAILED REASONS SET OUT ABOVE, WE UPHOLD THE GRIEVANCE OF THE AO. THE CIT(A) WAS I NDEED NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 67,89,30,514 IN RE SPECT OF INCOME-TAX PAID ABROAD. WE VACATE THE RELIEF GRANTED BY THE CIT(A) AND RESTORE THIS DISALLOWANCE. ITA-TP NO.198/HYD/2021 :- 43 -: 36. OBLIVIOUS OF THE JUDICIAL PRECEDENTS DISCUSSED ABOVE, ANOTHER BENCH OF THIS TRIBUNAL, IN THE CASE OF MASTEK LTD (SUPRA), HOWEVE R, TOUCHED A DIFFERENT CHORD. THIS BENCH WAS OF THE VIEW THAT DEDUCTION IN RESPEC T OF TAXES PAID ABROAD CAN BE ALLOWED AS A DEDUCTION UNDER SECTION 37(1). IN C OMING TO THIS CONCLUSION, BENCH DID NOT TAKE NOTE OF THE LUBRIZOL DECISION (S UPRA) BY HON'BLE BOMBAY HIGH COURT, WHICH STANDS SPECIFICALLY APPROVED BY H ON'BLE SUPREME COURT IN THE CASE OF SMIMTHKLINE AND FRENCH INDIA (SUPRA), O R EVEN OF THE COORDINATE BENCH DECISION IN THE CASE OF TATA SONS (SUPRA). TH E COORDINATE BENCH DID REFER TO THE HIGH COURT DECISIONS IN THE CASES OF TATA SO NS LTD AND SOUTH EAST ASIA SHIPPING, BUT THESE DECISIONS WERE REJECTING THE RE FERENCE APPLICATIONS UNDER SECTION 256(2) THUS LENDING FINALITY TO THE D ECISIONS OF THE TRIBUNAL WHICH, IN ANY CASE, WERE RENDERED INEFFECTIVE IN THE LIGHT OF SUBSEQUENT DECISION OF HON'BLE BOMBAY HIGH COURT IN LUBRIZOL'S CASE. THE C OORDINATE BENCH DECISION IN THE CASE OF TATA SONS (SUPRA), AS WE HAVE SEEN E ARLIER IN THIS ORDER, SPECIFICALLY HELD SO. EVEN IF THERE WERE CONTRARY V IEWS OF THE TRIBUNAL AT THAT POINT OF TIME, AND EVEN IF THE COORDINATE BENCH HAD ANY RESERVATIONS ON CORRECTNESS OF TATA SONS DECISION (SUPRA) BY ANOTHE R COORDINATE BENCH, THE MATTER COULD HAVE BEEN AT BEST REFERRED TO A SPECIA L BENCH. HOWEVER, NEITHER ANY OF THE PARTIES BROUGHT THESE DECISIONS TO THE K NOWLEDGE OF THE BENCH, NOR DID THE BENCH KNOW ABOUT THESE DECISIONS. IT WAS TH US, IN IGNORANCE ABOUT THESE SIGNIFICANT DEVELOPMENTS, THE COORDINATE BENCH, IN MASTEK'S CASE (SUPRA), HAS OBSERVED AS FOLLOWS: 39. DUE CONSIDERATION OF THE PROVISIONS OF SEC.37 A ND SEC.40(A)(II) OF THE ACT AS WELL, IT EMERGES THAT U/S 37, ALL TAXES AND RATES A RE 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 LEV IABLE ON THE PROFITS AND GAINS CHARGEABLE UNDER THE ACT IS DEDUCTIBLE. ON THE OTHE R HAND, ALL OTHER TAXES LEVIED IN FOREIGN COUNTRIES WHETHER ON PROFITS OR GAINS OR OTHERWISE ARE DEDUCTIBLE UNDER THE PROVISIONS OF SEC. 37 OF THE ACT AND PAYM ENT OF SUCH TAXES DOES NOT AMOUNT TO APPLICATION OF INCOME. 40. 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 ISSUE, IN BRIEF, WAS THAT THE TAX AUTHORITIES OF TH E RESPECTIVE COUNTRY HAD COLLECTED INCOME-TAX AT SOURCE, ACCORDING TO THEM, A PART OF SUCH EARNINGS ACCRUED AND AROSE IN THEIR COUNTRIES WHICH WERE LIA BLE TO INCOME-TAX UNDER ITS TAXING LAWS. SUCH FOREIGN TAX CLAIMED AS A DEDUCTIO N BY THE ASSESSEE WAS TURNED DOWN BY THE AO. THIS WAS REVERSED BY THE AAC WITH A REASONING THAT THE 'PAYMENT OF FOREIGN INCOME-TAX FORMED PART OF THE E XPENDITURE LIKE OTHER USUAL BUSINESS EXPENSES INCURRED IN THE COURSE OF BUSINES S AND AS SUCH, THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION OF THE SAME U/S 37 OF THE ACT FOR BEING INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ' ON A FURTHER APPEAL, THE TRIBUNAL HAD, AFTER DUE CONSIDERATION OF THE PROVIS IONS OF BOTH THE SECTIONS - 37 WHICH ALLOWS A BUSINESS EXPENDITURE AND 40(A)(II) W HICH CONTAINED PROHIBITION - AS UNDER: ITA-TP NO.198/HYD/2021 :- 44 -: '40(A)(II) - ANY SUM PAID ON ACCOUNT OF ANY RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS' THE TRI BUNAL OBSERVED THAT THE TERM 'TAX' IS DEFINED IN RELATION TO THE AY COMMENCING O N THE 1ST DAY OF APRIL, 1965 AND IN SUBSEQUENT ASSESSMENT YEARS AS MEANING TAX C HARGEABLE UNDER THE PROVISIONS OF THE ACT AND THAT THIS AMENDMENT WAS E FFECTED BY THE FINANCE ACT 1965. TAKING COGNIZANCE OF IT, THE HON'BLE TRIB UNAL 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 DISA LLOWED BY THIS CLAUSE (II) OF SEC. 40(A). ACCORDINGLY, THE HON'BLE TRIBUNAL OBSERVED WITH REG ARD TO THE ALLOWABILITY OF FOREIGN TAXES U/S 37 OF THE ACT AS UNDER: 'SO WE HAVE TO SEE WHETHER SUCH EXPENDITURE IS ALLO WABLE UNDER SECTION 37 OF THE ACT. IN OUR VIEW, RATES AND TAXES WHICH ARE PAY ABLE IRRESPECTIVE OF ANY PROFITS BEING EARNED ARE ADMISSIBLE ALLOWANCES UNDE R SECTION 37 AND SECTION 40(A)(II) DOES NOT APPLY TO THEM. THE TAX LEVIED BY DIFFERENT COUNTRIES IS NOT A TAX ON PROFITS BUT A NECESSARY CONDITION PRECEDENT TO THE EARNING OF PROFITS. SO THE AAC WAS ABSOLUTELY JUSTIFIED IN ALLOWING THE AP PEAL OF THE ASSESSEE AND WE SEE NO REASON TO DIFFER FROM THE FINDING.' REFERENCE APPLICATION OF THE REVENUE WAS REJECTED B Y THE TRIBUNAL WHICH HAS BEEN RATIFIED BY THE HON'BLE BOMBAY HIGH COURT IN I TA NO.123 OF 1976. (II) IN THE CASE OF TATA SONS LTD. [ITA NO.89 OF 19 89], THE HON'BLE MUMBAI BENCH OF TRIBUNAL HAD HELD ON A SIMILAR ISSUE THAT: - 'IT IS AN ESTABLISHED PRINCIPLE THAT WHEN A MATTER IS SETTLED BY HIGHER COURTS IN A CASE OF A PARTICULAR ASSESSEE, AT LEAST IN THAT CAS E LITIGATION CANNOT BE ALLOWED TO PERPETUATE FOR AN INDEFINITE PERIOD. IN THE INST ANT CASE, THE ISSUE IS NOT ONLY SETTLED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE B Y THE TRIBUNAL IN ITA NOS. 5708/MUM/82 AND 5790/MUM/83 DATED 23.10.82, BUT EVE N AFTER REJECTION OF REVENUE'S APPLICATION UNDER SECTION 256(1) IN RA NO S.305 AND 306/BOM/85 DATED 14.1.86, ITS APPLICATION UNDER SECTION 256(2) ON THE ISSUE HAS BEEN REJECTED BY THE HIGH COURT BY ITS ORDER DATED 29/3/ 93 IN ITA NO.89 OF 1989. THUS, THE ISSUE HAS REACHED FINALITY IN THE ASSESSE E'S OWN CASE AND IT CANNOT BE DRAGGED INTO FURTHER LITIGATION.' 