M/s Promac Engineering Industries Ltd , Bangalore V. The Assistant Commissioner of Income TAx Circle-5(1)(2), Bangalore

ITA 501/BANG/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7329 (ITAT-BANGALORE)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 03-08-2021
• Assessment Year: 2014-2015
• Appeal Filed On: 21-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N S SHASH IDHAR C IT BENGALURU
• Keywords: Residential status; Double taxation relief; TDS
• Section: 80G; 2(A); 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI GEORGE GEORGE K., JUDICIAL MEMBER IT A NO. 501/ BAN G/2018 ASSESSMENT YEAR: 2014 - 15 M/S. PROMAC ENGINEERING INDUSTRIES LTD., # 1, ANJANAPURA POST, AVALAHALLI, BENGALURU 560 062. PAN: AAACP 8178R VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 5(1)(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : S HRI TATA KRISHNA, ADVOCATE RESPONDENT BY : SHRI N.S. SHASH IDHAR, ADDL .C IT(DR)(ITAT ), BENGALURU. DATE OF HEARING : 03 .0 8 .202 1 DATE OF PRONOUNCEMENT : 17 .0 8 .202 1 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 24.11.2017 OF THE CIT(APPEALS)-5, BENGALURU FOR THE ASSESSMENT YEAR 2014-15. 2. THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISE D BY THE ASSESSEE:- 1. THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) IS NOT JUSTIFIED IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE. ITA NO.501/BANG/2018 PAGE 2 OF 12 2. THE LEARNED ASSESSING OFFICER IS NOT JUSTIFIED I N MAKING ASSESSMENT IN DEFIANCE OF INSTRUCTIONS/SCRUTINY NOR MS PROVIDED BY THE CBDT FOR THE CASES SELECTED UNDER CASS. 3. AS REGARDS RESTRICTING THE CLAIM OF FOREIGN TAX CREDIT UNDER SECTION 90 TO THE EXTENT OF RS. 3,71,874/- AS AGAINST RS.1,71,80,438/- CLAIMED BY THE APPELLANT: 3.1. THE LEARNED COMMISSIONER (APPEALS) IS NOT JUST IFIED IN UPHOLDING THE ACTION OF THE LEARNED ASSESSING OFFIC ER IN RESTRICTING THE CLAIM OF FOREIGN TAX CREDIT (FTC) R ELIEF UNDER SECTION 90 TO RS. 3,71,874/- AS AGAINST AVAIL ABLE CREDIT OF TANZANIAN TAX OF RS. 1,71,80,438/- SUBJECT TO MA XIMUM OF RS. 1,37,87,386/-. 3.2. THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN CON SIDERING 'TOTAL REVENUE AS PER FINANCIAL STATEMENTS' AS AGAI NST 'TOTAL INCOME' AS PER THE PROVISIONS OF THE ACT FOR THE PU RPOSE OF COMPUTATION OF THE RELIEF OF FTC UNDER SECTION 90. 3.3. WITHOUT PREJUDICE TO ABOVE, THE LOWER AUTHORIT IES ARE NOT JUSTIFIED IN NOT ALLOWING DEDUCTION OF TANZANIA N TAX IN COMPUTING THE TOTAL INCOME UNDER THE PROVISIONS OF THE IT ACT IN RESPECT OF WHICH THE APPELLANT IS NOT ELIGIB LE FOR RELIEF. 