BANK OF INDIA, MUMBAI V. DCIT - 2(1)(1), MUMBAI

ITA 869/MUM/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 3674 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 12-02-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY SINGH
• Keywords: Business income; Residential status; Double taxation relief; Earning of tax free income; Retrospective amendment; Advance ruling; TDS; Capital Gains
• Section: 143(3); 260A; 250; 201; 64; 43; 48; 73; 72; 13; 22; 56; 90; 11

Judgement Text

ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 1 OF 49 INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH, MUMBAI [CORAM: PRAMOD KUMAR, VICE PRESIDENT , AND, VIKAS AW ASTHY JUDICIAL MEMBER] ITA NO . : 869/ MUM/201 8 ASSESSMENT YEAR: 201 2 - 13 BANK OF INDIA .. APPELLANT 8 TH FLOOR, STAR HOUSE, C 5 G BLOCK, B KC , BANDRA EAST , MUMBAI 400 051 [PAN: AAACB0472C] VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1), MUMBAI .RESPONDENT APPEARANCES: C NARESH , FOR THE A PPELLANT SANJAY SINGH , FOR THE RE SPONDENT DATE OF CONCLUDING THE H EARING : FEBRUA RY 4, 2021 DATE OF PRONOUNCING THE ORDER : MARCH 4 , 2021 O R D E R PER PRAMOD KUMAR, VP : 1. ONE OF THE INTERESTING QUESTION S THAT HA VE COME UP FOR OUR ADJUDICATION , IN THIS CASE, IS WHETHER AN INDIAN TAXPAYER CAN CLAIM REFUND S FROM THE GOVE RNMENT OF INDIA OF TAXES PAID BY THE SAID TAXPAYER OUTSIDE INDIA, I.E., THE FOREIGN GOVERNMENTS , IN RESPECT OF THE INCOME TAXES PAID ABROAD ON INCOME EARNED IN THE RESPECTIVE TAX JURISDICTIONS . ITS LIKE SOMEONE MAKING A CONTRIBUTION TO , SAY , THE US EXCHEQ UER BECAUSE AN INCOME WAS EARNED THERE, AND CLAIMING THAT THE INDIAN TREASURY REFUNDS THE SAID TAX BECAUSE THE AGGREGATE OF OVERALL TAXABLE INCOME, FROM ALL THE OPERATIONS WORLDWIDE - INCLUDING INDIA , IS IN NEGATIVE , I.E. , A L OSS FIGURE . IN EFFECT, ONE PAY S TAX , FOR EXAMPLE , TO THE U S AND SEEK S ITS REFUND FROM THE INDIA N EXCHEQUER. 2. SUCH ISSUES ARE MORE OF AN INTER EST TO THE INDIAN BUSINESS HOUSES OPERATING ABROAD RATHER THAN A TYPICAL INDIAN PUBLIC SECTOR UNDERTAKING, AND YET IRONICALLY , IT H AS COME UP FOR ADJUDICATION IN THIS CASE OF A PUBLIC SECTOR UNDERTAKING. BE THA T AS IT MAY, WHATEVER WE DECIDE IN THIS CASE WILL BE EQUALLY APPLICABLE TO ALL SIMILARLY SITUATED TAXPAYERS AND THUS AFFECT A LARGE NUMBER OF INDIAN TAXPAYERS. THE ORDER IMPUGNE D IN THIS A PPEAL IS THE ORDER DATED 30 TH NOVEMBER, 2017, PASSED BY THE LEA RNED COMMISSIONER (APPEALS) IN THE MATTER OF ORDER UNDER SECTION 250 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2012 - 13. ISSUES REQUIRING OUR ADJUDICATION IN THIS APPEA L: 3 . AS WE HAVE NOTED IN OUR OPENING OBSERVATIONS, T HE QUESTI ONS THAT WE ARE REQUIRED TO ADJUDICATE UPON IN THIS APPEAL ARE OF FAR - REACHING RAMIFICATIONS, AND THE ANSWERS TO THESE ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 2 OF 49 QUESTIONS AFFECT A LARGE NUMBER OF INDIAN CORPORATES HAVING BUS INESS OPERA TIONS, THROUGH BRANCHES OR OTHER FORMS OF PERMANENT ESTABLISHME NTS (PE S), OUTSIDE INDIA. THESE QUESTIONS, AS LEARNED REPRESENTATIVES FAIRLY AGREE, ARE AS FOLLOWS: (A) W HETHER OR NOT , ON THE FACTS AND IN THE CIRCUMSTANCES OF THIS CASE, LEARNED C IT(A) WAS J USTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER , IN DECLINI NG REFUND TO THE ASSESSEE FOR RS 165,96,87,349 FOR INCOME TAX PAID IN TREATY PARTNER JURISDICTIONS, FOR RS 15,79,80.943 FOR INCOME TAX PAID IN NON - TREATY PARTNER JURISDICTIONS AND FOR RS 87,54,656 IN RESPECT OF DIVIDEND TAXES ABROAD? AND, IN THE E VENT OF OUR HOLDING THIS ISSUE AGAINST THE ASSESSEE, (B) W HETHER OR NOT THE LEARNED CIT(A) WAS JUSTIFIED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DECLINING DEDUCTION , IN THE COMPUT ATION OF BUSINESS INCOME, OF RS 182,64,22,948 IN RESPECT OF TAX ES SO P AID ABROAD ? 4 . THE RELATED GROUNDS OF APPEAL, FOR THE RECORDS, ARE SET OUT BELOW : 1A: ON THE FACTS IN THE CIRCUMSTANCES OF THE CASE IN LAW, WHILE COMPUTING REFUND DUE TO THE APPELLANT BANK, THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX - 2(1)(1) [H EREINAF TER REFERRED TO AS DCIT] HAS ERRED IN NOT GRANTING THE CREDIT OF: A ) INCOME TAX PAID BY THE BRANCHES OF THE APPELLANT BANK, LOCATED OUTSIDE INDIA, UNDER SECTION 90 OF THE INCO ME TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT] AMOUNTING TO RS 16 5,96,87 ,349; B ) INCOME TAX PAID BY THE BRANCHES OF THE APPELLANT BANK OUTSIDE INDIA, UNDER SECTION 91 OF THE ACT, AMOUNTING TO RS 15,79,80.943; C ) TDS, ON DIVIDEND INCOME RECEIVED FROM F OREIGN ASSO CIATES OF THE BANK, AMOUNTING TO RS 87,54,656 A ND THE HONBLE CIT(A) ERRED IN CONFIRMING THE SAID DISALLOWANCE. THE LEARNED CIT(A) BE DIRECTED TO ALLOW THE CREDIT FOR THE AFORESAID TAXES PAID OUTSIDE INDIA, UNDER SECTION 90 AND 91 , AND ENHANCE THE REFUND DUE TO THE APPELLANT BANK ACCORDINGLY . 1B: WITHOUT PREJUDICE TO GRO UND 1A ABOVE, ASSUMING WITHOUT ACCEPTING THAT YOUR HONOURS ARE OF THE OPINION THAT THE CREDIT FOR TAXES PAID OUTSIDE INDIA AGGREGATING TO RS 182,64,22,948 IS NOT ALLOWABLE UND ER SECTION 90N AND 91 OF THE ACT, AS THE CASE MAY BE, WHILE COMPUTING THE REFUND DUE, THEN APPELLANT BANK PRAYS THAT SUCH TAXES BE ALLOWED AS A DEDUCTION WHILE COMPUTING TOTAL INCOME AND THE LEARNED DCIT BE DIRECTED TO REDUCE THE TOTAL INCOME ACCORDINGLY. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 3 OF 49 5 . WE WI LL TAKE FIRST TAKE UP THE CLAIM OF THE ASSESSEE FOR THE REFUND OF TAXE S PAID ABROAD, AND, IN THE EVENT OF OUR REJECTING TH E SAID CLAIM, WE WILL TAKE UP THE ALTERNATIVE CLAIM OF THE ASSESSEE, I.E. , FOR DEDUCTION OF THESE TAXES IN THE COMPUTATION OF BUSINESS INCOME OF THE ASSESSEE. CLAIM FOR REFUND , OF THE TAXES PAID A BROAD , BY THE INDIAN TAX AUTHORITIES : 6 . THE ASSESSEE BEFORE US IS A MAJOR INDIAN BANK, WITH SEVERAL BRANCHES ABROAD - A FEW IN THE TREATY PARTNER JURISDICTIONS, I.E., THE COUNTRIES WITH WHICH INDIA HAS ENTERED INTO DOUBLE TAXATION AVOIDANCE AGREEMENTS UN DER SEC TION 90, AND REMAINING IN THE NON - TREATY PARTNER JURISDICTIONS. THE ASSESSEE HAS ALSO INVESTED, AS A SHAREHOLDER, IN TWO FOREIGN BANKS, NAMELY PT BANK SWADESHI (INDONESIA) AND INDO ZAMBI A BANK LIMITED (ZAMBIA). THE ASSESSEE HAS EARNED BUSINESS PROFI TS FROM ITS BRANCHES OUTSIDE INDIA, NAMELY IN UK, USA, FRANCE, BELGIUM, KENYA, JAPAN, SINGAPORE, CHINA, HONG KONG, CAMBODIA, AND JERSEY. DURING THE RELEVANT PREVIOUS YEAR, THE ASSESS EE EARNED P ROFITS IN THESE JURISDICTIONS, AND, IN ACCORDANCE WITH THE DOME STIC TA X LAWS IN THE RESPECTIVE TAX JURISDICTIONS, THE ASSESSEE BANK PAID INCOME TAX AGGREGATING TO RS 165.96 CRORES IN TREATY PARTNER JURISDICTIONS (ON TAXABLE INCOME AGGREGATING TO RS 200.90 CRORES IN THESE JURISDICTIONS) AND RS 15.79 CRORES IN NON - TREAT Y PARTN ER JURISDICTIONS (ON TAXABLE INCOME AGGREGATING TO RS 635.19 CRORES IN THESE JURISDICTIONS), IN ADDITION TO INCOME TAX AMOUNTING TO RS 87,54,656 HAVING BEEN WITHHELD FROM THE FOREIGN DIV IDEND INCOME AGGREGATING TO RS 8,46,61,252 RECEIVED BY THE ASSE SSEE. H OWEVER, WHILE THE ASSESSEE DID EARN PROFITS FROM THESE FOREIGN OPERATIONS AND BY WAY OF FOREIGN DIVIDEND INCOME, THE COMPUTATION OF THE ASSESSEES GLOBAL INCOME, WHICH IS TAXA BLE IN INDI A, RESULTED IN A NET LOSS OF RS 191,38,89,912. THIS IS THE LOSS COMPUT ED BY THE ASSESSING OFFICER, VIDE APPEAL EFFECT ORDER DATED 15 TH MARCH 2017, AND THE ASSESSEE DOES NOT, THEREFORE, HAVE ANY TAX LIABILITY IN INDIA IN RESPECT OF ITS INCOME. SI NCE THE ASS ESSEE DOES NOT HAVE ANY INDIAN TAX LIABILITY IN RESPECT OF THE PROFITS EARNED BY THE ASSESSEE ABROAD, THE ASSESSEE WAS NOT GIVEN ANY CREDIT FOR THE TAXES PAID ABROAD. THE ASSESSEE IS NOT SATISFIED. THE CLAIM OF THE ASSESSEE IS THAT THE TAXES SO PAID BY THE ASSESSEE TO THE OVERSEAS TAX JURISDICTIONS, WHERE THE RELATED PROFITS ARE EARNED, SHOULD BE GIVEN DUE CREDIT IN THE COMPUTATION OF REFUND DUE TO THE ASSESSEE, AND, ACCORDINGLY, THE INCOME TAX PAID BY THE ASSESSEE TO FOREIGN TAX JURISDICTIONS SH OULD BE REF UNDED TO THE ASSESSEE BY THE INDIAN TAX AUTHORITIES. THIS CLAIM WAS RE JECTED BY THE ASSESSING OFFICER BY OBSERVING AS FOLLOWS: THE CLAIM OF THE ASSESSEE HAVE BEEN PERUSED BUT NOT FOUND ALLOWABLE. AS PER SECTION 90 OF THE INCOME TAX ACT, 1961, R ELIEF OF TA XES PAID IN FOREIGN COUNTRIES IS GIVEN AGAINST THE INCOME TAX C HARGEAB LE UNDER INCOME TAX ACT, 1961 AND HENCE IT DOES NOT SAY THAT THE TAX PAID N FOREIGN COUNTRIES WOULD BE REFUNDED IN THE CASES WHERE INCOME TAX CHARGEABLE UNDER INCOME TAX ACT, 1961, IS NI L. THEREFORE, THE CLAIM OF THE ASSESSEE TO REFUND TAXES PAID IN FOREIG N COUNTRIES IS HEREBY REJECTED. 