41. TAKING INTO ACCOUNT ALL THESE FACTS AND CIRCUMS TANCES OF THE ISSUE AND IN CONSONANCE WITH THE FINDINGS OF THE HON'BLE BENCHES OF MUMBAI TRIBUNAL (SUPRA), WE ARE OF THE FIRM VIEW THAT THE LEARNED C IT (A) WAS JUSTIFIED IN HIS STAND WHICH REQUIRES NO INTERFERENCE OF THIS BENCH AT THIS JUNCTURE. IT IS ORDERED ACCORDINGLY. 37. THE VIEWS SO TAKEN BY THE COORDINATE BENCH, HOW EVER, ARE NOT ONLY DIAMETRICALLY OPPOSED TO AN EARLIER DECISION OF ANO THER COORDINATE BENCH IN THE CASE OF TATA SONS (SUPRA), AS REPRODUCED EARLIER, A ND OF HON'BLE BOMBAY HIGH COURT'S DECISION IN THE CASE OF LUBRIZOL INDIA (SUP RA) BUT ALSO CLEARLY CONTRARY TO CERTAIN OBSERVATIONS A LATER JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE ITA-TP NO.198/HYD/2021 :- 45 -: CASE OF RELIANCE INFRASTRUCTURE LTD VS CIT [TS 676 HC 2016 (BOM)] WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLO WS: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SO FAR AS THE QUESTION RELATING TO THE TRIBUNAL NOT FOLLOWING ITS ORDER IN THE CASE OF THE APPLICANT ITSELF FOR A.Y. 1979- 80, WE FIND THAT THERE IS A JUSTIFICATION FOR THE S AME. THIS IS SO AS THE DECISION OF THIS COURT IN INDER SINGH GILL (SUPRA) WAS NOTED BY THE TRIBUNAL ON AN IDENTICAL ISSUE WHILE PASSING THE ORDER FOR THE SUBJECT ASSES SMENT YEAR. THUS, THE TRIBUNAL HAD NOT ERRED IN NOT FOLLOWING ITS ORDER F OR A.Y. 1979-80. IN FACT, THE DECISIONS OF THIS COURT IN SOUTH EAST ASIA SHIPPING CO.(SUPRA) AND TATA SONS LTD. (SUPRA), WHICH ARE BEING RELIED UPON IN PREFER ENCE TO INDER SINGH GILL (SUPRA) CANNOT BE ACCEPTED AS BOTH THE ORDERS BEING RELIED UPON BY THE APPLICANT WAS RENDERED NOT AT THE FINAL HEARING BUT ON APPLICATIONS UNDER SECTION 256(2) OF THE ACT AND AT THE STAGE OF ADMISSION UNDER SECTION 260A OF THE ACT. THIS UNLIKE THE JUDGMENT RENDERED IN A REFERENCE BY THIS COURT IN INDER SINGH GILL (SUPRA). MOREOVER, THE DECISION IN SOUTH EAST ASIA SHIPPING CO. (SUPRA) IS NOT AVAILABLE IN ITS ENTIRETY. THERE FORE, IT WOULD NOT BE SAFE TO RELY UPON IT AS ALL FACTS AND ON WHAT CONSIDERATION OF L AW, IT WAS RENDERED IS NOT KNOWN. SIMILARLY, THE DECISION OF THIS COURT IN TAT A SONS (SUPRA) BEING INCOME TAX APPEAL NO.209 OF 2001 PRODUCED BEFORE US, DISMI SSED THE APPEAL OF THE REVENUE BY ORDER DATED 2ND APRIL, 2004 BY MERELY FO LLOWING ITS ORDER DATED 23RD MARCH, 1993 REJECTING THE REVENUE'S APPLICATIO N FOR REFERENCE UNDER SECTION 256(2) OF THE ACT. THUS, IT ALSO CANN OT BE RELIED UPON TO DECIDE THE CONTROVERSY. MOREOVER, THE ORDER OF THIS COURT IN TATA SONS LTD. (SUPRA) AS PRODUCED BEFORE US FOR ASSESSMENT YEAR 1985-86 HAD NOT NOTICED THE DECISION OF THIS COURT IN INDER SINGH GILL (SUPRA) ON A REFE RENCE. THEREFORE, IT IS RENDERED PER INCURIAM. [EMPHASIS, BY UNDERLINING, SUPPLIED BY US] 38. TO THE BEST OF OUR KNOWLEDGE THERE IS NO, AND H AVING DONE OUR NECESSARY RESEARCH ON JUDICIAL PRECEDENT ON THESE ISSUES WE D O NOT FIND ANY, DECISION OF ANY OF HON'BLE HIGH COURTS WHICH IS CONTRARY TO THE VIEW SO TAKEN BY HON'BLE BOMBAY HIGH COURT IN RELIANCE INFRASTRUCTURE'S CASE (SUPRA). CLEARLY, THEREFORE, THE COORDINATE BENCH, IN MASTEK LTD'S CA SE (SUPRA), WAS SWAYED BY JUDICIAL PRECEDENTS WHICH, AS HELD BY HON'BLE BOMBA Y HIGH COURT IN THE AFORESAID CASE, ARE NOT REALLY BINDING JUDICIAL PRE CEDENTS ON THE ISSUE. THERE ARE DIRECT DECISIONS OF HON'BLE BOMBAY HIGH COURT I TSELF, IN THE CASE OF INDER SINGH (SUPRA) AND LUBRIZOL (SUPRA), WHICH, FOR THE DETAILED REASONS SET OUT ABOVE BY HON'BLE BOMBAY HIGH COURT, MUST BE PREFERR ED OVER THESE DECISIONS DECLINING TO ADMIT REFERENCE APPLICATIONS UNDER SEC TION 256(2), AS IT THEN EXISTED. 39. HAVING SAID THAT, WE MAY ALSO POINT OUT THAT EA RLIER DECISION OF HON'BLE BOMBAY HIGH COURT IN LUBRIZOL'S CASE (SUPRA) AND TH E FACT THAT IT STANDS SPECIFICALLY APPROVED BY HON'BLE SUPREME COURT IN T HE CASE OF SMITHKLINE AND FRENCH INDIA (SUPRA) WAS NOT BROUGHT TO THE NOTICE OF HON'BLE BOMBAY HIGH ITA-TP NO.198/HYD/2021 :- 46 -: COURT EITHER. IT WAS IN THIS BACKDROP THAT THEIR LO RDSHIPS FURTHER MADE THE FOLLOWING OBSERVATIONS IN THE CASE OF RELIANCE INFR ASTRUCTURE (SUPRA): IT THEREFORE, FOLLOWS THAT THE TAX WHICH HAS BEEN P AID ABROAD WOULD NOT BE COVERED WITH IN THE MEANING OF SECTION 40(A) (II) O F THE ACT IN VIEW OF THE DEFINITION OF THE WORD 'TAX' IN SECTION 2(43) OF TH E ACT. TO BE COVERED BY SECTION 40(A)(II) OF THE ACT, IT HAS TO BE