4. AS REGARDS DENYING DEDUCTION UNDER SECTION 8 0G IN RESPECT OF DONATION OF RS. 3,78,000/-: 4.1. THE ASSESSING OFFICER OUGHT TO HAVE ALLOWED DE DUCTION UNDER SECTION 80G IN RESPECT OF DONATIONS MADE TO T HE EXTENT OF EVIDENCES AVAILABLE I.E. FOR RS. 3,78,000 /-. 4.2. THE LEARNED COMMISSIONER (APPEALS) IS NOT JUST IFIED IN ADJUDICATING THE AFORESAID GROUND. FOR THE ABOVE REASONS AND FOR SUCH OTHER REASONS WH ICH MAY BE ALLOWED BY THE HONOURABLE MEMBERS TO BE URGED AT TH E TIME OF HEARING, IT IS PRAYED THAT THE AFORESAID APPEAL BE ALLOWED. 3. THE ASSESSEE HAS ALSO RAISED THE FOLLOWING ADDIT IONAL GROUNDS OF APPEAL :- ITA NO.501/BANG/2018 PAGE 3 OF 12 3.4. THE LOWER AUTHORITIES ARE NOT JUSTIFIED IN FA ILING TO APPRECIATE THAT THE CASE OF THE APPELLANT FALLS UND ER SECTION 90(1)(A)(II) AND HENCE THE APPELLANT IS ELIGIBLE FO R RELIEF IN RESPECT OF TAX PAID IN TANZANIA. 3.5 WITHOUT PREJUDICE TO THE ABOVE, THE LOWER AUTHO RITIES ARE NOT JUSTIFIED IN FAILING TO APPRECIATE THAT THE TAX DED UCTED AT SOURCE IN TANZANIA IS NOT AN INCOME THAT ACCRUES OR ARISES OU TSIDE INDIA AND THEREFORE, THE SAME CANNOT BE INCLUDED IN THE TOTAL INCOME OF THE APPELLANT. 4. THE LD. AR SUBMITTED THAT THE ADDITIONAL GROUNDS WERE INADVERTENTLY MISSED OUT IN THE ORIGINAL GROUNDS OF APPEAL AND TH E SAME MAY BE ADMITTED. THE LD. DR HAS NOT PUT SERIOUS OBJECTION TO ADMISSION OF ADDITIONAL GROUNDS. WE ADMIT THE ADDITIONAL GROUN DS PLACING RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE O F NATIONAL THERMAL POWER COMPANY LTD. V. CIT, 229 ITR 283 (SC) . 5. GROUND NO.1 IS GENERAL IN NATURE. GROUND NO.2 W AS NOT PRESSED AT THE TIME OF HEARING AND AS SUCH THE SAME IS DISMISS ED AS NOT PRESSED. 6. WE TAKE UP FOR CONSIDERATION THE GROUND NO.3 ALO NG WITH THE ADDITIONAL GROUNDS. THE FACTS ARE THAT THE APPELLA NT IS ENGAGED IN THE BUSINESS OF EXECUTING TURNKEY PROJECTS OF CEMENT PL ANT AND MACHINERY AND BALANCE OF PLANTS FOR POWER PLANTS FROM THE TIME OF DESIGN, MANUFACTURE, SUPPLY, SUPPLY, TRANSPORTATION, ERECTION COMMISSION ER, TESTING AND HAND OVER THE PROJECT TO THE RESPECTIVE CUSTOMER AND FIL ED ITS RETURN OF INCOME U/S139 DECLARING A TAXABLE INCOME OF RS.4,24,94,646 /- AND DISCHARGED THE TAXES THEREON. DURING THE YEAR, THE COMPANY HAS EXE CUTED ONE OF THE CONTRACTS WITH LAKE CEMENT LIMITED, TANZANIA TOTAL CONTRACT VALUE EXECUTED WITH TANZANIA IS USD 37.61 MILLION I.E., E QUIVALENT TO RS.244.47 CROSS (CONSIDERING