7 . AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) REJECTED THE CLAIM OF THE ASSES SEE AND OBS ERVED AS FOLLOWS: HOWEVER, EVEN IF THE CLAIM OF THE ASSESSEE I S TO BE CONSIDERED ON THE MERIT, THEN TOO, THE SAME IS NOT FOUND TO BE ACCEPTABLE IN VIEW OF THE PROVISION OF SECTION 90(1)(A)(II) OF THE INCOME - TAX ACT. IN THE FACTS OF THE ASSESSEE 'S CASE IT IS NOT ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 4 OF 49 DISPUTED THAT AFTER ACCOUNTING FOR THE INCOME EARNED BY THE ASS ESSEE FROM ITS BRANCHES LOCATED ABROAD, THE TOTAL INCOME COMPUTED IN INDIA IS NOT RESULTING INTO ANY TAX PAYABLE AFTER GIVING THE EFFECT TO THE APPELLATE ORDER. THE APPELLANT IN SUPPORT ITS CONTENTION HAS RELIED ON THE DECISION OF HON'BLE KARNATAKA HIGH CO URT IN THE CASE OF WIPRO LTD. V DCIT (SUPRA). IN RESPECT OF SUCH RELIANCE PLACED, IT IS OBSERVED THAT THE HON'BLE HIGH COURT IN THEIR ORDER AT PARA 33 HAVE CLEARLY OBSERVED TH AT SECTION 91 MAKES IT CLEAR THAT IF A PERSON IS RESIDING IN INDIA HAS PAI D TAX I N ANY COUNTRY WITH WHICH, THERE IS NO AGREEMENT U/S 90 FOR THE RELIEF OR AVOIDANCE OF DOUBLE TAXATION, INCOME - TAX IF DEDUCTED OR OTHERWISE PAID AS PER LAW IN FORCE IN THAT COU NTRY, THEN HE SHALL BE ENTITLED TO THE DEDUCTION FROM THE INDIA 'INCOME - TA X PAYAB LE' BY HIM IN A SUM COMPUTED ON SUCH DOUBLY TAXED INCOME, AT THE INDIAN RATE OF TAX OR THE RATE OF TAX OF THE SAID COUNTRY, WHICHEVER IS LOWER OF THE INDIAN RATE OF TAX, IF BO TH THE RATE S ARE EQUAL. FROM THE OBSERVATIONS AS AFORESAID AT PARA 33 OF THE ORD ER IT CAN BE NOTED THAT THE ENTITLEMENT TO THE DEDUCTION IS FROM THE INDIAN 'INCOME - TAX PAYABLE'. IT DOES NOT SAY ANYWHERE THAT DEDUCTION OR THE REFUND WOULD EVEN BE AVAILABLE WHEN THERE IS NO TAX PAYABLE IN INDIA. IT IS FURTHER SEEN FROM THE SAME O RDER OF THE HON'BLE HIGH COURT WHEREIN AT PARA 39 THEY HAVE OBSERVED AS UNDER. 'THIRDLY, IN CASES COVERED UNDER SECTION 90(1)(A)( II ) IT IS NOT A CASE OF THE INCOME BEING SUBJECTED TO TAX OR THE ASSESSEE HAS PAID TAX ON THE INCOME. THIS APPLIES TO A CASE WH ERE THE INCOME OF THE ASSESSEE IS CHARGEABLE UNDER THIS ACT AS WELL AS IN THE CORRESPONDING LAW IN FORCE IN THE OTHER COUNTRY. THOUGH THE INCOME - TAX IS CHARGEABLE UNDER THE ACT, IT I S OPEN TO T HE PARLIAMENT TO GRANT EXEMPTIONS UNDER THE ACT FROM PAYMENT OF TAX FO R ANY SPECIFIED PERIOD. NORMALLY IT IS DONE AS AN INCENTIVE TO THE ASSESSEE TO CARRY ON MANUFACTURING ACTIVITIES OR IN PROVIDING SERVICES. THOUGH THE CENTRAL GOVERNMENT MAY EX TEND THE SA ID BENEFIT TO THE ASSESSEE IN THIS COUNTRY, BY NEGOTIATIONS WIT H THE O THER COUNTRIES, THEY COULD ALSO BE REQUESTED TO EXTEND THE SAME BENEFIT. IF THE CONTRACTING COUNTRY AGREES TO EXTEND THE SAID BENEFIT, THEN THE ASSESSEE GETS THE RELIEF. IN AN OTHER SCENA RIO, THOUGH THE SAID INCOME IS EXEMPT IN THIS COUNTRY, BY VIRTU E OF TH E AGREEMENT, THE AMOUNT OF TAX PAID IN THE OTHER COUNTRY COULD BE GIVEN CREDIT TO THE ASSESSEE. THUS FOR THE PAYMENT OF INCOME - TAX IN THE FOREIGN JURISDICTION, THE ASSESSEE GE TS THE BENE FIT OF ITS CREDIT IN THIS COUNTRY.' FROM THE ABOVE SAID PARA I T CAN B E CLEARLY SEEN THAT THE RELIEF IS IN RESPECT OF GRANT OF RELIEF AND CREDIT FOR THE TAXES PAID IN OTHER COUNTRY. THIS READ WITH THE PARA 33 OF THE SAID ORDER MAKES IT CLEAR THA T THE CREDI T OR THE RELIEF WHICH IS AVAILABLE IS IN RESPECT OF INDIAN INCO ME - TAX PAYABLE AND IT WOULD NOT BE OPEN TO TAKE THE CREDIT OF SUCH TAXES PAID OUTSIDE INDIA IF THERE ARE NO INDIAN INCOME - TAX PAYABLE BY THE ASSESSEE. THE PROVISIONS OF SECTION 90(1) (A)( II ) CAN NOT BE INTERPRETED TO MEAN GRANT OF REFUND TO THE ASSESSEE OF T AXES PA ID BY SUCH ASSESSEE OUTSIDE INDIA BY THE INDIAN AUTHORITIES UNDER THE SITUATIONS WHEN THERE ARE NO TAX IS PAYABLE BY THE ASSESSEE IN INDIA, IN THIS VIEW OF THE MATTER, IT IS H ELD THAT TH E RELIANCE PLACED BY THE ASSESSEE ON THE AFORESAID DECISION OF WIPRO L TD. V DCIT(SUPRA) DOES NOT HELP THE CAUSE OF THE ASSESSEE FOR SEEKING REFUND OF TAXES PAID OUTSIDE INDIA, IN INDIA WHEN IT HAS NO INDIAN INCOME - TAX PAYABLE. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 5 OF 49 8 . THE ASSESSEE IS NOT SATI SFIED AND IS IN FURTHER APPEAL BEFORE US. RIVAL CONTENTIONS ON THIS I SSUE 9 . LEARNED COUNSELS BASIC SUBMISSION BEFORE US, ON THIS ISSUE, IS THAT IT IS NOW A SETTLED LEGAL POSITION THAT THE ACTUAL PAYMENT OF TAX ABROAD IS NOT A CONDITION PRECE DENT FOR BE ING ENTITLED TO TAX CREDIT, IN THE COMPUTATION OF TAX LIABILIT Y, IN INDIA . HE RELIES UPON THE DECISIONS OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF WIPRO LTD VS DCIT [(2015) 62 TAXMANN.COM 26 (KAR)] WHEREIN IT WAS HELD THAT EVEN THOUGH INCOM E IN QUESTI ON OF THE ASSESSEE WAS EXEMPT FROM TAX IN INDIA, THE ASSESSEE W AS ENTITLED TO TAX CREDIT IN RESPECT OF TAXES PAID ABROAD ON THE FOREIGN INCOME EMBEDDED THEREIN. IN EFFECT , THUS, THE TAXES ONE PAYS ABROAD, FOR ALL PRACTICAL PURPOSES, CAN INDEED B E REFUNDED IN INDIA. IT IS FURTHER POINTED OUT THAT THIS DECISION HAS BEEN CONSISTENTL Y FOLLOWED BY VARIOUS COORDINATE BENCHES OF THIS TRIBUNAL. IT IS ALSO POINTED OUT THAT ACTUAL TAXATION OF AN INCOME IS NOT THE CONDITION PRECEDENT FOR TAKING BENEFIT OF T HE TAX TREA TY PROVISIONS IN THE OTHER COUNTRY. HE HAS FILED A DECISION OF A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ADIT VS GREEN EMIRATES SHIPPING & TRAVELS [(2006) 200 ITD 203 (MUM) ] IN SUPPORT OF THIS PROPOSITION. LEARNED COUNSEL THEN REPEATEDL Y STATES, E VEN THOUGH AFTER BEING CONVEYED OUR RESERVATIONS OF THIS AVERME NT, THAT IT IS AN ADMITTED POSITION THAT THE INCOME OF THE FOREIGN BRANCHES HAS BEEN SUBJECTED TO TAX IN BOTH THE TREATY PARTNER JURISDICTIONS, AND, THEREFORE, THE ASSESSEE CANNOT BE DENIED CRE DIT FOR THE TAXES PAID ABROAD. WHEN ASKED HOW THE SAID INCOME H AS BEEN SUBJ ECTED TO TAX IN INDIA, LEARNED COUNSEL EXPLAINS THAT THE INCOME IN QUESTION WAS INCLUDIBLE IN ITS TOTAL INCOME IN INDIA INASMUCH MUCH AS IT HAS REDUCED THE ENTITLEMENT FO R LOSSES CA RRIED FORWARD, AND, TO THAT EXTENT, IT HAS SUFFERED INCOME TAX IN INDIA. IT IS CONTENDED THAT THE INCOME EARNED ABROAD HAS A REAL IMPACT ON THE ASSESSEES INDIAN TAX LIABILITY BECAUSE HIS CARRIED FORWARD BUSINESS LOSSES HAVE BEEN REDUCED BY THE SAID INCOME . LEARNED COUNSEL ALSO REFERS TO THE DECISION OF HONBLE JURISD ICTIONAL HIG H COURT IN THE CASE OF CIT VS PETROLEUM INDIA INTERNATIONAL [(2013) 29 TAXMANN.COM 250 (BOMBAY)] . ALL THAT SUBJECT TO TAX IN INDIA MEANS, ACCORDING TO THE LEARNED COUNS EL, IS THAT THE INCOME IN QUESTION SHOULD BE SUBJECTED TO INDIAN TAX LAWS WHETHER OR N OT THERE IS ANY ACTUAL LIABILITY TO TAX, AND THAT CLEARLY IS THE SITUATION BEFORE US. IT WAS PUT TO THE LEARNED COUNSEL THAT LIABLE TO TAX AND SUBJECT TO TAX ARE TWO DIFFERENT T ERMS USED IN THE TAX TREATIES, AND IN THE LIGHT OF HIS HYPOTHES IS, WILL THE RE BE THE LINE OF DEMARCATION BETWEEN LIABLE TO TAX AND SUBJECT TO TAX, HE DID NOT HAVE ANYTHING TO SAY. WHEN ASKED WHETHER HE DOES INDEED PRAY THAT THE TAXES PAID AB ROAD CONTRI BUTED IN THE RESPECTIVE NATIONAL EXCHEQUERS SHOULD BE REFUNDED BY THE INDI AN TAX ADMINISTRATION AND FROM THE INDIAN EXCHEQUER, HE DOES CONFIRM THAT PRAYER. LEARNED COUNSEL FOR THE ASSESSEE THEN TAKES US THROUGH THE RELATED TAX TREATY PROVISIONS AND JUSTIFI ES THE INTERPRETATION THAT HE IS CANVASSING. WE ARE THUS