PAYABLE UNDER TH E ACT. WE ARE CONSCIOUS OF THE FACT THAT SECTION 2 OF THE ACT, WHILE DEFINING THE VARIOUS TERMS USED IN THE ACT, QUALIFIES IT BY PRECEDING THE DEFINITION WITH THE W ORD 'IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES' THE MEANING OF THE WORD 'TAX' AS FOUND IN SECTION 2 (43) OF THE ACT WOULD APPLY WHEREVER IT OCCURS IN THE ACT. IT IS NOT EVEN URGED BY THE REVENUE THAT THE CONTEXT OF SECTION 40(A)(II ) OF THE ACT WOULD REQUIRE IT TO MEAN TAX PAID ANYWHERE IN THE WORLD AND NOT ONLY TA X PAYABLE/ PAID UNDER THE ACT. [EMPHASIS, BY UNDERLINING, SUPPLIED BY US] 40. IRONICALLY, THERE IS NO MEETING GROUND BETWEEN THE OBSERVATIONS SO MADE BY HON'BLE BOMBAY HIGH COURT AND ITS EARLIER OBSERVATI ONS, IN LUBRIZOL'S CASE (SUPRA), TO THE EFFECT THAT 'IF THE WORD 'TAX' IS T O BE GIVEN THE MEANING ASSIGNED TO IT BY S. 2(43), THE WORD 'ANY' USED BEFORE IT WI LL BE OTIOSE AND THE FURTHER QUALIFICATION AS TO THE NATURE OF LEVY WILL ALSO BE COME MEANINGLESS', WHICH STAND SPECIFICALLY APPROVED BY HON'BLE SUPREME COUR T IN THE CASE OF SMITHKLINE FRENCH INDIA'S CASE (SUPRA) NOR, FOR THAT PURPOSE, WITH HON'BLE SUPREME COURT'S OBSERVATIONS, IN SMITHKLINE FRENCH INDIA'S CASE (SUPRA), TO THE EFFECT THAT 'FIRSTLY, IT MAY BE MENTIONED, S. 10(4) OF THE 1922 ACT OR S. 40(A)(II) OF THE PRESENT ACT DO NOT CONTAIN ANY WORDS INDICATING THA T THE PROFITS AND GAINS SPOKEN OF BY THEM SHOULD BE DETERMINED IN ACCORDANC E WITH THE PROVISIONS OF THE IT ACT. ALL THEY SAY IS THAT IT MUST BE A RATE OR TAX LEVIED ON THE PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE OBSERVATIONS R ELIED UPON MUST BE READ IN THE SAID CONTEXT AND NOT LITERALLY OR AS THE PROVIS IONS IN A STATUTE'. SUCH A CONFLICT, AS IT WOULD APPEAR TO US, REQUIRES US TO BOW BEFORE THE HIGHER WISDOM OF HON'BLE SUPREME COURT AND TO THAT EXTENT, REMAIN COMPLETELY UNINFLUENCED BY ANY OBSERVATIONS, FROM ANY OTHER JUDICIAL FORUM BELOW HON'BLE SUPREME COURT, WHICH COME IN CONFLICT WITH THE VIEWS SO EXP RESSED BY THE HON'BLE SUPREME COURT. IN ANY EVENT, THE VIEWS SO EXPRESSED BY THE HON'BLE NON- JURISDICTIONAL HIGH COURT ARE WITHOUT THE BENEFIT O F CONSIDERING THE IMPACT OF HON'BLE SUPREME COURT'S DECISION IN SMITHKLINE AND FRENCH (SUPRA). 41. LEARNED COUNSEL FOR THE ASSESSEE SUBMITS THAT T HE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE INFRASTRU CTURE (SUPRA) IS DIRECTLY ON THE ISSUE OF FOREIGN TAX CREDIT WHILE LUBRIZOL'S DE CISION (SUPRA) AND SMITHKLINE AND FRENCH INDIA DECISION (SUPRA) ARE IN THE CONTEX T OF SURTAX. THESE DECISIONS, ACCORDING TO THE LEARNED COUNSEL, HAVE NOTHING TO D O WITH THE QUESTION OF DEDUCTIBILITY OF TAXES PAID ABROAD. THE ONLY DIRECT DECISION ON THE ISSUE IS FROM HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE I NFRASTRUCTURE (SUPRA) AND THAT IS IN FAVOUR OF THE ASSESSEE. IT IS HIS ARGUME NT THAT SINCE THERE IS NO DECISION ITA-TP NO.198/HYD/2021 :- 47 -: BY THE JURISDICTIONAL HIGH COURT TO THE CONTRARY OF WHAT HAS BEEN STATED BY HON'BLE BOMBAY HIGH COURT, RELIANCE INFRASTRUCTURE (SUPRA) DECISION IS A BINDING PRECEDENT FOR US AND WE MUST FOLLOW THE SAM E. ANY OTHER APPROACH, HE VERY POLITELY TELLS US, WOULD BE VIOLATE FUNDAMENTA L PRINCIPLES OF JUDICIAL DISCIPLINE AND CANNOT, THEREFORE, MEET APPROVAL OF HON'BLE COURTS ABOVE. HE REMINDS US THAT THE TRIBUNAL DECISION IN THE CASE O F TATA SONS (SUPRA) IS AUTHORED BY ONE OF US AND SUGGESTS, IN VERY DECOROU S MANNER- WHICH IS HIS HALLMARK ANYWAY, THAT WE SHOULD NOT BECOME SO ATTAC HED TO OUR LABOUR OF LOVE THAT THE CAUSE OF JUSTICE IS SACRIFICED. WE ARE THU S URGED TO FOLLOW THE MASTEK DECISION (SUPRA) RELIANCE INFRASTRUCTURE DECISION ( SUPRA) IN LETTER AND IN SPIRIT. LEARNED COUNSEL HAS THEN POINTED OUT THAT THE EXPLA NATIONS TO SECTION 40(A)(II) REFER ONLY SUCH TAXES PAID OUTSIDE INDIA IN RESPECT OF WHICH RELIEF UNDER SECTION 90 AND 91 ARE AVAILABLE, AND IT CANNO T BE OPEN TO EXTEND THE SCOPE OF WHAT IS COVERED BY EXPLANATIONS TO SECTION 40(A)(II). 42. LEARNED COUNSEL'S REMARKS ARE INDEED THOUGHT PR OVOKING. WE HAVE TO TAKE A CONSCIOUS CALL ON THE POINTS MADE BY HIM. AS WE DO SO, WE MUST MAKE IT CLEAR, THOUGH AT THE COST OF STATING THE OBVIOUS, THAT WHA TEVER WE SAY IS, AND SHALL ALWAYS REMAIN, WHAT HON'BLE COURTS ABOVE HOLD ON TH IS ISSUE. IN A WAY, THEREFORE, WE ARE WRITING ON THE SAND FULLY AWARE T HAT WHATEVER WE WRITE, NO MATTER HOW PAINSTAKINGLY WE WRITE, ON THIS SAND, WI LL BE WASHED AWAY BY A WAVE OF JUDICIAL THOUGHT FROM HON'BLE COURTS ABOVE. WE ARE ALSO ALIVE TO THE FACT THAT CONSIDERING HOW SIGNIFICANT THIS ISSUE IS IT IS ONLY A MATTER OF TIME THAT HON'BLE COURTS ABOVE MAY HAVE TO TAKE A CALL ON IT. ITS IRONICALLY IN THIS COMFORT OF A VERY LIMITED AND SHORT LIVED IMPACT OF OUR DEC ISION ON THIS ISSUE, WE ARE TAKING THIS CLOSE CALL. COMING TO THE CORE ISSUE, T HE ARGUMENT BEFORE US IS THAT FOR THE PURPOSE OF SECTION 40(A)(II), THE DEFINITIO N OF 'TAX' MUST BE THE SAME AS IS ASSIGNED TO 'TAX' UNDER SECTION 2(43) OF THE ACT. I T IS FOR THIS REASON THAT TAX PAID