THE EXCHANGE FLUCTUATION OF RS 6 5 PER USD). AS PART OF THE CONTRACT, THE APPELLANT NEEDS TO PERFORM THE FO LLOWING SERVICES LIKE AS DESIGN AND ENGINEERING, PROCUREMENT, SUPPLY, ERECTI ON, INSTALLATION & ITA NO.501/BANG/2018 PAGE 4 OF 12 COMMISSIONING, DRAWING, DATE & DOCUMENTATION, MANUF ACTURING AND INSPECTION, TESTING AND SUPPLY, TRANSPORT WORTHY EX PORT PACKING, START UP COMMISSIONING SPARES, SPECIAL TOOLS AND TACKLES, FO RWARDING CHARGES, SEA FREIGHT UP TO DARES SALAAM PORT, COMPREHENSIVE INSURANCE ON WARE HOUSE TO WARE HOUSE BASIS, COVERING ALL RISKS, INCL UDING BUT NOT LIMITED TO RISK ASSOCIATED WITH TRANSIT, FLOOD, FIRE STORAGE, BURGLARY THEFT, ERECTION, TESTING & COMMISSIONING, TAGGING/MARKING AND PAINTI NG/PRESERVATION. DURING THE YEAR, TOTAL BILLING DONE BY THE COMPANY AGAINST ABOVE MENTIONED PROJECT IS RS.63.32 CRORES AND THE SAME I S INCLUDED IN THE TOTAL TURNOVER OF RS.380 CRORE FOR THE YEAR CONSIDERING T HE TANZANIAN TAX LAWS, OUT OF THE ABOVE BILLING LAKE CEMENT LIMITED HAS DE DUCTED A SUM EQUIVALENT TO RS.1,71,80,438/- AGAINST THE TURNOVER OF RS.10,27,10,579/-. THE ASSESSING OFFICER ALLOWED ONLY A SUM OF RS.3,71 ,874/- AS RELIEF U/S. 90/90A WHICH IS ARRIVED AS BELOW:- PARTICULARS AMOUNT TOTAL TAX LIABILITY FOR THE FINANCIAL YEAR A 1,37,87,386/- TOTAL INCOME AS PER FINANCIAL STATEMENTS B 3,80,80,41,649/- INCOME FROM TANZANIA C 10,27,10,579/- TOTAL TAX PAYABLE IN INDIA ATTRIBUTABLE TO INCOME FROM TANZANIA D=(A/B)*C 3,71,874/- 7. AS PER THE TDS CERTIFICATE ISSUED BY LAKE CEMENT LTD., THE AO CONSIDERED THE INCOME FROM TANZANIA TO BE RS.10,27, 10,579/- AND ALLOWED RS.3,71,874/- AS DEDUCTION U/S. 90. THE ASSESSEES CONTENTION IS THE AO HAS CONSIDERED ONLY THE TDS CERTIFICATE TO ARRIVE A T THE INCOME AND HAS NOT CONSIDERED THE PROJECT REVENUE AND PROJECT PROFIT A ND LOSS ACCOUNT. SINCE THE TURNOVER OF THE COMPANY DURING THE YEAR FROM TH E CONTRACT WITH LAKE CEMENT LIMITED IS RS.63.32 CRORES, THE SAME IS TO B E CONSIDERED AS INCOME FROM TANZANIA IN COMPUTATION OF FOREIGN TAX CREDIT. FURTHER, IT IS SUBMITTED THAT THE AO HAS ALSO DISALLOWED DEDUCTION U/S.80G TO THE EXTENT ITA NO.501/BANG/2018 PAGE 5 OF 12 OF RS 5,22,750/-. HOWEVER PROOF OF PAYMENT IS AVAIL ABLE TO THE EXTENT OF RS.3,78,000/-. 8. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT THE AP PELLANT CLAIMED ADDITIONAL CREDIT FOR FOREIGN TAX DEDUCTED AT SOURC E OF RS.1,71,80,438/-. THE AO HAS GIVEN A FINDING THAT CREDIT CAN BE GIVEN ONL Y TO TOTAL TAX PAYABLE IN INDIA ATTRIBUTABLE TO INCOME FROM TANZANIA. THE ART ICLE 23 OF THE DTAA CLEARLY SAYS THAT SUCH DEDUCTION SHALL NOT, HOWEVER , EXCEED THAT PORTION OF THE TAX AS COMPUTED BEFORE THE DEDUCTION IS GIVEN, WHICH IS ATTRIBUTABLE, AS THE CASE MAY BE, TO THE INCOME WHICH MAY BE TAXED I N TANZANIA. ACCORDINGLY, THE CIT(APPEALS) CONFIRMED THE ORDER O F THE AO. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THIS CASE, THE ISSUE IS WITH REGARD TO GRANTING OF FOREIGN TAX CREDIT IN RESPECT OF TAX PAID IN TANZANIA. THE CONTENTION OF THE LD. AR IS THAT THE ASSESSEES CASE FALLS U/S. 90(1)(A)(II) OF THE ACT. IN THE CASE OF SECTION 90(1)(A)(I), RELIEF IS GRANTED IN RESPECT OF INCOME ON WHICH INCOME TAX IS PAID IN BOTH THE COUNTRIES. WHEREAS, U/S. 90(1)(A) (II) OF THE ACT, RELIEF IS GRANTED IN RESPECT OF INCOME TAX CHARGEABLE IN BOTH THE COUNTRIES. IN OTHER WORDS, UNDER CLAUSE (I) ASSESSEE SHOULD HAVE PAID T AX IN BOTH COUNTRIES, WHEREAS UNDER CLAUSE (II) IT IS ENOUGH IF THE INCOM E IS CHARGEABLE TO TAX IN BOTH THE COUNTRIES AND THERE IS NO MANDATE THAT THE TAX SHOULD HAVE BEEN PAID IN BOTH THE COUNTRIES. HE ALSO BROUGHT TO OU R ATTENTION ARTICLE 23 OF DTAA BETWEEN INDIA & TANZANIA . 10. THE LD. AR ALSO RELIED ON THE ORDER OF TRIBUNAL IN THE CASE OF ITTIAM SYSTEMS PVT. LTD. V. ITO IN ITA NOS.2464 & 2465/BAN G/2017 DATED 13.01.2021 WHEREIN IT WAS HELD AS FOLLOWS:- 17. FOR SAKE OF CONVENIENCE IT IS NECESSARY TO REP RODUCE THE RELEVANT CLAUSES OF DOUBLE TAXATION AGREEMENT WITH THE COUNTRIES ITA NO.501/BANG/2018 PAGE 6 OF 12 IN RESPECT OF WHICH FOREIGN TAX CREDIT HAS BEEN CLA IMED BY ASSESSEE. INDIA US DTAA 18. ARTICLE 25 OF THE INDO - US DOUBLE TAXATION AGR EEMENT DEALS WITH RELIEF FROM DOUBLE TAXATION. CLAUSE 2(A) IS TH E RELEVANT PROVISION. IT READS AS UNDER: 2.(A) WHERE A RESIDENT OF INDIA DERIVES INCOME WHIC H, IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, MAY BE TAXED IN THE UNITED STATES, INDIA SHALL ALLOW AS A DEDUCTION FROM THE TAX ON THE INCOME OF THAT RESIDENT AN AMOU NT EQUAL TO THE INCOME-TAX PAID IN THE UNITED STATES, WHETHER D IRECTLY OR BY DEDUCTION. SUCH DEDUCTION SHALL NOT, HOWEVER, EXCEED THAT PART OF THE INCOME-TAX (AS COMPUTED BEFORE THE DEDUCTION IS GIVEN) WHICH IS ATTRIBUTABLE TO THE IN COME WHICH MAY BE TAXED IN THE UNITED STATES .' (EMPHASIS SUPPLIED) 19. A PERUSAL OF THE AFORESAID PROVISION MAKES IT C LEAR THAT, IF A RESIDENT INDIAN DERIVES INCOME, WHICH MAY BE TAXED IN UNITED STATES, INDIA SHALL ALLOWED AS A DEDUCTION FROM THE TAX ON THE INCOME OF THE