URGED TO UPHOLD T HE PLEA OF THE ASSESSEE. LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT HE HAS ALREADY FILED A WRITTEN NOTE IN SUPPORT OF HIS STAND, AND HE WOULD SEEK TO RELY UPON THE S AME. HE NEV ERTHELESS MAKES BRIEF SUBMISSIONS SUPPORTING THE STAND THAT REF UNDS CANNOT BE GRANTED FOR THE TAXES PAID ABROAD. IT IS SUBMITTED THAT IT IS CLEARLY STRETCHING THE THINGS TOO FAR THAT THE TAXES PAID, FOR EXAMPLE, IN UK, TO THE UK EXCHEQUER, SHOUL D BE REFUND ED IN INDIA, FROM THE INDIAN EXCHEQUER . LEANED DEPARTMENTAL RE PRESENTATIVE SU BMITS THAT IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT RIGHT NOW , WE ARE DEALING WITH THE PROCEEDINGS TO GIVE EFFECT TO THE APPELLATE ORDER , AND SUCH CONTENTIOUS ISS UES CANNOT BE TAKEN UP AT THIS STAGE. ONCE THE ASSESSEE HAS NOT RAISED THE SE POINTS EARLIE R, HE CANNOT RAISE THESE POINTS EVEN AT THIS STAGE WHERE ONLY THE MECHANICAL EXERCISE OF GIVING EFFECT TO THE APPELLATE ORDER IS TO BE CARRIED OUT. ON MERITS, IT IS S UBMITTED TH AT THE QUESTION OF THE FOREIGN TAX CREDIT ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 6 OF 49 WILL ONLY ARISE WHEN THERE IS ANY INDIAN TAX PAYABLE BY THE ASSESSEE. WHEN THERE IS NO INDIAN TAX PAYABLE BY THE ASSESSEE, NO CREDIT CAN BE GRANTED IN RESPECT OF THE TAXES PAID ABROAD. OUR ATTENTION IS T HEN INVITED TO A DECISION OF A COORDINATE BENCH IN THE CASE OF JCIT VS DIG ITAL EQUIPMENT INDIA PVT LTD [(2004) 94 ITD 340 (MUM)] WHEREIN IT IS HELD , VACATING THE RELIEF GRANTED BY THE CIT(A), THAT A FOREIGN TAX CREDIT IS TO ELIMINATE DOUBLE TAXATION OF AN INCOME AND IT CAN NEVER EXCEED THE ACTUAL TAX LIABILITY IN THE RESIDENCE J URISDICTION. AS REGA RDS THE WIPRO DECISION (SUPRA) BY HONBLE KARNATAKA HIGH COURT, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITS THAT THIS DECISION OVERLOOKS, AND DOES NOT EVEN DEAL W ITH, OTHER HONBLE HIGH COURT JUDGMENTS IN THE CASE OF CIT VS M A MORRIS [ (1994) 210 ITR 284 ( AP)] AND CIT VS DR R N JHANJI [(1990) 185 ITR 586 (RAJ)] . ON THE FIRST PRINCIPLES, THIS DECISION IS CLEARLY INCORRECT INASMUCH AS ALL THE METHODS OF ELIMINATING T HE DOUBLE T AXATION, I.E. EXEMPTION METHOD, CREDIT METHOD OR HYBRID METHOD, RESTRICT THE LIABIL ITY TO TAX IN THE SOURCE JURISDICTION, BUT THE RELIEF SOUGHT IN THE PRESENT CASE GOES WELL BEYOND THAT AND WOULD RESULT IN A REFUND OF TAXES BY INDIA AND WHAT IS BEING TERME D AS A REFUND IS NOT EVEN PAID TO INDIAN EXCHEQUER. LEARNED DEP ARTMENTAL REPRESENTA TIVE THEN POINTS OUT THAT THIS JUDICIAL PRECEDENT IS IN CONTEXT OF THE QUESTION AS TO WHETHER THE CREDIT FOR INCOME TAX PAID IN A COUNTRY OUTSIDE INDIA IN RELATIO N TO AN INC OME ELIGIBLE FOR DEDUCTION UNDER SECTION 10A WOULD NOT BE AVAIL ABLE UNDER SECTION 90(1) (A), AND WHAT THEIR LORDSHIPS HAVE HELD IS THAT M ERELY BECAUSE THE EXEMPTION HAS BEEN GRANTED IN RESPECT OF THE TAXABILITY OF THE SAID SOURCE OF INCOME, IT CA NNOT BE POS TULATED THAT THE ASSESSEE IS NOT LIABLE TO TAX , AND, THEREFORE , THE CASE FALLS UNDER SE CTION 90(1)(A)(II) . IT IS THEN POINTED OUT THAT 10A WAS HELD TO BE IN THE NATURE OF EXEMPTION AND, THEREFORE, IT CANNOT BE SAID THAT THE SAID INCOME WAS NOT LIABLE TO T AX, BUT THEN, IN THE LIGHT OF THE SUBSEQUENT JUDGMENT OF HONBL E SUPREME COURT IN THE CASE OF CIT VS YOKOGAWA INDIA LTD [(2017) 77 TAXMANN.COM 41 (SC)] , SECTION 10A IS REQUIRED TO BE TREATED AS DEDUCTION AND NOT AS AN EXEMPTION, AND THUS THE DEC ISION OF HO NBLE KARNATAKA HIGH COURT CEASES TO BE GOOD IN LAW. IT IS THE N POINTED OUT THAT EVEN GOIN G BY THE INTERPRETATION CANVASSED BY HONBLE KARNATAKA HIGH COURT, SUCH A REFUND IS PERMISSIBLE AS A RESULT OF RELAXATION IN THE NATURE OF TREATY THAT IND IA CAN ENTE R UNDER SECTION 90(1)(A)(II) BUT THEN THIS STATUTORY CAME INTO EFFECT FROM 1 ST APRIL 2004 A ND ALL THE RELATED TAX TREATIES WERE ENTERED INTO BY INDIA WELL BEFORE THAT DATE. THIS DECISION CANNOT, THEREFORE, HAVE ANY IMPACT OF THE TAX TREATIES WHI CH WERE ENT ERED INTO PRIOR TO THAT DATE. LEARNED DEPARTMENTAL REPRESENTATI VE SUBMITS THAT THIS DECISIO N FROM A HIGH COURT OTHER THAN HONBLE JURISDICTIONAL HIGH COURT, AND IS NOT A BINDING JUDICIAL PRECEDENT FOR THIS REASON ALSO. IT IS THEN POINTED OUT THA T THIS DECI SION WAS IN THE CONTEXT OF AN INCOME THAT WAS TAXABLE IN THE HA NDS OF THE ASSESSEE BUT EXE MPT FOR THE REASON OF AN INCENTIVE PROVISION AND THE ASSESSEE HAD ACTUALLY PAID HIS TAXES ON THE NON - EXEMPT INCOME. IN NONE OF THESE CASES, THEREFORE, THER E WAS ANY Q UESTION OF REFUND BEING MADE TO THE ASSESSEE. LEARNED DEPARTME NTAL REPRESENTATIVE VERY PO LITELY, BUT EQUALLY FIRMLY, SUBMITS THAT THIS DECISION IS PER INCURIAM , IT IS FROM A NON - JURISDICTIONAL HIGH COURT, AND ON A MATERIALLY DIFFERENT SET OF FA CTS, AND, T HEREFORE, DOES NOT BIND US. FOR ALL THESE REASONS, AND RELYING UPON THE REASONING ADOPTED BY THE LEARNED CIT(A), HE URGES US TO APPROVE THE ORDER OF THE LEARNED CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. IN A BRIEF REJOINDER, LEARNED COUNSEL FOR THE AS SESSEE SUBMITS THAT THE CIT(A) HAD CLEARLY HELD THAT APPELLANT IS ENTITLED OF RELIEF OF T AX PAID IN A FOREIGN COUNTRY WHICH WAS NOT GRANTED WHEN AO GAVE EFFECT TO THE DIRECTION OF LD. CIT(A) . IT IS THUS SUBMITTED THAT THE GROUNDS RAISED CLEARL Y EMANATES AND ARISE FROM THE APPEAL EFFECT ORDER. LEARNED COUNSEL THEN PO INTS OUT THAT LEARNED DEPART MENTAL REPRESENTATIVE SEEKS TO DISTINGUISH VARIOUS DECISIONS RELIED ON BY THE BANK ON THE CONTENTION THAT IN NONE OF THE CASES, REFUNDS WERE BEING CLAIME D WHEN THE ASSESSED INCOME WAS A LOSS AND NO TAXES WERE PAID BUT THEN THI S PLEA AMOUNTS TO STIPULATIN G ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 7 OF 49 A NEW CONDITION VIZ TO BE ELIGIBLE FOR TAX RELIEF, THE ASSESSEE SHOULD NOT HAVE AN ASSESSABLE LOSS AFTER SET OFF FOREIGN INCOME WHICH IS NOT PRESCRIBE D IN SEC 90 OR 91 OF THE ACT OR ANY OF THE DTAA APPLICABLE TO APPELLANT . H E SUBMITS THAT THE ISSUE IS WHETHER THE APPELLANT IS ENTITLED TO RELIEF IN RESPECT OF INCOME CHARGEABLE UNDER THE ACT AND THE CORRESPONDING LAW IN FORCE IN A FOREIGN COUNTRY IN ACCOR DANCE WITH THE DTAA , AND THAT ISSUE IS NO LONGER RES INTEGRA . HIS STAND IS THAT THE ASSESSEE IS BEING SUBJECTED TO DOUBLE JEOPARDY INASMUCH AS ON THE ONE HAND THE ASSESSEE IS DECLINED TAX CREDIT, AND, ON THE OTHER HAND, HIS LOSS BEING CARRIED FOR WARD ARE B EING REDUC E D TO THE EXTENT OF PROFITS EARNED ABROAD. AS AGAINST A BUSINESS LOSS OF RS 826.58 CRORES, WHAT IS BEI NG ALLOWED TO BE CARRIED FORWARD FOR SET - OFF AGAINST FUTURE PROFITS IS ONLY RS 191.39 CRORES AS THE FOREIGN PROFITS OF RS 635.19 CRORE ARE SET O FF AGAINST THE SAME. IT IS SUBMITTED THAT SUCH DOUBLE JEOPARDY WILL BE AB SOLUTELY UNJUST AND INEQUITABLE TO T HE ASSESSEE. WE ARE , IN EFFECT, ONCE AGAIN URGED TO DIRECT THE ASSESSING OFFICER TO REFUND THE TAXES PAID BY THE ASSESSEE ABROAD. OUR ANALYSIS ON THE FIRS T ISSUE FOR CONSIDERATION 1 0 . LET US NOW DEAL WITH THE SPECIFI C CLAIMS MADE BY THE ASSESSEE. THE INCOMES EARNED BY THE ASSESSEE OUTSIDE INDIA, AND TAXES PAID BY THE ASSESSEE IN THE RESPECTIVE JURISDICTION ARE AS FOLLOWS: SL NO. TAX JURISDICTIO N / CONCERN ED INCOME AS PER TAX LAWS OF THE RESPECTIVE JURISDICTION TAXES PAID IN THE RESPECTIVE TAX JURISDIC TION 1 UNITED KINGDOM 164,83,03,346 42,85,58,870 2 SINGAPORE 148,75,29,708 24,27,31,477 3 UNITED STATES OF AMERICA 134,29,98,097 43,57,35,733 4 JAPAN 115, 31,72,581 34,59,51,694 5 BELGIUM 29,27,12,456 9,49,70,556 6 K ENYA 27,25,92,653 8,84,42,686 7 CH INA 11,38,14,129 1,00,64,665 8 FRANCE 4,07,81,841 1,32,31,668 TOTAL 635,19,04,811 165,96,87,349 1 1 . SO FAR AS TAXES PAID IN THE UNITED KINGDOM ARE CONCER NED, WE FIND THAT THE PROVISION RELATING TO THE TAX CREDITS IN THE INDO UK DOUBLE TAXATION AVOIDANCE A GREEMENT [ ( 1994 ) 206 ITR (STA) 235 ; INDO UK TAX TREATY, IN SHORT] IS CONCERNED, ARTICLE 24 OF THE INDO UK TAX TREATY, RELATABLE TO THE ELIMINA TION OF DOU BLE TAXATION IN INDIA, PROVIDES AS FOLLOWS: ARTICLE 24 ELIMIN ATION OF DOUBLE TAXATION 2. SUBJECT TO THE PROVISIONS OF THE LAW OF INDIA REGARDING THE ALLOWANCE AS A CREDIT AGAINST INDIAN TAX OF TAX PAID IN A TERRITORY OUTSIDE INDIA (WHICH SHAL L NOT AFFEC T THE GENERAL PRINCIPLE HEREOF), THE AMOUNT OF THE UNITED KINGD OM TAX PAID, UNDER THE LAWS OF THE UNITED K INGDOM AND IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, WHETHER DIRECTLY OR BY DEDUCTION, BY A RESIDENT OF INDIA, IN RESPECT OF IN COME FROM S OURCES WITHIN THE UNITED KINGDOM WHICH HAS BEEN SUBJECTED TO TA X BOTH IN INDIA AND THE UNITED KINGDOM SHAL L BE ALLOWED AS A CREDIT AGAINST THE INDIAN TAX PAYABLE IN RESPECT OF SUCH ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 8 OF 49 INCOME BUT IN AN AMOUNT NOT EXCEEDING THAT PROPORTION OF INDIAN TAX WHICH S UCH INCOME BEARS TO THE ENTIRE INCOME CHARGEABLE TO INDIAN TAX . FOR THE PURPOSES OF THE CREDIT REFERRED T O IN THIS PARAGRAPH, WHERE THE RESIDENT OF INDIA IS A COMPANY, BY WHICH SURTAX IS PAYABLE, THE CREDIT TO BE ALLOWED AGAINST INDIAN TAX SHAL L BE ALLOWE D IN THE FIRST INSTANCE AGAINST THE INCOME - TAX PAYABLE BY THE C OMPANY IN INDIA AND, AS TO THE BALANCE, IF ANY, AGAINST THE SURTAX PAYABLE BY IT IN INDIA. . 6. INCOME WHICH IN ACCORDANCE WITH PROVISIONS OF THIS CONVENTION IS NOT TO BE SUBJ ECTED TO TA X IN A CONTRACTING STATE MAY BE TAKEN INTO ACCOUNT FOR CALCULAT ING THE RATE OF TAX TO BE IMPOSED IN THAT C ONTRACTING STATE ON OTHER INCOME. 7. FOR THE PURPOSES OF PARAGRAPHS 1 AND 2 OF THIS ARTICLE PROFITS, INCOME AND CHARGEABLE GAINS, OWNED BY A RESIDENT OF A CONTRACTING STATE WHICH MAY BE TAXED IN THE OTHER CONTRAC TING STATE IN ACCORDANCE WITH THE PROVISION S OF THIS CONVENTION SHALL BE DEEMED TO ARISE FROM SOURCES IN THAT OTHER CONTRACTING STATE. [EMPHASIS, BY UNDERLINING, SUPPLIED BY US] 1 2 . THE SCHEM E OF ARTICLE 24(2) IS LIKE THIS. THE FIRST IMPORTANT POINT IS T HAT THE TAX CREDITS BEING GRANTED IS SUBJEC T TO THE PROVISIONS OF THE DOMESTIC LAW, WHICH , HOWEVER , SHALL NOT AFFECT THE GENERAL PRINCIPLES UNDER THIS TREATY PROVISION. HOWEVER, AS T HE DOMESTIC LAW PROVISIONS IN THIS REGARD, INTRODUCED VIDE RULE 128 OF THE INCOME TAX RULES 1962, HAVE COME INTO EFFECT ONLY WITH EFFECT FROM 1 ST APRIL 2017, THAT RIDER IS WHOLLY ACADEMIC IN THE PRESENT CONTEXT. THE SECOND IMPORTANT POINT IS THAT THE INCOM E IN QUESTI ON, IN RESPECT OF WHICH FOREIGN TAX CREDIT IS TO BE GIVEN, MUST HAVE BEEN SUBJECTED TO TAX IN BOTH THE JUR ISDICTIONS, I.E., UNITED KINGDOM AS ALSO IN INDIA. AND THIRD POINT IS THAT IF THE INCOME IN QUESTION HAS BEEN SUBJECTED TO TAX IN BOTH THE JURISDI CTIONS, I.E. UK AND INDIA, ONLY SO MUCH OF TAX CREDIT IS GIVEN AS IS PROPORTIONATE TO THE INCOME SO DOUBLY T AXED VIS - - VIS ENTIRE INCOME CHARGEABLE TO TAX IN INDIA. 1 3 . THE QUESTION, THEREFORE, ARISES WHETHER THE INCOME IN QUESTION, I.E. RS 164 ,83,03,346 CAN BE SAID TO HAVE BEEN SUBJECTED TO TAX IN THE UNITED KINGDOM AS ALSO IN INDIA. 1 4 . LEARNED COUNSEL HAS R EPEATEDLY STATED DURING THE COURSE OF HEARING, DESPITE OUR EXPRESSING RESERVATIONS ON THE CORRECTNESS OF THIS AVERMENT, THAT THERE IS NO DISPUTE ON THE FACT THAT THE INCOME EARNED BY THE ASSESSEE ABROAD HAS BEEN SUBJECTED TO TAX IN INDIA AS ALSO ABROAD. HI S PLEA IS THAT WHILE THE ASSESSES HAS ACTUALLY SUFFERED TAXATION OF A SOURED FOREIGN INCOME IN THE SOURCE JURISDICTION, THE INCOME EARNED BY THE ASS ESSEE ABROAD HAS ALSO BEEN INCLUDED IN THE INCOME TAXABLE IN IN DIA, WHICH HAPPENS TO BE A NEGATIVE FIGURE NEVE RTHELESS, THE FOREIGN - SOURCED INCOME HAS BEEN SUBJECTED TO TAX IN INDIA AS WELL. TAKING THIS ARGUMENT TO ITS LOGICAL CONCLUSION, LEARNE D COUNSEL H AS SUBMITTED THAT ONCE AN INCOME HAS BEEN SUBJECTED TO TAX IN B OTH THE JURISDICTIONS, THE ASSESSEE HAS TO BE R ELIEVED OF SUCH DOUBLE SUBJECTION OF TAX IN TWO JURISDICTIONS, BY GIVING APPROPRIATE RELIEF IN THE RESIDENCE JURISDICTION, I.E., INDIA. LEARNED CO UNSEL HAS ALSO SUBMITTED THAT THE ACTUAL TAXATION OF AN INCOME IN NOT A CONDITION PRECEDENT FOR AVAILING THE T AX TREATY BENEFIT, AND HE HAS RELIED UPON A DECISION OF THE COORDINATE BENCH IN THE CASE OF GREEN EMIRATES SHIPPING & TRAVELS (SUPRA) I N SUPPORT O F THIS PROPOSITION. LEARNED COUNSEL HAS THEN ALSO RELIED UPON THE DECISIONS OF HONBLE KARNATAKA HIGH COURT I N WIPROS CASE (SUPRA) IN SUPPORT OF THE CONTENTION THAT THE ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 9 OF 49 PAYMENT OF TAX IN THE RESIDENCE JURISDICTION IS NOT A CONDITION PRECEDENT FOR AVAILI NG THE BENEFIT OF FOREIGN TAX CREDITS. 15 . SO FAR AS THE DECI SION OF COORDINATE BENCH, IN THE CASE OF GREEN EMIRATES SHIPPING & TRAVELS (SUPRA) IS CONCERNED, THAT WAS A DECISION IN THE CONTEXT DEFINITION OF THE EXPRESSION LIABLE TO TAX AND IN THE CON TEXT OF INDO UAE DOUBLE TAXATION AVOIDANCE AGREEMENT; [( 1995 ) 20 5 ITR (ST) 29; INDO UAE TAX TREATY IN SHORT] WI TH A JURISDICTION WHICH DID NOT HAVE, AT LEAST AT THE RELEVANT POINT OF TIME, ANY PROVISIONS ENABLING DOMESTIC LAW TAXATION OF THE INC OME CONCERN ED. ON THESE PECULIAR FACTS, BOTH THE JURISDICTIONS SUBSEQUENTLY REVISED THE DTAA ITSELF, AND DELINKED THE TREA TY ENTITLEMENT REQUIREMENT, I.E. DEFINITION OF RESIDENT IN UAE, TO THE TAXATION OF THE RESIDENT BY RESTATING THE DEFINITION AS AN IND IVIDUAL WHO IS PRESENT IN THE UAE FOR A PERIOD OR PERIODS AGGREGATING TOTAL LING IN AGGREGATE AT LEAST 183 DAYS IN THE CALE NDAR YEAR CONCERNED, AND A COMPANY, WHICH IS INCORPORATED IN UAE AND WHICH IS MANAGED AND CONTROLLED WHOLLY IN UAE . QUITE CLEARLY, TH EREFORE, TH E EXPRESSION LIABLE TO TAX IS NO LONGER USED IN THIS TREATY AN D, THE ACTUAL TAXATION OF AN INCOME CEASES TO B E RELEVANT FOR THIS PURPOSE. IN ANY EVENT, WHAT THIS DECISION HOLDS IS THAT THE ACTUAL TAXATION OF AN INCOME IS NOT AVAILING THE TREAT Y BENEFITS IN GENERAL, BECAUSE THE TERM LIABLE TO TAX, AS APPEARING IN TH E DEFINITION OF A RESIDENT, REFERS TO A LOCALIT Y RELATED ATTACHMENT LEADING TO RESIDENCE TYPE TAXATION, AND NOT THE TAXATION PER SE . HOWEVER, THE ENTITLEMENT OF TAX CREDITS USES TH E EXPRESSIO N OF THE RELATED INCOME HAVING BEEN SUBJECTED TO TAX IN BOTH T HE TAX JURISDICTIONS , AND THAT IS THE PRE - CONDITIO N FOR BEING GRANTED FOREIGN TAX CREDITS. LIABLE TO TAX IS ONE THING, AND SUBJECTED TO TAX IS ANOTHER. WHEN WE ARE TO COMPARE A TAX TREATY WITH, SAY, A BUILDING OR A RESIDENTIAL UNIT, I F LIABLE TO TAX IS THE KEY TO OPEN THE MAIN DOOR, I.E. , ENTITLE SOM EONE TO THE TAX TREATY ENTITLEMENT IN GENERAL , SUBJECTED TO TAX IN BOTH INDIA AND UNITED KINGDOM IS A KEY TO OPEN DOORS OF ONE O F THE ROOM S INSIDE, I.E. ONE OF THE SPECIFIC BENEFITS OF THE TREATY ENTITLE MENT. THE FORMER IS A CONDITION PRECEDENT TO BE COVE RED BY THE SCOPE OF THE TAX TREATY, AND THE LATTER IS A CONDITION PRECEDENT FOR BEING ELIGIBLE FOR GETTING THE FOREIGN TAX CREDIT S UNDER ART ICLE 24(2). NOTHING , THEREFORE, TURNS ON THE CONNOTATIONS OF LI ABLE TO TAX IN THE PRESENT CONTEXT , AND WE REJECT THI S PLEA OF THE ASSESSEE WITHOUT GOING IN TO ANY FURTHER DETAILS ABOUT THE SAME. 16 . THE CONNOTATIONS OF SUBJECTED TO TAX ARE SIMPLE AND EASY TO UNDERSTAND. IN PLAIN WORDS, IT MEANS WHEN AN INCOME IS ACTUALLY SUBJECTED TO TAX, I.E. , TAX IS LEVIED ON THE SAI D INCOME. HONBLE AUTHORITY FOR ADVANCE RULING, IN THE CASE OF GENERAL ELECTRIC PENSION TRUST IN RE [(2006) 280 ITR 425 (AAR )] HAD , HIG HLIGHTING THE DISTINCTION BETWEEN LIABLE TO TAX AND SUBJECT T O TAX, OBSERVED MADE CERTAIN IMPORTANT OBSERVATIONS AND EMPHASIZED THAT ACTUAL TAXATION IS A SINE QUA NON FOR AN INCOME BEING TREATED AS HAVING BEEN SUBJECTED TO TAX. THAT WAS A CA SE IN WHICH THE AAR WAS DEALING WITH A TREATY REQUIREMENT FOR RESIDENT OF A CONTRACT STATE FOR A TRUST WHICH REQUIRED THE INCOME D ERIVED BY THE TRUST BEING SUBJECT TO TAX IN THE TREATY PARTNER JURISDICTION. IT WAS IN THIS CONTEXT THAT THE AAR, SPEAKING THROUGH HO NBLE JUSTICE QUADRI, SPEAKING FOR THE AUTHORITY OF ADVANCE RULI NG, OBSERVED THAT THE EXPRESSION SUBJECT