OUTSIDE INDIA, NOT BEING TAX LEVIED UNDER THE INDIA N INCOME TAX ACT, IS SAID TO BE INTACT FROM THE BAR PLACED UNDER SECTION 40(A)(I I) OF THE ACT. SECTION 40(A)(II), IT MAY BE RECALLED, PROVIDES THAT 'ANY S UM PAID ON ACCOUNT OF ANY RATE OF TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINE SS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS' SHALL NOT BE ALLOWED AS A DEDUCTION, INTER ALIA, UNDER SE CTION 37(1) OF THE ACT. THE ENTIRE CONTROVERSY BEFORE US IS CONFINED TO THE CON NOTATIONS OF EXPRESSION 'TAX' APPEARING IN THE AFORESAID STATUTORY PROVISION. THE QUESTION THUS IS AS TO WHAT ARE THE CONNOTATIONS OF THE EXPRESSION 'TAX' AND TH E ALTERNATIVE APPROACHES CANVASSED ARE THAT (A) THE CONNOTATIONS OF EXPRESSI ON 'TAX' APPEARING IN THE ABOVE PROVISIONS ARE CONTROLLED BY DEFINITION UNDER SECTION 2(43) OF THE ACT; (B) THE CONNOTATIONS OF THE EXPRESSION 'TAX' APPEARING IN THE ABOVE PROVISION EXTEND TO ANY TAX, WHETHER UNDER THE INCOME TAX ACT, 1961 OR NOT, AS LONG AS THE TAX IS LEVIED ON THE PROFITS AND GAINS OF BUSINESS, OR ASS ESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS AND GAI NS. THIS CONTROVERSY IS EVIDENT FROM THE FOLLOWING EXTRACTS FROM THE VARIOU S DECISIONS, INCLUDING THE DECISION CITED BY THE LEARNED COUNSEL OF THE ASSESS EE, AS ALSO FROM ORDERS IMPUGNED IN APPEAL BEFORE US: ITA-TP NO.198/HYD/2021 :- 48 -: (I) MASTEK LTD'S DECISION BY THE COORDINATE BENCH, RELIED UPON BY THE LEARNED COUNSEL: 39. DUE CONSIDERATION OF THE PROVISIONS OF SEC.37 A ND SEC.40(A)(II) OF THE ACT AS WELL, IT EMERGES THAT U/S 37, ALL TAXES AND RATES A RE 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 LEV IABLE ON THE PROFITS AND GAINS CHARGEABLE UNDER THE ACT IS DEDUCTIBLE. ON THE OTHE R HAND, ALL OTHER TAXES LEVIED IN FOREIGN COUNTRIES WHETHER ON PROFITS OR GAINS OR OTHERWISE ARE DEDUCTIBLE UNDER THE PROVISIONS OF SEC. 37 OF THE ACT AND PAYM ENT OF SUCH TAXES DOES NOT AMOUNT TO APPLICATION OF INCOME. 40. 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 ISSUE, IN BRIEF, WAS THAT THE TAX AUTHORITIES OF TH E RESPECTIVE COUNTRY HAD COLLECTED INCOME-TAX AT SOURCE, ACCORDING TO THEM, A PART OF SUCH EARNINGS ACCRUED AND AROSE IN THEIR COUNTRIES WHICH WERE LIA BLE TO INCOME-TAX UNDER ITS TAXING LAWS. SUCH FOREIGN TAX CLAIMED AS A DEDUCTIO N BY THE ASSESSEE WAS TURNED DOWN BY THE AO. THIS WAS REVERSED BY THE AAC WITH A REASONING THAT THE 'PAYMENT OF FOREIGN INCOME-TAX FORMED PART OF THE E XPENDITURE LIKE OTHER USUAL BUSINESS EXPENSES INCURRED IN THE COURSE OF BUSINES S AND AS SUCH, THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION OF THE SAME U/S 37 OF THE ACT FOR BEING INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. ' ON A FURTHER APPEAL, THE TRIBUNAL HAD, AFTER DUE CONSIDERATION OF THE PROVIS IONS OF BOTH THE SECTIONS - 37 WHICH ALLOWS A BUSINESS EXPENDITURE AND 40(A)(II) W HICH CONTAINED PROHIBITION - AS UNDER: '40(A)(II) - ANY SUM PAID ON ACCOUNT OF ANY RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS' ITA NO. 197 AND 508/AHD/2016 ASSESSMENT YEAR: 2012-13 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 CHARGEAB LE 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 THA T '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 SEC. 40(A). ACCORDINGLY, THE HON'BLE TRIBUNAL OBSERVED WITH REG ARD TO THE ALLOWABILITY OF FOREIGN TAXES U/S 37 OF THE ACT AS UNDER: 'SO WE HAVE TO SEE WHETHER SUCH EXPENDITURE IS ALLO WABLE UNDER SECTION 37 OF THE ACT. IN OUR VIEW, RATES AND TAXES WHICH ARE PAY ABLE IRRESPECTIVE OF ANY PROFITS BEING EARNED ARE ADMISSIBLE ALLOWANCES UNDE R SECTION 37 AND SECTION 40(A)(II) DOES NOT APPLY TO THEM. THE TAX LEVIED BY DIFFERENT COUNTRIES IS NOT A TAX ON PROFITS BUT A NECESSARY CONDITION PRECEDENT TO THE EARNING OF PROFITS. SO THE AAC WAS ABSOLUTELY JUSTIFIED IN ALLOWING THE AP PEAL OF THE ASSESSEE AND WE SEE NO REASON TO DIFFER FROM THE FINDING.' REFERENCE APPLICATION OF THE REVENUE WAS REJECTED B Y THE TRIBUNAL WHICH HAS BEEN RATIFIED BY THE HON'BLE BOMBAY HIGH COURT IN I TA NO.123 OF 1976. ITA-TP NO.198/HYD/2021 :- 49 -: ....................... (II) RELIANCE INFRASTRUCTURE (SUPRA) BY HON'BLE BOM BAY HIGH COURT WE WOULD HAVE ANSWERED THE QUESTION POSED FOR OUR CONSIDERAT ION BY FOLLOWING THE DECISION OF THIS COURT IN INDER SINGH GILL (SUPRA). HOWEVER, WE NOTICE THAT THE DECISION OF THIS COURT IN INDER SINGH GILL (SUPRA) WAS RENDERED UNDER THE INDIAN INCOME TAX ACT, 1922 AND NOT UNDER THE A CT. WE FURTHER NOTE THAT JUST AS SECTION 40(A)(II) OF THE ACT DOES NOT ALLOW DEDUCTION ON TAX PAID ON PROFIT AND/OR GAIN OF BUSINESS. THE INDIAN INCOME T AX ACT, 1922 ACT ALSO CONTAINS A SIMILAR PROVISION IN SECTION 10(4) THERE OF. HOWEVER, THE INDIAN INCOME TAX ACT, 1922 CONTAINS NO DEFINITION OF 'TAX ' AS PROVIDED IN SECTION 2(43) OF THE ACT. CONSEQUENTLY, THE TAX PAID ON INC OME / PROFITS AND GAINS OF BUSINESS / PROFESSION ANYWHERE IN THE WORLD WOULD N OT BE ALLOWED AS DEDUCTION FOR DETERMINING THE PROFITS / GAINS OF THE BUSINESS UNDER SECTION 10(4) OF THE