RESIDENT, AN AMOUNT EQUAL TO THE TAX PAID IN UNITED STATES OF AMERICA, WHETHER DIRECTLY OR BY DEDUCTION . THE CONDITIONS MANDATED IN THE TREATY IS THAT IF ANY 'I NCOME DERIVED' AND 'TAX PAID IN UNITED STATES OF AMERICA ON SUCH I NCOME', THEN TAX RELIEF/CREDIT SHALL BE GRANTED IN INDIA ON TAX PAID IN UNITED STATES OF AMERICA. INDIA JAPAN DTAA 20. ARTICLE 23(2) OF INDIA JAPAN DTAA DEALS WITH EL IMINATION OF DOUBLE TAXATION. CLAUSE 2(A) IS THE RELEVANT PROVIS ION. IT READS AS UNDER: 2. DOUBLE TAXATION SHALL BE AVOIDED IN THE CASE OF INDIA AS FOLLOWS : (A) WHERE A RESIDENT OF INDIA DERIVES INC OME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, MAY BE TAXED IN JAPAN, INDIA SHALL ALLOW AS A DEDUCTION FR OM THE TAX ON THE INCOME OF THAT RESIDENT AN AMOUNT EQUAL TO THE JAPANESE TAX PAID IN JAPAN, WHETHER DIRECTLY OR BY DEDUCTION . SUCH DEDUCTION IN EITHER CASE SHALL NOT, HOWEVER, EXCEED THAT PART OF THE INCOME-TAX (AS COMPUTED BEFORE THE DEDUCTION IS GIVEN) WHICH IS ATTRIBUTABLE, AS THE C ASE ITA NO.501/BANG/2018 PAGE 7 OF 12 MAY BE, TO THE INCOME WHICH MAY BE TAXED IN JAPAN. FURTHER, WHERE SUCH RESIDENT IS A COMPANY BY WHICH SURTAX IS PAYABLE IN INDIA, THE DEDUCTION IN RESPECT OF INCOM E-TAX PAID IN JAPAN SHALL BE ALLOWED IN THE FIRST INSTANCE FROM I NCOME-TAX PAYABLE BY THE COMPANY IN INDIA AND AS TO THE BALAN CE, IF ANY, FROM SURTAX PAYABLE BY IT IN INDIA. (EMPHASIS SUPPLIED) INDIA GERMANY DTAA 21. ARTICLE 23(2) OF INDIA GERMANY DTAA DEALS WITH ELIMINATION OF DOUBLE TAXATION. CLAUSE 2 IS THE RELEVANT PROVIS ION. IT READS AS UNDER: 2. TAX SHALL BE DETERMINED IN THE CASE OF A RESIDE NT OF THE REPUBLIC OF INDIA AS FOLLOWS : WHERE A RESIDENT OF THE REPUBLIC OF INDIA DERIVES INCOME OR OWNS CAPITAL WHICH, IN A CCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, MAY BE TAXED IN THE FEDERAL REPUBLIC OF GERMANY, THE REPUBLIC OF INDIA SHALL ALLOW AS A DEDUCTION FROM THE TAX ON SUCH INCOME OF THAT RESIDENT AN AMOUNT EQUAL TO THE INCOME-TAX PAID IN THE FEDERAL REPUBLIC OF GERMANY, WHETHER DIRECTLY OR BY DEDUCTION, AND AS A DEDUCTION FROM THE TAX ON SUCH CAPITAL OF THAT RESIDENT AN AM OUNT EQUAL TO THE CAPITAL TAX PAID IN THE FEDERAL REPUBLIC OF GER MANY. SUCH DEDUCTION IN EITHER CASE SHALL NOT, HOWEVER, EXCEED THAT PART OF THE INCOME-TAX OR CAPITAL TAX (AS COMP UTED BEFORE THE DEDUCTION IS GIVEN) WHICH IS ATTRIBUTABL E, AS THE CASE MAY BE, TO THE INCOME OR THE CAPITAL WHICH MAY BE TAXED IN THE FEDERAL REPUBLIC OF GERMANY . (EMPHASIS SUPPLIED) 22. ALL THESE