TO TAX HAS M ATERIALLY DISTINCT CONNOTATIONS VIS - - VIS THE CONNOTATIONS OF LIABLE TO TAX, AND OBSERVED THAT IT IS WORTH POINTING OUT THA T THE PHRAS E LIABLE TO TAX IN PARA (1) AND THE PHRASE SUBJECT TO TAX IN PROVISO (B) ARE NOT SYNONYMOUS. IF BOTH WERE TO BE REA D AS SYNONYMOUS, PROVISO(B) WOULD BECOME OTIOSE. WHEREAS PARA (1) SPEAKS OF BEING IN THE TAX NET, PROVISO IS CONCERNED WITH AC TUAL TAXATI ON . THE AAR THEN ADDED THUS IT WOULD FOLLOW THAT THE TERM 'R ESIDENT OF USA' FOR THE PURPOSE OF THE TREATY WOULD MEA N A PERSON WHO UNDER THE LAWS OF USA IS LIABLE TO TAX THEREIN BY REASON OF HIS ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 10 OF 49 DOMICILE, RESIDENCE, CITIZENSHIP, PLACE OF MANA GEMENT, PLA CE OF INCORPORATION, OR ANY OTHER CRITERION OF A SIMILAR NATURE; HOWEVER, IN THE CASE A TRUST, THE TERM 'RESIDENT OF US A' WOULD APPLY ONLY TO THE EXTENT THAT THE INCOME DERIVED BY SUCH TRUST IS SUBJECT TO TAX IN USA AS THE INCOME OF A RESIDENT E ITHER IN IT S HANDS OR IN THE HANDS OF ITS BENEFICIARIES . WHAT ESSENTIALLY FOLLOWS FROM THIS DISCUSSION IS THAT SO FAR INCOME BEI NG SUBJECTED TO TAX IN A PARTICULAR JURISDICTION IS CONCERNED, THAT REQUIREMENT CAN BE MET WHEN INCOME TAX IS ACTUALLY LEVIED IN RESPECT OF THE SAID INCOME IN THE JURISDICTION IN QUESTION, AND, TO THIS EXTENT, WE ARE IN RESPECTFUL AGREEMENT WITH THE VIEWS SO E XPRESSED IN THE SAID RULING. WE MAY, IN THIS REGARD, REFER TO A JUDICIAL PRECEDENT FROM THE UNITED KINGDOM WHICH HAS, IN E XTENDED AND PROFOUND DISCUSSIONS, TAKEN NOTE OF JUDICIAL PRECEDENTS FROM TH E OTHER PART OF THE WORLD - INCLUDING INDIA, AS ALSO OF T HE ACADEMIC LITERATURE AND THE IFA AND OECD REPORTS, AND ANALYZED THIS ISSUE IN GREAT DETAIL. IN THE CASE OF PAUL WISER VS TH E COMMISSIO NERS [(2012) UK FTT 501 (TC)], EXPLAINING THE CONNOTATIONS OF EX PRESSION SUBJECT TO TAX, THE UNITED KINGDOM FIRST TIER TRI BUNAL HAS OBSERVED AS FOLLOWS: 24. AN AUSTRALIAN CASE, EMANUEL V FEDERAL COMMISSIONER OF TAXATION [1968] HCA 57, CONCERN ED THE AUST RALIA/UK DOUBLE TAX TREATY. AT THE RELEVANT TIME, THE RATE OF AU STRALIAN WITHHOLDING TAX ON DOMESTIC SOURCE DIVIDENDS WAS 30 %. UNDER THE TREATY, HOWEVER, THAT RATE WAS REDUCED TO 15% IN THE CASE OF SUCH DIVIDENDS TO A UK RESIDENT WHO IS SUBJECT TO UNITED KINGDOM TAX IN RESPECT THEREOF. THE UK RESIDENT RECIPIENT WAS N OT DOMICILED IN THE UK, AND SO, ALTHOUGH GENERALLY WITHIN TH E SCOPE OF UK TAX AS A RESIDENT, WAS CHARGEABLE ON INCOME FROM NON - UK SOURCES ONLY TO THE EXTENT THAT THE INCOME WAS REMI TTED TO THE UK. THE DIVIDENDS HAD NOT BEEN SO REMITTED. 25. IN THE HIGH CO URT OF AUSTRALIA, WINDEYER J HELD THAT THE TAXPAYER WAS NOT ENTITLED TO THE REDUCED RATE OF WITHHOLDING TAX. HE SAID (AT [15]): THE PRESENT CASE HAS, AS I HAVE SAID, PROCEEDED ON THE BASIS T HAT THE TAXPAYER IS NOT DOMICILED IN THE UNITED KINGDOM AND TH AT HE IS TREATED AS HAVING SATISFIED THE COMMISSIONERS OF IN LAND REVENUE OF THAT FACT. THEREFORE IN RESPECT OF THE DIVIDENDS IN QUESTION THE REMITTANCE BASIS WOULD APPLY. THEREFOR E, IN MY OP INION, UNLESS AND UNTIL THEY BE REMITTED AND RECEIVED BY HIM IN THE UNITED KINGDOM HE IS NOT SUBJECT TO UNITED KINGDOM TAX IN RESPECT THEREOF. THESE WORDS I THINK DESCRIBE A PRESENT LIABILITY OF A PERSON TO TAX, NOT THE CHARACTER OF INCOME IN RESPECT OF WHICH HE WILL IF IT COMES TO HIM IN THE UNITED KINGDOM IN THE FU TURE INCUR THEN A LIABILITY TO TAX 26. IN GENERAL ELECTRIC PENSION TRUST V DIRECTOR OF INCOME - TAX (INTERNATIONAL TAXATION) MUMBAI (2005) 8 ITLR 1053, THE INDIAN AUTHORITY FOR ADVA NCE RULINGS HELD THAT A PENSION FUND WHICH WAS EXEMPT FROM TAX IN THE US UN DER US TAX LAW WAS NOT SUBJECT TO TAX IN THE US AND SO COU LD NOT FALL WITHIN THE MEANING OF RESIDENT OF A CONTRACTING STATE AS THAT WAS DEFINED FOR A TRUST UNDER THE US/INDIA DO UBLE TAX TR EATY. AFTER DESCRIBING THE RELEVANT PROVISION, UNDER WHICH IN TH E CASE OF INCOME DERIVED OR PAID BY A TRUST THE TERM RESIDE NT OF A CONTRACTING STATE APPLIED ONLY TO THE EXTENT THAT THE INCOME DERIVED BY THE TRUST (WHICH WOULD HAVE TO BE LIABLE TO TAX BY REASON OF RESIDENCE OR ANOTHER RELEVANT CRITERION IN THE STATE I N QUESTION) WAS IN ADDITION SUBJECT TO TAX IN THAT STATE AS THE INCOME OF A RESIDENT EITHER IN ITS OWN HANDS OR IN THE HANDS OF THE BENEFICIARIES, SYED SHAH MOHAMMED QUADRI J SAID ( AT P 1061): IT IS WORTH POINTING OUT THAT THE PHRASE LIABLE TO TAX IN P ARA (1) AND THE PHRASE SUBJECT TO TAX IN PROVISO (B) ARE N OT SYNONYMOUS. IF BOTH WERE READ TO BE ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 11 OF 49 SYNONYMOUS, PROVISO (B) WOULD BECOME OTIOSE. WHEREAS PARA (1) SPEAKS OF BEING IN T HE TAX NET, PROVISO (B) SPEAKS OF ACTUAL TAXATION. 27. THE DISTINCTION BE TWEEN LIABLE TO TAX AND SUBJECT TO TAX HAS BEEN THE TOPI C OF SOME DEBATE WITHIN THE INTERNATIONAL TAX COMMUNITY. THIS DEBATE HAS BEEN ALLUDED TO IN A NUMBER OF ACADEMIC COMMENTA RIES. MS MC CARTHY REFERRED ME TO ONE, FROM THE CANADIAN TAX JOURNAL (1996) VOL 44, NO 2, 408 ENTITLED A RESIDENT OF A CONTRACTING STAT E FOR TAX TREATY PURPOSES: A CASE COMMENT ON CROWN FOREST INDUSTRIES BY A NUMBER OF CONTRIBUTORS LED BY DAVID A WARD OF CANADA, AND INCLUDING, FROM THE UK, DR JOHN AVERY JONES. THE FOCUS OF THE A RTICLE IS ON THE CASE IN THE SUPREME COURT OF CANADA OF THE QUEEN V CROWN FOREST INDUSTRIES LIMITED ET AL., 95 DTC 5389 (SCC) A CASE ON WHETHER A BAHAMIAN CORPORATION CARRYING ON BUSINESS IN THE US AND WITH A PLACE OF MANAGEMENT THERE WAS A RESIDENT OF T HE US WITHIN THE US/CANADA DOUBLE TAX TREATY. IN THAT CASE, THE SUPREME COURT OF CANADA CONCLUDED THAT IN INTERPRETING THE TERM RESIDENT OF A CONTRACTING STATE IN THAT TREATY THE EXPRESSION LIABLE TO TAX REQUIRED THE PERSON IN QUESTION TO BE SUBJECT TO AS COMPREHENSIVE A LIABILITY TO TAXATION AS IS IMPOSED BY A STATE. THAT ANALYSIS ARGUABLY BROUGHT THE REQUIREMENTS OF LIABLE TO TAX CLOSER TO THOSE CONSIDERED APPROPRIATE FOR SU BJECT TO TA X. BUT IN THEIR DISCUSSION, THE AUTHORS DRAW THE SAME DISTINCTI ON BETWEEN LIABLE TO TAX AND SUBJECT TO TAX AS WAS LATER DESCRIBED IN GENERAL ELECTRIC. 28. THE AUTHORS REFER IN PARTICULAR TO THAT DISTINCTION BEING DRAWN BY PARTICIPANTS AT A SEMINAR CO NDUCTED IN 1985 BY THE INTERNATIONAL FISCAL ASSOCIATION (IFA). THE CONCLUSION, FOR WHICH IT IS DEMONSTRATED THAT THERE IS WIDESPREAD INTERNATIONAL SUPPORT, IS THAT IF A PERSONS CONNECTING CHARACTERISTICS WITH A STATE ARE THE SAME AS THOSE OF PERSONS WHO ARE FULLY LIABLE AND ACTUALLY SUBJECT TO TAX, THAT PERSON CAN B E SAID TO BE LIABLE TO TAX EVEN THOUGH HE IS NOT SUBJECT TO TAX ON PART OR ALL OF HIS INCOME BY VIRTUE OF SPECIAL PROVISIONS OF THE STATE OF HIS RESIDENCE: SEE P 419 AND FOOTNOTE 32 . 29. THIS VIEW HAS REMAINED UNALTERED BY THE PASSAGE OF TIME. ACCORDING T O AN ARTICLE PUBLISHED IN 2011, WORRYING INTERPRETATION OF LIABLE TO TAX: OECD CLARIFICATION WOULD BE WELCOME (ARNAUD DE GRAAF AND FRANK PTGENS), INTERTAX, VOL 39, ISSUE 4, 169 , WHICH DIS CUSSES A RULING OF THE DUTCH SUPREME COURT (4 DECEMBER 2009; V - N 2009/63.17) THAT ADOPTED A SIMILAR APPROACH TO THE RESIDENC E ARTICLE IN THE NETHERLANDS/US TREATY TO THAT OF CROWN FOREST, THE BROAD INTERNATIONAL CONSENSUS WAS CONFIRMED AT THE IF A CONGRESS IN 2004. AS THE AUTHORS DESCRIBE THE POSITION (AT P 172), THAT V IEW ENCOMPASSES A CONTRAST BETWEEN LIABLE TO TAX, WHICH RE FERS SIMPLY TO AN ABSTRACT LIABILITY TO TAX ON A PERSONS WORLDWIDE INCOME, AND THE EXPRESSION SUBJECT TO TAX WHICH MAY REQUIRE AN EFFECTIVE LIABILITY TO TAX ON A PERSONS INCOME. 30. THE SAME ANALYSIS ALSO APPEARS FROM THE EDITORS NOTE TO THE GENERAL ELECTRIC RULING IN THE INTERNATIONAL TAX LAW REPORTS, WHERE HE SAYS (P1054): IT IS GENERALLY RECOGNISED THAT SUBJECT T O TAX HAS A DIFFERENT MEANING FROM LIABLE TO TAX AND REQUIRES THAT THE P ERSON CLAIMING BENEFIT OF THE TREATY IS ACTUALLY REQUIRED TO PAY TAX (OR WOULD, FOR EXAMPLE, BE REQUIRED TO DO SO IF IT HAD ANY POSITIVE INCOME). 