INDIAN TAX ACT, 1922. THEREFORE, ON THE STATE OF TH E STATUTORY PROVISIONS AS FOUND IN THE INDIAN INCOME TAX ACT, 1922 THE DECISI ON OF THIS COURT IN INDER SINGH GILL (SUPRA) WOULD BE UNEXCEPTIONABLE. HOWEVER, THE RATIO OF THE AFORESAID DECISION IN IND ER SINGH GILL (SUPRA) CANNOT BE APPLIED TO THE PRESENT FACTS IN VIEW OF THE FACT THAT THE ACT DEFINES 'TAX' AS INCOME TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT. THUS, BY DEFINITION, THE TAX WHICH IS PAYABLE UNDER THE ACT ALONE ON THE PRO FITS AND GAINS OF BUSINESS ARE NOT ALLOWED TO BE DEDUCTED NOTWITHSTANDING SECT IONS 30 TO 38 OF THE ACT. IT THEREFORE, FOLLOWS THAT THE TAX WHICH HAS BEEN PAID ABROAD WOULD NOT BE COVERED WITH IN THE MEANING OF SECTION 40(A) (II) O F THE ACT IN VIEW OF THE DEFINITION OF THE WORD 'TAX' IN SECTION 2(43) OF TH E ACT. TO BE COVERED BY SECTION 40(A)(II) OF THE ACT, IT HAS TO BE PAYABLE UNDER TH E ACT. WE ARE CONSCIOUS OF THE FACT THAT SECTION 2 OF THE ACT, WHILE DEFINING THE VARIOUS TERMS USED IN THE ACT, QUALIFIES IT BY PRECEDING THE DEFINITION WITH THE W ORD 'IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES' THE MEANING OF THE WORD 'TAX' AS FOUND IN SECTION 2 (43) OF THE ACT WOULD APPLY WHEREVER IT OCCURS IN THE ACT. IT IS NOT EVEN URGED BY THE REVENUE THAT THE CONTEXT ITA NO.197 AND 508/ AHD/2016 ASSESSMENT YEAR: 2012-13 OF SECTION 40(A)(II) OF THE ACT WOULD REQUIRE IT TO MEAN TAX PAID ANYWHERE IN THE WORLD AND NOT ONLY TAX PAYABLE/ PAI D UNDER THE ACT. (III) ARGUMENTS OF THE ASSESSEE AS NOTED IN THE ASS ESSMENT ORDER AND THE CIT(A)'S ORDER IMPUGNED IN APPEAL BEFORE US IT IS S UBMITTED THAT THE TAXES PAID IN FOREIGN JURISDICTIONS CONSTITUTED EXPENDITURE LA ID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OR PRO FESSION, AND, THEREFORE, DEDUCTIBLE UNDER SECTION 37(1) OF THE ACT. THE DEDU CTION FOR WITHHOLDING TAX WAS AN INEVITABLE & IF WE DO NOT AGREE FOR THE SAME THEN WE WOULD NOT BE ABLE TO CARRY OUT SUCH BUSINESS DEAL AS WELL. FURTHER, THE ABOVE EXPENDITURE IS NOT COVERED UNDER SECTION 40(A)(II) HENCE IT IS DULY ALLOWED AS AN EXPENDITURE UNDER SECTION 37(1) OF THE ACT. SECTION 40(A)(II) PROVIDES THAT 'ANY SUM PAID ON ACCOUNT OF ANY RATE OR TAX LEVIED ON THE ITA-TP NO.198/HYD/2021 :- 50 -: PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR A SSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAIN S',; 'TAX' HAS BEEN DEFINED U/S.2(43) AS 'FAX' IN RELATI ON TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 1965, AND ANY S UBSEQUENT ASSESSMENT YEAR MEANS INCOME-TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT, AND IN RELATION TO ANY OTHER ASSESSMENT YEAR INCOME-TAX AND SUPER-T AX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT PRIOR TO THE AFORESAID DATE [AND IN RELATION TO THE ASSESSMENT YEAR COMMENCING ON THE 1ST DAY OF APRIL, 2006, AND ANY SUBSEQUENT ASSESSMENT YEAR INCLUDES THE FRINGE BENEFIT TAX PAY ABLE UNDER SECTION 115WA. IT IS SUBMITTED THAT 'TAX' ONLY INCLUDES TAXES LEVI ED UNDER INDIAN INCOME TAX ACT, 1961 AND FOREIGN TAX IS OUT OF THE DEFINITION OF 'TAX' HENCE FOREIGN TAX PAID WILL NOT BE DISALLOWED BY VIRTUE OF SEC.40 (A)(II). RELIANCE IS PLACED ON FOLLOWING DECIDED CASES WHERE IT HAS BEEN HELD THAT TAXES PAID IN FOREIGN COUNTRY IS AN ALLOWABLE EXPENDITURE U/S.37(1) CIT VS. TATA SONS LTD (ITA NO. 89 OF 1989) - BOMBAY HIGH COURT R EJECTED REFERENCE IN 1993 FOR THIS MATTER HENCE ITS APPROVED STAND OF HIGH CO URT THAT FOREIGN TAX CREDIT IS AN ALLOWABLE EXPENDITURE. CIT VS. SOUTH EAST ASIA SHIPPING CO (ITA NO.123 OF 1976) - BOMBAY HIGH COURT REJECTED REFERENCE OF THIS MATTER AS WELL. DCIT VS. MASTEK LIMITED (AHMEDABAD TRIBUNAL) - JUR ISDICTIONAL TRIBUNAL DECISION DELIVERED ON 16M MAY 2012 WHICH RELIED ON ABOVE DECISION OF BOMBAY HIGH COURT. THE ABOVE CONTENTION OF ETPL HAS BEEN ACCEPTED BY T HE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN ETPL'S CASE FOR AY 2009- 10. COPY OF THE SAID ORDER IS ATTACHED AS ANNEXURE 1A [EMPHASIS, BY UNDERLININ G, SUPPLIED BY US NOW]. 43. IN THE LIGHT OF THE ABOVE OBSERVATIONS IN JUDIC IAL PRECEDENTS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE, AND IN THE LI GHT OF EXTRACTS FROM THE IMPUGNED ORDERS, THE CORE ISSUE, IN OUR CONSIDERED VIEW, IS WHETHER OR NOT THE MEANING OF EXPRESSION 'TAX' APPEARING IN SECTION 40 (A)(II) MUST REMAIN CONFINED TO A TAX LEVIED UNDER THE INDIAN INCOME TAX ACT, 19 61. AS A MATTER OF FACT, HON'BLE BOMBAY HIGH COURT, IN THE CASE OF RELIANCE INFRASTRUCTURE (SUPRA), THEIR LORDSHIPS HAVE GONE TO THE EXTENT OF SAYING T HAT BUT FOR DEFINITION OF TAX UNDER SECTION 2(43) 'WE (THEIR LORDSHIPS) WOULD HAV E ANSWERED THE QUESTION POSED FOR OUR CONSIDERATION BY FOLLOWING THE DECISI ON OF THIS COURT IN INDER SINGH GILL (SUPRA)' WHICH WAS RENDERED IN THE CONTE XT OF THE INCOME TAX ACT, 1922, AND ADDED THAT 'THE RATIO OF THE AFORESAID DE CISION IN INDER SINGH GILL (SUPRA) CANNOT BE APPLIED TO THE PRESENT FACTS IN V IEW OF THE FACT THAT THE ACT (INCOME TAX ACT, 1961) DEFINES 'TAX' AS INCOME TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT'. IN OUR HUMBLE AND SINCERE UNDERSTANDING, GIVEN THESE ITA-TP NO.198/HYD/2021 :- 51 -: FACTS, IT IS NOT REALLY POSSIBLE FOR US TO IGNORE T HE QUESTION AS TO WHAT IS THE IMPACT OF SECTION 2(43) ON CONNOTATIONS OF EXPRESSI ON 'TAX' APPEARING IN SECTION 40(A)(II), AND WHEN WE ADDRESS THIS QUESTION, WE CA NNOT BE OBLIVIOUS OF THE FOLLOWING GUIDANCE FROM HON'BLE COURTS ABOVE: (I) HON'BLE BOMBAY HIGH COURT IN LUBRIZOL'S CASE (S UPRA) WITH RESPECT, THIS ARGUMENT [I.E. THE DEFINITION OF 'TAX' UNDER SECTIO N 2(433) MUST HOLD THE FIELD] DOES NOT APPEAL TO US. IT IS SIGNIFICANT TO NOTE TH AT THE WORD 'TAX'; IS USED IN CONJUNCTION WITH THE WORDS 'ANY RATE OR TAX', THE W ORD 'ANY' GOES BOTH WITH THE RATE AND TAX. THE EXPRESSION IS FURTHER QUALIFI ED AS A RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PROFITS OR G AINS. IF THE WORD 'TAX' IS TO BE GIVEN THE MEANING ASSIGNED TO IT BY S. 2(43) OF THE ACT, THE WORD 'ANY' USED BEFORE IT WILL BE OTIOSE AND THE FURTHER QUALIFICAT ION AS TO THE NATURE OF LEVY WILL ALSO BECOME MEANINGLESS. FURTHERMORE, THE WORD 'TAX ' AS DEFINED IN S. 2(43) OF THE ACT IS SUBJECT TO 'UNLESS THE CONTEXT OTHERWISE REQUIRES'. IN VIEW OF THE DISCUSSION ABOVE, WE HOLD THAT THE WORDS 'ANY TAX' HEREIN REFERS TO ANY KIND OF TAX LEVIED OR LEVIABLE ON THE PROFITS OR GAINS OF A NY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BA SIS OF, ANY SUCH PROFITS OR GAINS. [EMPHASIS, BY UNDERLINING, SUPPLIED BY US NOW] (II) HON'BLE SUPREME COURT IN SMITHKLINE AND FRENCH 'S CASE (SUPRA) SPECIFICALLY APPROVING THE LUBRIZOL JUDGMENT ...........FIRSTLY, IT MAY BE MENTIONED, S. 10(4) OF THE 1922 ACT OR S. 40(A)(II) OF THE PRESENT ACT DO NOT CONTAIN ANY WORDS INDICATING THAT THE PROFITS AND GAINS SPOKEN OF BY THEM SHOULD BE DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THE IT ACT. ALL T HEY SAY IS THAT IT MUST BE A RATE OR TAX LEVIED ON THE PROFITS AND GAINS OF BUSI NESS OR PROFESSION. THE OBSERVATIONS RELIED UPON MUST BE READ IN THE SAID C ONTEXT AND NOT LITERALLY OR AS THE PROVISIONS IN A STATUTE. BUT SO FAR AS THE ISSU E HEREIN IS CONCERNED, EVEN THIS LITERAL READING OF THE SAID OBSERVATIONS DOES NOT H ELP THE ASSESSEE. AS WE HAVE POINTED OUT HEREINABOVE THE SURTAX IS ESSENTIALLY L EVIED ON THE BUSINESS PROFITS OF THE COMPANY COMPUTED IN ACCORDANCE WITH THE PROV ISIONS OF THE IT ACT. MERELY BECAUSE CERTAIN FURTHER DEDUCTIONS [ADJUSTME NTS] ARE PROVIDED BY THE SURTAX ACT FROM THE SAID PROFITS, IT CANNOT BE SAID THAT THE SURTAX IS NOT LEVIED UPON THE PROFITS DETERMINED OR COMPUTED IN A CCORDANCE WITH THE PROVISIONS OF THE IT ACT. SEC. 4 OF THE SURTAX ACT READ WITH THE DEFINITION OF 'CHARGEABLE PROFITS' AND THE FIRST SCHEDULE MAKE TH E POSITION ABUNDANTLY CLEAR. ..................................... WE AGREE WITH THE VIEW TAKEN BY THE HIGH COURTS OF CALCUTTA [MOLINS (INDIA) LTD. VS. CIT (1983) 144 ITR 317 (CAL) AND BROOKE BO ND (INDIA) LTD. VS. CIT (1992) 193 ITR 390 (CAL) : TC 15R.590], BOMBAY (IN) LUBRIZOL (INDIA) LTD. VS. CIT (1991) 187 ITR 25 (BOM) FOLLOWED IN SEVERAL OTHER DECISIONS OF THAT COURT], KARNATAKA [CIT VS. INTERNATIONAL INSTRUMENT S PVT. LTD. (1983) 144 ITR ITA-TP NO.198/HYD/2021 :- 52 -: 936 (KAR), MADRAS [SUNDARAM INDUSTRIES LTD. VS. CIT (1986) 159 ITR 646 (MAD), ANDHRA PRADESH [VAZIR SULTAN TOBACCO CO. LTD . VS. CIT (1988) 169 ITR 35 (AP)], RAJASTHAN [ASSOCIATED STONE INDUSTRIES CO . LTD. VS. CIT (1988) 170 ITR 653 (RAJ)], GUJARAT [S.L.M. MANEKLAL INDUSTRIES LTD. VS. CIT (1988) 172 ITR 176 (GUJ) FOLLOWED IN SEVERAL CASES THEREAFTER] , ALLAHABAD [HIMALAYAN DRUG CO. PVT. LTD. VS. CIT (1996) 218 ITR 346 (ALL) ] AND PUNJAB & HARYANA HIGH COURT [HIGHWAY CYCLE INDUSTRIES LTD. VS. CIT ( 1989) 178 ITR 601 (P&H) : TC 17R.807]. 44. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT TH E PLEA OF THE ASSESSEE DOES NOT MERIT LEGAL ACCEPTANCE. NO DOUBT IT IS A CLOSE CALL BUT WITHIN OUR LIMITATION OF KNOWLEDGE AND WISDOM, WE SINCERELY BELIEVE THAT THE PLEA OF THE ASSESSEE MUST BE REJECTED. TO PUT A QUESTION OF OURSELVES, C AN IT BE OPEN TO US TO HOLD THAT THE MEANING OF EXPRESSION 'TAX' UNDER SECTION 40(A)(II) WILL BE FETTERED BY THE DEFINITION OF TAX UNDER SECTION 2(43), SO FAR A S THE QUESTION OF CREDIT FOR TAXES ABROAD IS CONCERNED, EVEN THOUGH HON'BLE SUPR EME COURT NOTES, IN THE CASE OF SMITHKLINE FRENCH (SUPRA), THAT 'S. 40(A)(I I) OF THE PRESENT ACT DO NOT CONTAIN ANY WORDS INDICATING THAT THE PROFITS AND G AINS SPOKEN OF BY THEM SHOULD BE DETERMINED IN ACCORDANCE WITH THE PROVISI ONS OF THE IT ACT. ALL THEY SAY IS THAT IT MUST BE A RATE OR TAX LEVIED ON THE PROFITS AND GAINS OF BUSINESS OR PROFESSION'. WE, THEREFORE, DO NOT THINK WE HAVE TH E LIBERTY OF TAKING THE VIEW THAT LEARNED COUNSEL IS URGING US TO TAKE. 45. IN ANY CASE, HON'BLE BOMBAY HIGH COURT'S JUDGME NT IN THE CASE OF RELIANCE INFRASTRUCTURE (SUPRA) PROCEEDS ON PECULIAR FACTS A ND A SORT OF CONCESSION BY THE REVENUE INASMUCH AS IT WAS NOT THE CASE OF THE REVENUE THAT CONTEXT IN WHICH