CLAUSES ARE IDENTICALLY WORDED AS ART ICLE 25(2)(A) OF INDIA US DTAA. 23. RELEVANT CLAUSES FOR ELIMINATION OF DOUBLE TAXA TION IN THE TREATIES UNDER CONSIDERATION STATES THAT, FOREIGN T AX CREDIT SHALL NOT EXCEED THE PART OF THE INCOME TAX AS COMPUTED BEFOR E THE DEDUCTION IS GIVEN, 'WHICH IS ATTRIBUTABLE AS THE C ASE MAY BE, TO THE INCOME WHICH MAY BE TAXED IN THAT OTHER STATE'. WE ALSO NOTE THAT, THESE CLAUSES USES THE EXPRESSION 'INCOME', W HICH ESSENTIALLY MEANS 'INCOME' EMBEDDED IN THE GROSS RECEIPT, AND N OT THE 'GROSS RECEIPT' ITSELF. WE THEREFORE DO NOT AGREE WITH THE COMPUTATION ADOPTED BY LD.AO. ITA NO.501/BANG/2018 PAGE 8 OF 12 24. IN ALL THE ABOVE CLAUSES, FOR ELIMINATING DOUBL E TAXATION OF DOUBLY TAXABLE INCOME IN THE HANDS OF ASSESSEE, IT WOULD BE NECESSARY TO ESTABLISH THE TAXES PAID BY ASSESSEE I N USA, JAPAN, AND GERMANY. THE CONDITION STIPULATED IS VERY CLEAR THAT FTC IS AVAILABLE ON TAXES PAID IN THESE COUNTRIES. INDIA- KOREA DTAA 25. WE NOTE THAT LD.AR RELIED ON ARTICLE 24(3), WHE REAS, IN INDIA KOREA DTAA, ARTICLE 23 DEALS WITH ELIMINATION OF DO UBLE TAXATION. CLAUSE (A)(I) IS THE RELEVANT PROVISION, THAT READS AS UNDER: DOUBLE TAXATION SHALL BE ELIMINATED AS FOLLOWS: (I) IN INDIA: (I) WHERE A RESIDENT OF INDIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, M AY BE TAXED IN KOREA, INDIA SHALL ALLOW AS A DEDUCTION FROM THE TAX ON THE INCOME OF THAT RESIDENT, AN AMOUNT EQUAL TO THE TAX PAID IN KOREA. SUCH DEDUCTION SHALL NOT, HOWEVER, EXCEED THAT PORT ION OF THE TAX AS COMPUTED BEFORE THE DEDUCTION IS GIVEN, WHIC H IS ATTRIBUTABLE, AS THE CASE MAY BE, TO THE INCOME WHI CH MAY BE TAXED IN INDIA. (EMPHASIS SUPPLIED) 26. ON PERUSAL OF THE SAID ARTICLE, WE FIND THAT, I N INDIA FTC IS AVAILABLE TO THE TAXES PAID IN KOREA AND SUCH CREDI T SHALL NOT EXCEED THE TAXES PAYABLE IN INDIA ON DOUBLY TAXED I NCOME. THUS THERE IS A DIFFERENCE IN FTC AVAILABLE TO ASSE SSEE ON TAXES PAID IN USA, JAPAN AND GERMANY VIS-S-VIS KOREA. 27. IN THE PRESENT FACTS OF THE CASE, RESPECTIVE TR EATY COUNTRIES WITHHELD TAXES AGAINST INCOME FROM THE SOURCE STATE AT A PARTICULAR RATE. ARTICLE 25 OF INDO U.S TREATY, ART ICLE 23 (2) OF INDO-JAPAN TREATY AND THE INDO-GERMANY TREATY, ALLO WS FTC IN INDIA TO THE EXTENT OF TAX PAID IN THESE COUNTRIES, WHEREAS, ARTICLE 23 OF INDO-KOREA TREATY ALLOWS FTC WHICH SHALL NOT TAX PAYABLE ON SUCH DOUBLY TAXABLE INCOME IN INDIA. ITA NO.501/BANG/2018 PAGE 9 OF 12 28. WE NOTE THAT AUTHORITIES BELOW FAILED TO UNDERS TAND THE TREATY PROVISIONS APPLICABLE IN PRESENT FACTS WITH THESE C OUNTRIES REGARDING GRANTING OF FTC TO ASSESSEE. ON PERUSAL O F TREATY PROVISIONS, WE ARE OF THE VIEW, THAT ASSESSEE IS EL IGIBLE FOR FTC IN FULL, AMOUNTING TO TAXES PAID IN USA, JAPAN AND GER MANY. WE DRAW SUPPORT FROM DECISION OF HONBLE KARNATAKA HIG H COURT IN CASE OF WIPRO(SUPRA). 