31. ALTHOUGH IT WAS NOT CITED TO ME, I SHOUL D ALSO REFER TO THE COMMENTARY ON THE OECD MODEL CONVENTION. ALT HOUGH, AS I HAVE MENTIONED EARLIER, THE TREATY PROVISION WIT H WHICH I AM CONCERNED DOES NOT FOLLOW THE OECD MODEL, THERE ARE NONETHELESS SOME USEFUL INDICATORS TO BE OBTAINED FROM T HE COMMENTA RY. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 12 OF 49 32. IN ITS REFERENCE TO ARTICLE 18 OF THE MODEL ON THE TAXA TION OF PENSIONS, THE COMMENTARY REFERS TO THE POSSIBLE MISM ATCHES THAT CAN ARISE WHERE THE CONTRACTING STATES MAY HAVE DIFFERENT RULES REGARDING PENSIONS. IT REFERS PARTICULARLY TO THE POSITI ON WHERE ONE CONTRACTING STATE REGARDS A DEDUCTION FOR PENSION C ONTRIBUTIONS ESSENTIALLY AS A DEFERRAL OF TAX ON THE PART OF THE EMPLOYMENT INCOME THAT IS SAVED TOWARDS RETIREMENT, AND THE OTHER STATE, IN WHICH THE INDIVIDUAL BECOMES RESIDENT, D OES NOT TAX PENSION BENEFITS. IN SUCH CASES THE COMMENTARY REFERS TO EXAMPL ES OF PROVISIONS WHICH STATES ARE FREE TO AGREE BILATERALLY. ONE SUCH POSSIBLE PROVISION, WHICH THE COMMENTARY CITES AS AN EXAMPLE OF A PROVISION ALLOWING SOURCE TAXATION OF PENSION PAYMENTS O NLY WHERE THE STATE OF RESIDENCE DOES NOT TAX THOSE PAYMENTS IS AS FOLLOWS: HOWEVER, SUCH PENSIONS AND OTHER SIMILAR REMUN ERATION MAY ALSO BE TAXED IN THE CONTRACTING STATE IN WHICH THEY ARISE IF THESE PAYMENTS ARE NOT SUBJECT TO TAX IN THE OT HER CONTRAC TING STATE UNDER THE ORDINARY RULES OF ITS TAX LAW. THIS IS TH EREFORE AN EXAMPLE OF THE EXPRESSION SUBJECT TO TAX BEING USED TO DRAW A DISTINCTION BETWEEN CASES WHERE THE STATE OF RESIDENCE TAXES PENSION INCOME, AND CASES WHERE IT DOES NOT. 33. THE ST ARTING POINT IS TO LOOK FOR A CLEAR MEANING OF THE WORDS IN ART XI(2) THAT IS CONSISTENT WITH THE PURPOSE OF THE TREATY. THA T PURPOSE I DISCERN TO BE THE ALLOCATION OF TAXING RIGHTS AS BETWEEN THE UK AND ISRAEL TO OBVIATE DOUBLE TAXATION, AND TO PREVENT TH E EVASION OF TAX. ITS PURPOSE IS NOT TO ENABLE DOUBLE NON - TAXATI ON OF THE RELEVANT INCOME. 34. IN MY VIEW, CONSIST WITH WHA T I REGARD AS THE PURPOSE OF THE TREATY IN THIS REGARD, THE ORDINARY MEANING OF ART XI(2) IS THAT PENSION INCOME DERIVED FROM UK SOU RCES IS ONLY EXEMPT FROM UK TAX IF THAT INCOME IS CHARGEABLE TO ISRAEL TAX SUCH THAT ISRAEL TAX WILL ORDINARILY BE PAYABLE I N RESPECT OF THAT INCOME, SUBJECT TO DEDUCTIONS FOR ALLOWANCES AND RELIEFS, ETC. THIS FOLLOWS FROM THE DISTINCTION THAT M UST IN MY V IEW BE DRAWN BETWEEN THE USE, IN DOUBLE TAX TREATIES, OF THE EXP RESSIONS LIABLE TO TAX AND SUBJECT TO TAX, AND ALSO BY T HE REQUIREMENT, UNDER ART XI(2), THAT THE INDIVIDUAL CONCERNED SHOULD NOT ONLY BE A RESIDENT OF ISRAEL (THAT IS, RESIDENT IN ISRAEL FOR THE PURPOSES OF ISRAEL TAX), BUT SHOULD BE SUBJECT TO TAX IN RESPECT OF THE RELEVANT INCOME. THE REFERENCE TO THAT INCOM E IN THIS CONTEXT CLEARLY DISTINGUISHES THIS PROVISION FROM ONE WHICH REQUIRES THAT THE INDIVIDUAL FALL WITHIN THE SCOPE OF A STATE S TAXATION GENERALLY. THIS PROVISION IS NOT CONCERNED WITH THE S TATUS OF THE INDIVIDUAL, BUT WITH THE CHARGEABILITY TO TAX O F THE SPECIFIC INCOME. INCOME WHICH IS EXEMPTED FROM TAXATION CANNOT DURING THE CURRENCY OF THAT EXEMPTION BE INCOME IN R ESPECT OF W HICH AN INDIVIDUAL CAN BE SAID TO BE SUBJECT TO TAX. 35. ALTHOU GH IT IS NOT NECESSARY TO PLACE ANY RELIANCE ON THE INTERNAT IONAL CASES AND ACADEMIC WRITINGS I HAVE REFERRED TO, NOR ON THE OECD COMMENTARY, THIS CONCLUSION DOES ACCORD WITH WHAT A PPEARS TO B E A BROAD CONSENSUS AS TO THE MEANING OF THE EXPRESSION SUBJECT TO TAX. I HAVE NO DOUBT THAT THE CONTRACTING STATES OF ISR AEL AND THE UK, WHEN ENTERING INTO THE TREATY, INTENDED THAT PENSION INCOME EXEMPT FROM ISRAEL TAX SHOULD BE EXCLUDED FRO M THE EXEMP TION FROM UK TAX. IF IT HAD BEEN INTENDED OTHERWISE, SO THAT MER ELY BEING WITHIN THE SCOPE OF ISRAEL TAX AS A GENERAL MATTER WOULD SUFFICE FOR THE TREATY EXEMPTION TO APPLY, THERE WOULD HAVE BEEN NO NEED TO INCLUDE ANY REFERENCE TO THE PENSION I NCOME BEING SUBJECT TO TAX; THE POSITION WOULD HAVE BEEN COVERED BY THE MER E REFERENCE TO THE INDIVIDUAL BEING A RESIDENT OF ISRAEL. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 13 OF 49 3 6. IT FOLLOWS THAT I DO NOT ACCEPT MR WEISERS ARGUMENTS ON THE PROPER MEANING TO BE GIVEN TO ART XI(2). NOR DO I ACCEPT THAT THE TE RMS OF ART XI ARE AMBIGUOUS OR ANYTHING OTHER THAN CLEAR AND, AD OPTING MR WEISERS PHRASEOLOGY, TRANSPARENT. 37. MS MCCARTH Y REFERRED ME TO CERTAIN REFERENCES FROM HMRCS INTERNATIONAL TAX MANUAL TO ILLUSTRATE THE LONG - STANDING PUBLISHED VIEW O F THE PHRAS E SUBJECT TO TAX. PARAGRAPH 332210 OF THAT MANUAL WAS FIRST PU BLISHED ON HMRCS WEBSITE ON 29 DECEMBER 2006. IT READS: I NTM332210 DT APPLICATIONS AND CLAIMS SUBJECT TO TAX BACKGROUND THE EXPRESSION SUBJECT TO TAX USUALLY MEANS THAT TH E PERSON MU ST ACTUALLY PAY TAX ON THE INCOME IN THEIR COUNTRY OF RESIDENCE. HOWEVER, A PERSON IS STILL REGARDED AS SUBJECT TO TAX IF , FOR EXAMPLE, HE OR SHE DOES NOT PAY TAX BECAUSE THEIR INCOME IS SUFFICIENTLY SMALL THAT IT IS COVERED BY PERSONAL ALLOW ANCES THAT ARE AVAILABLE TO SET AGAINST LIABILITY TO TAX IN THE OTHER COUNT RY. A PERSON IS NOT REGARDED AS SUBJECT TO TAX IF THE INC OME IN QUESTION IS EXEMPTED FROM TAX BECAUSE THE LAW OF THE OTHER COUNTRY PROVIDES FOR A STATUTORY EXEMPTION FROM TAX. FO R EXAMPLE THE INCOME IS THAT OF A CHARITY THE INCOME IS THAT OF AN EXE MPT APPROVED SUPERANNUATION SCHEME (PENSION FUND) IN SUCH C ASES THE SUBJECT TO TAX CONDITION IS NOT MET AND RELIEF IS NOT ALLOWABLE. 38. I AGREE WITH THIS SUMMARY. IT REFERS TO PARTICULAR EXEMPTIONS BY WAY OF EXAMPLE, BUT IT IS NOT LIMITED IN ANY WAY, AND IS APT TO APPLY ALSO TO THE (PRESENT SITUATION BEFORE US) 17 . WE ARE IN CONSIDERED AGREEMENT WITH THE ABOVE ANALYSIS OF THE UK FIRST TIER TRIBUNAL. CLOSER HOME, A COORDINATE BENCH OF TH IS TRIBUNAL, IN THE CASE OF DURAMETALLIC INDIA LTD VS ACIT [(200 3) 85 ITD 442 (CHENNAI)] , FOLLOWING THE SAME SCHOOL OF THOUG HTS, AND IN FACT GOING A STEP FURTHER BY EXCLUDING THE ADMISSIBLE DEDUCTION FROM THE SCOPE OF INCOME SUBJECTED TO TAX, HAS OBSERVE D AS FOLLOWS: 10. WE ARE THUS LEFT WITH THE QUESTION : WHAT IS THE AMOUNT OF SINGAPORE TAX PAYABLE BY THE ASSESSEE IN RESPE CT OF THE INCOME WHICH HAS BEEN SUBJECTED TO TAX IN BOTH COUNTRIES ? IT IS OUR CONSIDERED VIEW THAT THE EXPRESSION 'SUBJEC TED TO TAX' HAS A NARROWER MEANING, AND IT REFERS TO THE AMOUNT OF INCOME O N WHICH TAX HAS BEEN LEVIED . IN THE PRESENT CASE THOUGH 'INC OME CHARGEABLE TO TAX' IN BOTH COUNTRIES WAS ROYALTY, UNDER THE INDIAN TAX LAWS THE ASSESSEE WAS ALLOWED DEDUCTION UNDER SECTION 80 - O AND TAX WAS LEVIED IN INDIA, ON THE NET AMOUNT ONLY. HENCE ONL Y 50 PER CENT OF THE ROYALTY ON WHICH TAX WAS LEVIED IN INDI A, COULD BE CONSIDERED AS INCOME SUBJECTED TO TAX IN INDIA. EVEN THOUGH ROYALTY INCOME SUBJECTED TO TAX IN SINGAPORE WAS RS. 18,97,2 95, IN INDIA THE ASSESSEE HAD TO BEAR THE TAX BURDEN ONLY ON 50 PER CENT OF THE ROYALTY AMOUNT. THE INTENTION BEHIND THE ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 14 OF 49 AGR EEMENT FOR AVOIDANCE OF DOUBLE TAXATION IS TO REMOVE THE HARDSHIP CAUSED TO A TAX PAYER BY THE BURDEN OF DOUBLE TAXATION ON THE SAME QUANTUM OF INCOME. THAT OBJECTIVE IS ACHIEVED BY FOLLOWING THE PROCEDURE LAID DOWN IN THE PROVISIONS OF THE AGREEMENT. IN A CCORDANCE WITH THE PROVISIONS OF CLAUSE 2( A ) OF THE AGREEMENT TAX AT THE RATES APPLICABLE IN SINGAPORE ON THAT AMOUNT OF INCOME ASSE SSED IN BOTH COUNTRIES HAS TO BE FOUND OUT AND IT IS 40 PER CENT OF RS. 9,48,647 AND NOT RS. 18,97,295. 