THE EXPRESSION 'TAX' IS USED IN SECTION 40(A)(II) R EQUIRES A MEANING DIFFERENT FROM THE MEANING ASSIGNED BY SECTION 2(43). THIS IS EVIDENT FROM THE OBSERVATIONS MADE BY THEIR LORDSHIPS TO THE EFFECT THAT 'WE ARE CONSCIOUS OF THE FACT THAT SECTION 2 OF THE ACT, WHILE DEFINING THE VARIOUS TERMS USED IN THE ACT, QUALIFIES IT BY PRECEDING THE DEFINITION WITH THE WORD 'IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES' THE MEANING OF THE WORD 'TAX' AS FOUND IN SECTION 2 (43) OF THE ACT WOULD APPLY WHEREVER IT OCCURS IN THE ACT. IT IS NOT EVEN URGED BY THE REVENUE THAT THE CONTEXT OF SECTION 40(A)(II ) OF THE ACT WOULD REQUIRE IT TO MEAN TAX PAID ANYWHERE IN THE WORLD AND NOT ONLY TA X PAYABLE/ PAID UNDER THE ACT'. THAT WAS NOT THE SITUATION BEFORE US. THE VER Y THRUST OF STAND OF THE REVENUE WAS THAT THE CONNOTATIONS OF EXPRESSION 'TA X' IN SECTION 40(A)(II) MUST BE TAKEN IN ITS CONTEXTUAL MEANING WHICH EXTENDS TO ANY TAX ASCERTAINABLE WITH REFERENCE TO THE PROFITS OF THE ASSESSEE AS EVIDENT FROM THE WORDINGS OF SECTION WHICH REFER TO 'ANY RATE OR TAX LEVIED ON THE PROFI TS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHER WISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS', AND THAT ITS CONNOTATIONS CANNOT BE TREATED AS RESTRICTED TO TAX UNDER THE INCOME TAX ACT. THIS ARGUMENT, IN THE CONTEXT OF DEDUCTION IN RESPE CT OF TAX OUTSIDE INCOME TAX ACT, 1961, HAS ALREADY MET THE APPROVAL OF HON'BLE SUPREME COURT. THE LAW ITA-TP NO.198/HYD/2021 :- 53 -: LAID DOWN BY HON'BLE SUPREME COURT BINDS ALL OF US UNDER ARTICLE 141 OF THE CONSTITUTION OF INDIA. ONCE WE ARE AWARE ABOUT A PA RTICULAR POSITION THAT HON'BLE SUPREME COURT HAS TAKEN, IT IS NOT OPEN TO US TO REACH A CONCLUSION WHICH IS, OR CAN BE PERCEIVED AS, IN DEFIANCE TO TH E POSITION TAKEN BY HON'BLE SUPREME COURT. MAYBE, IF THE VIEWS EXPRESSED WERE B Y OUR JURISDICTIONAL HIGH COURT, OR BY ANY OF HON'BLE HIGH COURTS AFTER TAKIN G INTO ACCOUNT THE VIEWS EXPRESSED BY HON'BLE SUPREME COURT ON THAT ISSUE, T HINGS MAY HAVE BEEN LITTLE DIFFERENT, BUT THAT IS NOT THE CASE HERE. 46. IN VIEW OF THESE DISCUSSIONS, THE CORRECTNESS O F OUR RELIANCE ON TATA SONS DECISION (SUPRA) IS NO MORE THAN ACADEMIC. AS FOR T HE FACT THAT TATA SONS DECISION (SUPRA) IS BY ONE OF US, MERELY BECAUSE IT IS AUTHORED BY ONE OF US, WE CANNOT IGNORE IT EITHER. IT IS AS MUCH OF A BINDING JUDICIAL PRECEDENT AS MUCH ANY OTHER DECISION OF THE TRIBUNAL DECISION WHICH I S NOT PER INCURIAM. 47. IN OUR CONSIDERED VIEW, MASTEK LTD DECISION (SU PRA) BY THE COORDINATE BENCH IS A PER INCURIAM DECISION FOR THE REASON THA T IT WAS RENDERED WITHOUT TAKING INTO ACCOUNT AN EARLIER DECISION BY A BENCH OF EQUAL STRENGTH ON THE SAME ISSUE IN THE CASE OF TATA SONS (SUPRA), AS LEARNED REPRESENTATIVES APPEARING BEFORE THE SAID BENCH DID NOT BRING THIS JUDICIAL P RECEDENT TO THEIR NOTICE. IN THE CASE OF PUNJAB LAND DEVELOPMENT AND RECLAMATION COR PN. LTD. VS. PRESIDING OFFICER, LABOUR COURT (1990) 3 SCC 682; (1990) 77 F JR 17 (SC) HON'BLE SUPREME COURT EXPLAINED THE EXPRESSION 'PER INCURIA M' THUS (AT P. 36 OF 77 FJR) : 'THE LATIN EXPRESSION 'PER INCURIAM' MEANS THROUG H INADVERTENCE. A DECISION CAN BE SAID GENERALLY TO BE GIVEN PER INCURIAM WHEN THE SUPREME COURT HAS ACTED IN IGNORANCE OF A PREVIOUS DECISION OF ITS OW N OR WHEN A HIGH COURT HAS ACTED IN IGNORANCE OF A DECISION OF THE SUPREME COU RT.' A FORTIORI, A DECISION OF THE TRIBUNAL UNMINDFUL OF ITS EARLIER DECISION(S) O N THE SAME ISSUE IS ALSO A PER INCURIAM DECISION. OF COURSE, IF THE SUBSEQUENT DEC ISION HAD CONSIDERED THE EARLIER DECISION AND YET DIFFERED FROM THE CONCLUSI ON, THE SITUATION WOULD HAVE BEEN MATERIALLY DIFFERENT. THE ONLY REASON WE HAVE PREFERRED TATA SONS DECISION (SUPRA) OVER MASTEK DECISION (SUPRA), BOTH OF WHICH ARE DECISIONS FROM BENCHES OF EQUAL STRENGTH, IS THAT THE LATTER WAS DELIVERED IN IGNORANCE OF EARLIER DECISIONS IN THE CASES OF TATA SONS (SUPRA) AND LUB RIZOL INDIA (SUPRA). 48. A PER INCURIAM DECISION, AS NOTED BY SEVERAL BI NDING JUDICIAL PRECEDENTS, INCLUDING, FOR EXAMPLE, IN THE CASE OF CIT VS B R C ONSTRUCTIONS [(1979) 222 ITR 202 AP FULL COURT], CEASES TO BE A BINDING JUDI CIAL PRECEDENT. AS OBSERVED BY THE FULL BENCH OF HON'BLE AP HIGH COURT IN THIS CASE, 'IT MAY BE NOTICED THAT PRECEDENT CEASES TO BE A BINDING PRECEDENT-- ( I) IF IT IS REVERSED OR OVERRULED BY A HIGHER COURT, (II) WHEN IT IS AFFIRM ED OR REVERSED ON A DIFFERENT GROUND, (III) WHEN IT IS INCONSISTENT WITH THE EARL IER DECISIONS OF THE SAME RANK, (IV) WHEN IT IS SUB SILENTIO, AND (V) WHEN IT IS RE NDERED PER INCURIAM'. NOTHING, THEREFORE, TURNS ON MASTEK DECISION BY THE COORDINA TE BENCH. LEARNED COUNSEL HAS THEN INVITED OUR ATTENTION TO THE FACT THAT THE SAID DECISION IN MASTEK'S CASE (SUPRA) IS NOW PENDING FOR CONSIDERATION BEFORE HON 'BLE JURISDICTIONAL HIGH ITA-TP NO.198/HYD/2021 :- 54 -: COURT, AS THEIR LORDSHIPS HAVE, VIDE ORDER DATED 14 TH MARCH 2013 IN TA NO. 826 OF 2012, HAVE ADMITTED THE APPEAL, INTER ALIA, ON THE QUESTION 'WHETHER THE APPELLATE TRIBUNAL HAS SUBSTANTIALLY ERRED IN DELET ING THE DISALLOWANCE UNDER SECTION 40(A)(II) IN RESPECT OF RS 42,57,297 PAID AS BELGIUM TAX CLAIMED AS DEDUCTION UNDER SECTION 37(1) OF THE ACT'. IN OU R CONSIDERED VIEW, NOTHING TURNS ON THIS ARGUMENT EITHER, SINCE THE PENDENCY O F MATTER BEFORE HON'BLE JURISDICTIONAL HIGH COURT ACTS AS A BAR ONLY ON THE CONSTITUTION OF A SPECIAL BENCH OF THIS TRIBUNAL, AS WAS HELD IN THE CASE OF GENERAL MOTORS INDIA PVT LTD VS ACIT [TS-640 -ITAT-2016-AHD-TP], AND NOT OTHERWI SE. IN ANY EVENT, ONCE A JUDICIAL PRECEDENT IS HELD TO BE PER INCURIAM THE P ENDENCY OF APPEAL AGAINST SUCH A PER INCURIAM JUDICIAL PRECEDENT CANNOT CONVE RT IT INTO A BINDING PRECEDENT. 