28.1. ONLY IN CASE OF KOREA, FTC IS LIMITED TO TAXE S PAYABLE ON SUCH DOUBLY TAXED INCOME IN INDIA, BEFORE ANY DEDUC TION. IN OTHER WORDS, FTC IS LIMITED TO OR TAXES PAID IN KOREA OR INDIA, WHICHEVER IS LESS. 30. LD.AO IS THEREFORE DIRECTED TO GRANT FTC IN RES PECT OF TAXES PAID IN USA, JAPAN AND GERMANY. IN CASE OF TAXES PA ID IN KOREA, FTC WILL BE TAX ACTUALLY PAID IN KOREA OR PAYABLE I N INDIA ON SUCH DOUBLY TAXABLE INCOME, WHICH EVER IS LOWER. ACCORDINGLY, GROUND NO.1-3 RAISED BY ASSESSEE STAND S ALLOWED FOR STATISTICAL PURPOSES. 11. WE HAVE CAREFULLY GONE THROUGH THE ARTICLE 23 O F INDIA-TANZANIA DTAA WHICH PROVIDES AS FOLLOWS:- ARTICLE 23 METHODS FOR ELIMINATION OF DOUBLE TAXATION 1. THE LAWS IN FORCE IN EITHER OF THE CONTRACTING STA TES WILL CONTINUE TO GOVERN THE TAXATION OF INCOME IN THE RESPECTIVE CONTRACTING ST ATES EXCEPT WHERE PROVISIONS TO THE CONTRARY ARE MADE IN THIS AGREEMENT. 2. WHEN INCOME IS SUBJECT TO TAX IN BOTH CONTRACTING STATES, RELIEF FROM DOUBLE TAXATION SHALL BE GIVEN AS FOLLOWS: ( A ) IN INDIA: ( I ) WHERE A RESIDENT OF INDIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, MAY BE TAXED IN T ANZANIA, INDI A SHALL ALLOW AS A DEDUCTION FROM THE TAX ON THE IN COME OF THAT RESIDENT, AN AMOUNT EQUAL TO THE TAX P AID IN TANZANIA. SUCH DEDUCTION SHALL NOT, HOWEVER, EXCEED THAT PORT ION OF THE TAX AS COMPUTED BEFORE THE DEDUCTION IS GIVEN, WHIC H IS ATTRIBUTABLE, A S THE CASE MAY BE, TO THE INCOME WHICH MAY BE TAXED IN TANZANIA . ITA NO.501/BANG/2018 PAGE 10 OF 12 ( II ) WHERE IN ACCORDANCE WITH ANY PROVISION OF THE AGRE EMENT INCOME DERIVED BY A RESIDENT OF INDIA IS EXEMPT FRO M TAX IN INDIA, INDIA MAY NEVERTHELESS, IN CALCULATING THE AMOUNT O F TAX ON THE REMAINING INCOME OF SUCH RESIDENT, TAKE INTO ACCOUN T THE EXEMPTED INCOME. ( B ) IN TANZANIA: ( I ) WHERE A RESIDENT OF TANZANIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, M AY BE TAXED IN INDIA, TANZANIA SHALL ALLOW A S A DEDUCTION FROM THE TAX ON THE INCOME OF THAT RESIDENT, AN AMOUNT EQUAL TO THE TAX PAID IN INDIA. SU CH DEDUCTION SHALL NOT, HOWEVER, EXCEED THAT PORTIO N OF THE TAX AS COMPUTED BEFORE THE DEDUCTION IS GIVEN, WHICH