11. IN SINGAPORE TA X INCENTIVE IS PROVIDED ON 100% OF THE INCOME, BUT TAX IS DEEMED TO HAVE BEEN PAID BY DEDUCTION. THERE IS A SPECIFIC REFE RENCE IN CL AUSE 2( A ) OF ARTICLE 24 TO THE AMOUNT OF TAX PAYABLE, - WHETHER DIRECTLY OR BY DEDUCTION. BUT WITH REGARD TO THE INDIAN TAX THERE IS NO REFERENCE TO TAX EXEMPTION OR CONCESSION IN THE HANDS OF A RESIDENT IN INDIA. THERE IS ONLY A REFERENCE TO TH E INDIAN T AX PAYABLE AND IT CAN MEAN ONLY THE TAX LIABILITY ARISING OUT O F THE ASSESSMENT OF THE AMOUNT OF ROYALTY IN INDIA. WHAT IS SUBJECTED TO TAX IN BOTH THE COUNTRIES IS RS. 9,48,647 AND SO THE ASSESSEE IS ENTITLED TO THE CREDIT ON THE SINGAPORE TAX OF RS. 3,7 9,459, I.E., TAX CALCULATED AT 40 PER CENT ON THE SUM OF RS. 9,4 8,647. THOUGH IT HAS TO BE LIMITED TO AN AMOUNT NOT EXCEEDIN G THAT PORTION OF INDIAN TAX WHICH SUCH INCOME BEARS, I.E., THE DOUBLY TAXED INCOME OF RS. 9,48,647 BEARS TO THE ENTIRE I NCOME CHARG EABLE TO INDIAN TAX, AS THE INDIAN INCOME - TAX AT 50 PER CENT COM ES TO RS. 4,74,323, THE CEILING IS NOT APPLICABLE IN THIS CA SE. THE ASSESSEE IS THUS ENTITLED TO A CREDIT OF RS. 3,79,459 BEING THE SINGAPORE TAX PAID ON THE INCOME SUBJECTED TO TAX IN BOTH CO UNTRIES. 12. IN THIS CONNECTION IT IS USEFUL TO REFER TO SECTIO N 91 WHICH PROVIDES FOR RELIEF IN RESPECT OF INCOME FROM COU NTRIES WITH WHICH THERE EXISTS NO AGREEMENT UNDER SECTION 90 FOR AVOIDANCE OF DOUBLE TAXATION. IT IS PROVIDED IN SECTION 91 THAT A P ERSON RESIDENT IN INDIA IS ENTITLED TO THE DEDUCTION FROM THE IN COME - TAX PAYABLE BY HIM, A SUM CALCULATED ON SUCH DOUBLY TAX ED INCOME AT THE INDIAN RATE OF TAX OR AT THE RATE OF THE FOREIGN COUNTRY WHICHEVER IS LOWER. IN THE CASE OF CIT V. C.S. MURTHY [198 8] 169 ITR 686 1 THE A.P. HIG H COURT HELD THAT AS THE ASSESSEE HAD BEEN GRANTED DEDUCTION UNDER SECTION 80RRA, ON 50 PER CENT OF THE REMUNERATION FROM FOREIGN EMPLOYER, ONLY BALANCE AMOUNT WAS SUBJECTED TO TAX IN INDIA AN D SO RELIEF ON DOUBLE TAXATION WAS AVAILABLE ONLY ON 50 PER CENT OF THE REMUNERATION. THAT WAS THE VIEW TAKEN BY THE RAJASTH AN HIGH COURT ALSO IN CIT V. DR. R.N. JHANJI [1990] 185 ITR 586 2 . IN THAT CASE THE CO URT OBSERVE D: 'SECTION 91 CANNOT BE CONSTRUED IN ISOLATION, BUT WITH THE O THER PROVISIONS OF THE ACT. ACCORDINGLY IT IS ONLY THE TAX A LREADY PAID ON THAT PART OF THE FOREIGN INCOME UNDER THE INDIAN INCOME - TAX WHICH IS REQUIRED TO BE DEDUCTED FOR THE PURPO SE OF GIVIN G RELIEF FROM DOUBLE TAXATION.' THE ABOVE DECISION WAS FOLLOWED IN THE SUBSEQUENT DECISION OF THE RAJASTHAN HIGH COURT IN C IT V. DR. J.C. SHARMA [1990] 186 ITR 173 3 . 13. TRUE, THE ABOVE DECISIONS ARE CONCERN ED WITH THE D.I.T. RELIEF UNDER SECTION 90. THE LD. COUNSEL FOR THE ASSESSE E IS CORRECT THAT THE EXPRESSION USED IN SECTION 91 IS 'SUCH DOUBLY TAXED INCOME' AND NOT INCOME SUBJECTED TO TAX IN BOTH COUNTRIES AS APPEARING IN THE AGREEMENT WITH SINGAPORE WI TH WHICH WE ARE NOW CONCERNED. WE MAY MENTION HERE THAT IN THE CASE OF C.S. MURTHY (SUPRA) DECIDED BY THE A.P. HIGH COURT THE EXPRESSIO N SUBJECTED TO TAX HAS BEEN USED ON PAGE 691, AS WE HAVE UNDERSTOOD '... THE MAIN REQUIREMENT, THEREFORE, IS THAT THE INCOME MUS T HAVE BEEN TAXED OUTSIDE INDIA AND THE SAME INCOME MUST HAVE AG AIN BEEN SUBJECTED TO TAX UNDER ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 15 OF 49 THE INCOME - TAX ACT IN INDIA. IF ANY PORTION OF THE FOREIGN INCOME IS NOT SUBJECTED TO TAX IN INDIA, THEN, THE ASSESSEE WILL NOT BE ENTITLED TO CLAIM DEDUCTION O N THAT PART OF THE FOREIGN INCOME WHICH IS NOT SUBJECTED TO TAX IN THIS COUNTRY . THIS FITS INTO THE REAL SCHEME AND INTENT O F SECTION 91 OF THE ACT WHICH IS TO THE EFFECT THAT IN RESPECT OF ANY INCOME, A PERSON SHOULD NOT BE DOUBLY TAXED, ONCE O UTSIDE INDI A AND AGAIN IN INDIA. IF THE INCOME TAXED OUTSIDE INDIA IS SUBJE CTED TO TAX AGAIN IN INDIA, THEN, THE PROVISIONS OF SECTION 91 OF THE ACT WOULD COME INTO OPERATION AND THE ASSESSEE CAN CLAIM APPROPRIATE RELIEF ON THE DOUBLY TAXED INCOME. . . .' [EMPHASIS S UPPLIED] 14. IT MAY BE SEEN THAT THE COURT HAS USED THE EXPRESS ION DOUBLY TAXED TO MEAN THAT THE INCOME TAXED OUTSIDE IND IA IS SUBJECTED TO TAX AGAIN IN INDIA. THE VIEW TAKEN IS THAT THE SAME INCOME SHOULD HAVE BEEN SUBJECTED TO TAX IN BOTH C OUNTRIES. I N THE CIRCUMSTANCES OF THIS CASE, WE HOLD THAT THE CIT(A) WAS JU STIFIED IN CONFIRMING THE ORDER PASSED BY THE ASSESSING OFFI CER ALLOWING THE D.I.T. RELIEF ON THE SINGAPORE TAX ON NET AMOUNT OF ROYALTY SUBJECTED TO TAX IN INDIA. THIS GROUND OF AP PEAL IS ACC ORDINGLY DECIDED AGAINST THE ASSESSEE. 18 . IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE CONSIDERED VIEW THAT THE INCOME EARNED BY THE ASSESSEE IN THE UNITED KINGDOM CANNOT BE SAID TO HAVE BEEN SUBJECTED TO TAX IN INDIA. WHILE IT DID INDEED SUFFER TAX ATION IN THE UNITED KINGDOM, AS THE ASSESSEE DID NOT HAVE ANY TA XABLE INCOME IN INDIA, AND AS THIS INCOME WAS OFFSET AGAINST THE LOS SES INCURRED BY THE ASSESSEE OUTSIDE OF UK, THE INCOME SO EARNED IN UK WAS NEVER SUBJECTED TO TAX IN INDIA. JUST BECAUSE LEA RNED COUNSEL SAYS SOMETHING UMPTEEN NUMBER OF TIMES, I.E. , IT IS AN ADMITTED POSITION THAT THE INCOME IN QUESTION HAS BEEN SUBJECTED TO TAX IN INDIA AS ALSO ABROAD, IT DOES NOT ACTUALLY BECOME AN ADMITTED POSITION. IT IS THUS NOT CORRECT TO PRO CEED ON THE BASIS THAT THE INCOME FROM SOURCES WITHIN THE UNITED KINGDOM , I.E., INCOME EARNED BY THE ASSESSEE IN THE UK FROM ITS BRANCH OFFICE S THERE HAS BEEN SUBJECTED TO TAX BOTH IN INDIA AND THE UNITED KINGDOM WHICH IS A SINE QUA NON FOR THE AVAILAB ILITY OF TA X CREDIT UNDER ARTICLE 23. WE REJECT THIS PLEA ON FACTS AS ALSO IN LAW . 19. AS REGARDS LEARNED COUNSELS RELIANCE ON HONBLE JURISD ICTIONAL HIGH COURTS JUDGMENT IN THE CASE OF PETROLEUM INDIA INTERNATIONAL (SUPRA), IT IS ONLY TO BE NOTED AND R EJECTED FOR THE SIMPLE REASON THAT THIS JUDICIAL PRECEDENT DEALS WITH AN AL TOGETHER DIFFERENT QUESTION AND THAT QUESTION IS WHETHER, IN TERMS O F THE PROVISIONS OF SECTION 91, THE TAXES PAID ABROAD, IN RESPECT OF WHICH CREDIT CAN BE AVAILED IN AN ASSESSMENT YEAR, CAN BE PAID EITHER IN THE RELEVANT PREVIOUS YEAR OR EVEN SUBSEQUENTL Y . THEIR LORDSHIPS HAVE HELD THAT AS LONG AS THE ASSESSEE HAS PAID T HE TAX, WHETHER IN THE RELEVANT PREVIOUS YEAR, OR EVEN LATER, THE TAX CREDIT IN RESPECT OF THE SAME IS AVAILABLE. THAT WAS A CASE IN WHICH THE ASSESSEE HAD PAID TAX OF RS 82 LAKHS IN KUWAI T, THE SAID INCOME WAS INCLUDED IN ITS INDIAN TAXABLE INCOME, BUT TH E FOREIGN TAX CREDIT WAS DECLINED ON THE GROUND THAT THE SAID PAYMENT OF RS 82 LAKHS WAS PAID AFTER THE END OF TH E RELEVANT PREVIOUS YEAR. THE STAND SO TAKEN BY THE ASSESSING OFFICER WAS R EVERSED BY A COORDINATE BENCH OF THIS TRIBUNAL, AND THE ORDER SO PAS SED BY THE COORDINATE BENCH WAS UPHELD BY HONBLE JURISDICTIONAL HIGH COURT. THE ISSUE ADJUDICATED UPON IN THIS JUDICIAL PR ECEDENT RELATES ONLY TO THE TIMING OF THE FOREIGN TAX PAYMENTS , AND WHETHER THE FOREIGN TAX CREDIT CAN BE DECLINED ONLY ON THE GRO UND OF DELAY IN PAYMENT OF TAXES OR MISTIMING OF PAYMENT OF TAXES. IT HAS NOTHING TO DO WITH THE PRESENT SITUATIO N WHERE TAX ES HAVE ADMITTEDLY BEEN PAID ABROAD IN THE RELEVANT PREVIOUS YEA R, BUT NO TAXES ON THE SAID INCOME HAVE BEEN LEVIED I N INDIA AT AL L. WE REJECT THIS LINE OF ARGUMENT AS WELL. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 16 OF 49 20. THE NEXT ISSUE TO BE CONSIDERED IS TO WHAT EXTENT THE FOREIGN TAX CREDIT, IN RESPECT OF TAXES PAID IN THE UK, IS AVAILABLE IN THE COMPUTATIO N OF TAX PAYABLE BY THE ASSESSEE IN INDIA. 