49. COMING TO THE SCOPE OF EXPLANATIONS TO SECTION 40(A)(II), ON WHICH LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED UPON SO MUCH, W E MAY ONLY ADD THAT IF THE MAIN PROVISION, AS IS THE CLAIM OF THE LEARNED COUN SEL, DOES NOT COVER THE TAXES PAID ABROAD, THERE CANNOT BE ANY OCCASION TO INCLUD E, UNDER EXPLANATIONS TO SECTION 40(A)(II), TAXES IN RESPECT OF WHICH REL IEF UNDER SECTION 90 AND 91 IS NOT ADMISSIBLE. THESE EXPLANATIONS DONOT EXTEND THE SCOPE OF THE SECTION 40(A)(II) BUT RATHER EXPLAIN THE SCOPE OF THE SAID SECTION. IF SOMETHING IS COVERED BY THE EXPLANATION, IT CANNOT BE SAID THAT IT IS NO T COVERED BY THE MAIN PROVISION. IF TAXES IN RESPECT OF WHICH TAX CREDIT UNDER SECTION 90 OR 91 ARE COVERED BY THE PROVISO, THESE ARE COVERED BY THE SC OPE OF SECTION 40(A)(II) AS WELL. AND IF THESE TAXES ARE COVERED BY SECTION 40( A)(II), THE THEORY THAT MEANING OF 'TAX' UNDER SECTION 40(A)(II) MUST REMAI N CONFINED TO THE TAXES LEVIED UNDER INCOME TAX ACT, 1961 COMES TO A NAUGHT SINCE THE TAXES IN RESPECT OF WHICH CREDITS ARE AVAILABLE UNDER SECTION 90 OR 91 CANNOT BE, UNDER ANY CIRCUMSTANCES, IMPOSED UNDER THE INDIAN INCOME TAX ACT. THE ARGUMENT OF THE LEARNED COUNSEL, IF WE HAVE UNDERSTOOD IT CORRECTLY , IS DEVOID OF, IN OUR CONSIDERED VIEW, LEGALLY SUSTAINABLE MERITS. 50. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT NO DEDUCTION UNDER SECTION 37(1) CAN BE ALLOWED IN RES PECT OF ANY INCOME TAX WITHHELD ABROAD AS THE SAME WILL BE, FOR THE DETAIL ED REASONS SET OUT ABOVE, HIT BY THE DISABLING PROVISIONS UNDER SECTION 40(A)(II) OF THE ACT. THE RELIEF GRANTED BY THE CIT(A), BY DIRECTING THE GRANT OF DEDUCTION OF RS.52,50,507 IN RESPECT OF INCOME TAX WITHHELD ABROAD IN RESPECT OF WHICH NO F OREIGN TAX CREDIT IS ADMISSIBLE, UNDER SECTION 37(1) OF THE ACT MUST, TH EREFORE, STAND VACATED. WE DIRECT SO. WE FURTHER DIRECT THAT, AS A RESULT OF O UR DIRECTIONS EARLIER IN THIS ORDER, IN THE EVENT OF ASSESSEE BEING ALLOWED ONLY PARTIAL TAX CREDIT IN RESPECT OF TAXES WITHHELD ABROAD, THE ASSESSEE CANNOT BE ALLOW ED ANY DEDUCTION, IN RESPECT OF THE BALANCE OF THE TAXES SO WITHHELD ABROAD, UND ER SECTION 37(1) OF THE ACT. ITA-TP NO.198/HYD/2021 :- 55 -: WE FURTHER DEEM IT APPROPRIATE TO OBSERVE HERE THAT SECTION 91 OF THE ACT IS A SPECIFIC PROVISION DEALING WITH FOREIGN TAX CREDIT TO BE GRANTED IN CASE OF TAXES PAID IN THE SPE CIFIED COUNTRIES I.E. EXCEPT PAKISTAN WHICH COMES UNDER THE LA TTER SUB-SECTION 2 THEREOF. IF WE GO BY THE ASSESSEES AN ALOGY THAT FOREIGN TAX CREDIT TO THE SPECIFIED EXTENT U/S.91(1) OF A SUM CALCULATED ON SUCH DOUBLY TAXED INCOME AT THE INDIAN R ATE OF TAX OF THE SAID COUNTRY, WHICHEVER IS THE LOWER, OR AT TH E INDIAN RATE OF TAX IF BOTH THE RATES ARE EQUAL IS ALLOWABLE F OR THE PURPOSE OF GRANTING CREDIT AND THE REMAINING COMPONENT IS TO BE GRANTED DEDUCTION UNDER CHAPTER-IV OF THE ACT, THE SA ME WOULD RENDER THE FORMER SPECIFIC PROVISION ITSELF AS OTIOSE GOING CONTRARY TO GENERALIA SPECIALISM NON DEROGANT WHICH MEANS THAT A SPECIFIC PROVISION PREVAILS OVER THE GENERAL ON E. WE THUS ADOPT STRICTER INTERPRETATION (SUPRA) AND CONCLUDE WHATEV ER IS THE ASSESSEES UNALLOWABLE FOREIGN TAX CREDIT CLAIM U/ S.91(1) SINCE EXCEEDING THE SPECIFIED LIMIT, WOULD NOT BE ENTI TLED FOR BUSINESS EXPENDITURE U/S.37 OF THE ACT. WE FURTHER Q UOTE B.R.CONSTRUCTIONS (SUPRA) TO TREAT HON'BLE BOMBAY HIGH COURTS JUDGEMENT AS NOT A BINDING PRECEDENT IN LIGHT OF THE FOR EGOING DETAILED DISCUSSION. THE ASSESSEE FAILS IN ITS 23 RD SUBSTANTIVE GROUND ACCORDINGLY. NO OTHER GROUND HAS BEEN PRESSED BEFORE US. 15. THIS ASSESSEES APPEAL IS PARTLY ALLOWED IN ABOV E TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH OCTOBER, 2021 SD/- SD/- (LAXMI PRASAD SAHU) (S.S.G ODARA) ACCOUNTANT MEMBER JUDICIAL MEM BER HYDERABAD, DATED: 06-10-2021 TNMM ITA-TP NO.198/HYD/2021 :- 56 -: COPY TO : 1.M/S.INFOR (INDIA) PRIVATE LIMITED, 7 TH FLOOR, THE SKYVIEW TOWER 10, SURVEY NO.83/1, MADHAPUR, HYDERABAD. 2.THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-2(1 ), HYDERABAD. 3.DISPUTE RESOLUTION PANEL (DRP)-1, BENGALURU. 4.DIRECTOR OF INCOME TAX (IT & TP), HYDERABAD. 5.ADDL. COMMISSIONER OF INCOME TAX (TRANSFER PRICIN G), HYDERABAD. 6.D.R. ITAT, HYDERABAD. 7. GUARD FILE.
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