IS ATTRIBUTABLE, AS THE CASE MAY BE, TO THE INCOME WHICH MAY BE TAXED IN INDIA. ( II ) WHERE IN ACCORDANCE WITH ANY PROVISION OF THE AGRE EMENT, INCOME DERIVED BY A RESIDENT OF TANZANIA IS EXEMPT FROM TAX IN TANZANIA, TANZANIA MAY NEVERTHELESS, IN CALCULATING THE AMOUNT OF TAX ON THE REMAINI NG INCOME OF SUCH RESIDENT, TAKE INTO ACCOUNT THE EX EMPTED INCOME. IN OUR OPINION, ARTICLE 23 OF INDIA-TANZANIA DTAA I S PARI MATERIA WITH ARTICLE 23 OF INDIA-KOREA DTAA. WHAT IS SAID IN THE CASE O F INDIA-KOREA DTAA IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. WE HAVE ALREADY REFERRED TO THE OBSERVATIONS OF THIS TRIBUNAL IN TH E CASE OF ITTIAM SYSTEMS PVT. LTD. (SUPRA) IN THE EARLIER PARAGRAPHS . ACCORDINGLY, RELIEF U/S. 90 TO BE GIVEN ON THE AMOUNT WHICH IS LOWER OF THE FOLLOWING I.E., TAX PAID ON INCOME OUTSIDE INDIA; OR PAYABLE IN INDIA ON SUCH DOUBLY T AXABLE INCOME, WHICHEVER IS LOWER. 12. IN OTHER WORDS, STEPS TO COMPUTE THE DOUBLE TAX ATION RELIEF ARE AS FOLLOWS:- (I) COMPUTE GLOBAL INCOME I.E., AGGREGATE OF INDIAN INC OME AND FOREIGN INCOME; (II) COMPUTE TAX ON SCH GLOBAL INCOME AS PER THE SLAB RA TES APPLICABLE AS PER INDIAN INCOME-TAX ACT; (III) COMPUTE AVERAGE RATE OF TAX (I.E., GLOBAL INCOME DI VIDED BY AMOUNT OF TAX); ITA NO.501/BANG/2018 PAGE 11 OF 12 (IV) COMPUTE AMOUNT BY MULTIPLYING FOREIGN INCOME WITH S UCH AVERAGE RATE OF TAX; AND (V) COMPUTE TAX PAID IN FOREIGN COUNTRY. THE AMOUNT OF RELIEF SHALL BE LOWER OF (IV) & (V) I .E., TAX PAID ON INCOME OUTSIDE INDIA AND TAX PAYABLE UNDER THE INDI AN INCOME- TAX. 13. WE DIRECT THE AO TO GRANT FTC AS ABOVE. THIS G ROUND IS PARTLY ALLOWED. 14. THE NEXT GROUND IS WITH REGARD TO DEDUCTION U/S 80G OF THE ACT AT RS.3,78,000. THE LD. AR SUBMITTED THAT THIS ISSUE THOUGH RAISED BEFORE THE CIT(APPEALS), BUT HE FAILED TO ADJUDICATE THE SAME. THE EVIDENCE IS AVAILABLE TO THE EXTENT OF RS.3,78,000 FOR PAYMENT OF DONATION AND THE ASSESSEE IS ENTITLED TO DONATION U/S. 80G. AFTER HE ARING BOTH THE PARTIES, WE REMIT THIS ISSUE TO THE FILE OF AO FOR FRESH DECISI ON ON THIS ISSUE WITH A DIRECTION TO THE ASSESSEE TO PROVIDE NECESSARY EVID ENCE IN SUPPORT OF THE CLAIM OF DEDUCTION U/S. 80G OF THE ACT. 15. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF AUGUST, 2021. SD/- SD/- ( GEORGE GEORGE K. ) ( CHANDRA POOJARI ) JUDICIAL MEMBER ACCOUNTANT MEM BER BANGALORE, DATED, THE 17 TH AUGUST, 2021. / DESAI S MURTHY / ITA NO.501/BANG/2018 PAGE 12 OF 12 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.