21. ARTICLE 24(2) MAKES IT CL EAR THAT CREDIT WILL BE AVAILABLE AGAINST THE INDIAN TAX PAYABLE IN RESPECT OF SUCH INCOME , BUT IN AMOUNT N OT EXCEEDIN G THAT PROPORTION OF INDIAN TAX WHICH SUCH INCOME BEARS TO THE E NTIRE INCOME CHARGEABLE TO INDIAN TAX . ESSENTIALLY, THEREFORE, THE FORE IGN TAX CREDIT IS AVAILABLE ONLY AGAINST THE INDIAN TAX PAYABLE ON SUCH INCOME. AS A COROLLARY TO THIS POSITI ON, WHEN IN DIAN TAX PAYABLE IN RESPECT OF SUCH INCOME IS NIL, THERE CANNOT BE ANY FOREIGN TAX CREDIT AGAINST AVAILABLE TO THE ASSESSEE. EVEN IF SUC H AN INCOME IS A POSITIVE FIGURE, SAY X AMOUNT, AND THE PROPORTIONATE TAX PAYABLE ON SUCH INCOME IS LESS TH AN X, SAY Y AMOUNT, THE FOREIGN TAX CREDIT WILL BE RESTRICTED TO Y AM OUNT ONLY. TO ILLUSTRATE, LET US ASSUME AN ASSESSEE EARNS RS 1,00,000 IN UK WHEREAS HIS TOTAL GLOBAL INCOME TAXABLE IN INDIA IS RS 10,00,000 , AND PAYS 50% TAX THEREON IN THE UK, WHE REAS TAX RA TE PAYABLE BY THE ASSESSEE IN INDIA IN RESPECT OF SUCH INCOME IS ONLY 30% . IN THIS CASE, WHEREAS THE ASSESSEE WILL PAY RS 50,000 AS TAX IN THE UK, THE ADMISSIBLE TAX CREDIT WILL ONLY BE RS 30,000 EVEN THOUGH HIS TOTAL TAX LIABILITY IN INDIA WILL BE RS 3,00 ,000. THAT IS WHAT IS TYPICALLY CALLED ORDINARY TAX CREDIT UND ER THE SCHEME OF THE TREATIES. LET US CONTRAST THIS WITH THE TREATIES I N WHICH FULL TAX CREDIT, A RATHER RARE FEATURE IN INDIAN TAX TREATIES, IS GIVEN. IN INDIA NAMIBIAN DOUBLE T AXATION AVO IDANCE AGREEMENT [( 1999 ) 236 ITR (STAT) 230 ; INDO NAMIBIAN TAX T REATY , IN SHORT], FOR EXAMPLE, ARTICLE 23(2) PROVIDES THAT WHERE A RESI DENT OF INDIA DERIVES INCOME OR CAPITAL GAINS FROM NAMIBIA, WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION MAY BE TAXED IN NAMIBIA, THEN INDIA SHALL ALLOW AS A DEDUCTION F ROM THE TAX ON THE INCOME OF THAT RESIDENT AN AMOUNT EQUAL TO THE TAX ON INCOME OR CAPITAL GAINS PAID IN NAMIBIA, WHETHER DIRECTLY OR BY DEDUCTION . IF THIS WAS THE METHOD TO BE FOL LOWED IN TH E ABOVE ILLUSTRATION, THE TAX CREDIT WOULD HAVE BEEN RS 50,000 W HICH IS MUCH MORE THAN UK TAX LIABILITY, BUT NEVERTHELESS LESS THAN THE INDIAN TAX LIABILITY. EVEN IN THIS SITUATION, SINCE TAX CREDIT IS ALLOWED AS A DEDUCTION FROM THE INDIAN TAX LIABILITY, THE DEDUCTION CANNOT EXCEED THE LIABILITY ITSELF. THIS ASPECT O F THE MATTER WILL BE MORE GLARING FROM THE ACADEMIC LITERATURE ON THE SU BJECT. LET US, THEREFORE, TAKE A LOOK AT THE GUIDANCE AVAILABLE ON WHAT CONSTITUTES TAX CREDIT, AND HOW DOES THIS MECHA NISM WORK S . 22. TAX CREDIT MECHANISM IS ONE OF THE TWO BROAD MEC HANISM S TO PROVIDE FOR THE ELIMINATION OF JURIDICAL DOUBLE TAXATION. WHEN THE SAME TAXATION OBJECT, I.E. , AN INCOME, IS TAXED IN THE HANDS OF THE SAME TAXATION SUBJECT, I.E. THE TA XPAYER, IN TWO TAX JURISDICTIONS, IT IS DEFINED AS JURIDICAL DOUBLE TAXATION , AND SUCH A JURIDICAL DOUBLE TAXATION CAN BE OF A CROSS - BORDER INCOME CAN BE RELIEVED EITHER UNDER EXEMPTION METHOD OR UNDER CREDIT METHOD FUNDAMENTALLY, THE DIFFERENCE BETWEEN T HE METHODS IS THAT THE EXEMPTION METHODS LOOK AT INCOME, WHILE THE CREDIT ME THODS LOOK AT TAX . THIS RELIEF IS RELEVANT ONLY IN THE RESIDENCE JURISDICTION , WHERE THE GLOBAL INCOME OF THE ASSESSEE IS TAXED, BECAUSE UNDER THE TAX TREATIES, ONLY SOURCE TAXATI ON RIGHTS A RE RESTRICTED, AND UNDER THE DOMESTIC TAX LAW LEGISLATION, THE RE LIEF IS UNILATERAL ANYWAY. THERE ARE SMALL VARIANTS OF THESE METHODS, AND SMALL N UANCES IN THEIR APPLICATIONS, BUT THOSE ISSUES ARE NOT REALLY RELEVANT IN THE PRESENT CONTEXT. COM ING BACK TO THESE METHODS OF RELIEVING DOUBLE TAXATION, UNDER THE EXEMPTION METHOD, WHICH HARDLY FINDS APPLICATION IN THE INDIAN TAX TREATIES OR UNDER THE DOM ESTIC LAW, ONCE AN INCOME IS TAXED IN THE SOURCE JURISDICTION, IT IS EXCLUDED FROM THE SCOPE OF TA XATION IN R ESIDENCE JURISDICTION. ONCE DOUBLY TAXED INCOME ITSELF IS EXCLUDE D FROM THE SCOPE OF TAXABLE INCOME, WHICH ELIMINATES DOUBLE TAXATION OF AN INCOME. THE SECOND METHOD OF RELIEVING THIS DOUBLE TAXATION OF INCOME ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 17 OF 49 IS THE CREDIT METHOD, AND IT IS IN THIS CONTEX T THAT FOREIGN TAX CREDITS ARE RELEVANT. IN PROF BRIAN J ARNOLD A ND PROF MICHAEL J MCINTYRE , IN THEIR BOOK INTERNATIONAL TAX PRIMER [SECOND EDITIO N, ISBN 90 - 411 - 8898 - 3, PUBLISHED BY KLUWER LAW INTERNATIONAL, THE NETHERLANDS, @ PAGE 36], DESCRI BE THIS MET HOD, INTER ALIA, AS UNDER: UNDER THE CREDIT METHOD, FOREIGN TAXE S PAID BY A RESIDENT TAXPAYER ON FOREIGN - SOURCED INCOME GENERALLY REDUCE THE DOMEST IC TAXES PAYABLE BY THE AMOUNT OF FOREIGN TAX. FOR EXAMPLE, IF P PAYS A FOREIGN TAX O F 10 ON SOME FOREIGN SO URCE INCOME AND OTHERWISE WOULD BE SUBJECT TO A DOMESTIC TAX OF 4 0 ON THAT INCOME, THE FOREIGN TAX CREDIT REDUCES THE DOMESTIC TAX FROM 40 TO 30. CO NSEQUENTLY, THE CREDIT METHOD COMPLETELY ELIMINATES INTERNATIONAL DO U BLE TAXATION OF RESIDENCE - SO URCE TYPE. UNDER THE CREDIT METHOD, FOREIGN SOURCE INCOME IS SUBJECT TO DOME STIC TAX, WHEREVER THE FOREIGN TAX RATE IS LESS THAN THE DOMESTIC TAX RATE. THE NET DOMESTIC RATE IN SUCH CIRCUMSTANCES IS AN AMOUNT EQUAL TO DIFFERENCE BETWEEN THE TWO TAX RATES M ULTIPLIED T O FOREIGN - SOURCE INCOME. IN EFFECT, THE FOREIGN TAXES ARE TOPPED UP BY DOMESTIC TAXES SO THAT THE COMBINED DOMESTIC AND FOREIGN TAX RATE ON THE FOR EIGN - SOURCE INCOME IS EQUAL TO DOMESTIC TAX RATE. CREDIT COUNTRIES INVARIABLY DO NOT PAY TAX RE FUNDS WHEN THEIR TAXPAYERS PAY A FOREIGN INCOME TAX AT AN EFFECTIVE RATE THA T IS HIGHER THAN THE DOMESTIC EFFECTIVE RATE. SEE, FOR EXAMPLE, ARTICLE 23B OF THE O ECD MODEL TREATY. NOR DO THEY ALLOW THE EXCESS FOREIGN TAX TO OFFSET DOMESTIC TAXES PAID ON THE DOMESTIC IN COME. IN OTHER WORDS, THE CREDIT FOR FOREIGN TAXES PAID IS USUALL Y LIMITED TO THE AMOUNT OF DOMESTIC TAX PAYABLE ON FOREIGN SOURCE INCOME. VARIOUS LI MITATION RULES, SOMETIMES QUITE COMPLEX IN APPLICATION, ARE USED TO PREVENT WHAT IS PERCEIVED AS INAPPROPRI ATE USE OF FOREIGN TAX CREDITS. AS A RESULT OF SUCH LIMITATIONS O N THE CREDIT, FOREIGN INCOME IS TYPICALLY TAXED AT THE FOREIGN EFFECTIVE RATE WHENEV ER THE FOREIGN EFFECTIVE RATE WHEREVER THE FOREIGN RATE IS HIGHER THAN DOMESTIC RATE. IN SUMMARY , UNDER THE CREDIT METHOD, FOREIGN - SOURCE INCOME EARNED BY THE RESIDENTS IS TAXED AT THE HIGHER OF THE DOMESTIC AND FOREIGN TAXES . [EMPHASIS, BY UNDERLINING, S UPPLIED BY US] 23. CLEARLY, THEREFORE, BY APPLICATION OF THE CREDIT METHOD, AND BY RESULTANT G RANT OF FORE IGN TAX CREDITS, CAN EVER EXCEED THE ACTUAL INDIAN TAX LIABILITY IN RESPECT OF FOREIGN - SOURCED INCOME. EXPLAINING THIS ASPECT OF THE CREDIT METHOD, OR GRANT OF FOREIGN TAX CREDITS. IN VERY EMPHATIC TERMS, PROF KLAUS VOGEL , IN HIS OFT REFERRED T REATISE KLA US VOGEL ON DOUBLE TAXATION CONVENTIONS [ISBN 978 - 81 - 899960 - 62 - 9; SECOND INDIAN REPRINT 2010, PUBLISHED BY WOLTERS KLUWERS (INDIA) PVT LTD, @ PAGE 1227], STATES AS FOLLOWS: H) MAXIMUM DEDUCTION (LIMITATION): CREDIT IS ALLOWED ONLY UPTO THAT P ART OF THE D OMESTIC TAX WHICH IS ATTRIBUTABLE TO THE ITEMS OF INCOME OR CA PITAL TAXED IN THE STATE OF SOURCE IN ACCORDANCE WITH THE TREATY. HENCE, APPLICATION OF CREDIT METHOD NEVER RESULTS IN A LOSS IN REVENUE WHICH IS GREATER THAN UNDER EXEMPTION WITH PROGRESSION METHOD . THE STATE THUS MAKES USE OF ADVANTAGE IT DERIVES FROM A LOWER RATE OF TAX APPLIED ABROAD, WHILE WARDING OFF THE DISADVANTAGES INHERENT IN APPLICATION OF A HIGHER RATE OF TAX IN THE OTHER CONTRACTING STATE [EMPHASIS, BY UNDERLINING, I S SUPPLIED B Y US] ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 18 OF 49 24. IN PLAIN WORDS, THEREFORE, A FOREIGN TAX CREDIT IS A NOTIONAL CREDIT, FOR TAXES PAID IN THE FOREIGN JURISDICTION, IN RESPECT OF THE TAXES SO PAID AND IT CANNOT, IN ANY EVENT, EXCEED THE HOME JURISDICTION TAX LIABILITY FOR THE RESIDEN T TAX - PAYER I N RESPECT OF THE SAID INCOME. UN MODEL CONVENTION COMMENTARY, W HICH SPECIFICALLY SETS OUT AND FOLLOWS OECD MODEL CONVENTION COMMENTARY IN THIS REGA RD , OBSERVES THAT ARTICLE 23 B, BASED ON THE CREDIT PRINCIPLE, FOLLOWS THE ORDINARY CREDIT METH OD: THE STATE OF RESIDENCE (R) ALLOWS, AS A DEDUCTION FROM ITS OWN TAX ON TH E INCOM E OR CAPITAL OF ITS RESIDENT, AN AMOUNT EQUAL TO THE TAX PAID IN THE OTHER ST ATE E (OR S) ON THE INCOME DERIVED FROM, OR CAPITAL OWNED IN, THAT OTHER STATE E (OR S), BUT THE DEDUCTION IS RESTRICTED TO THE APPROPRIATE PROPORTION OF ITS OWN TAX . [PAR A 57, ARTICLE 23, UN MODEL TAX CONVENTION COMMENTARY, 2011 ]. ON A SIMILAR NOTE, PRO F MICHAEL LANG , IN HIS BOOK INTRODUCTION TO THE LAW OF DOUBLE TAXATION CONVENTIONS [ISBN 978 - 9 0 - 8722 - 198 - 0; PUBLISHED BY IBFD; 2 ND EDITION, AT PAGE 140], SUMS UP THIS PRI NCIPLE AS FOLLOWS: 10.3.3. MAXIMUM CREDIT 455 DTCS GENERALLY SET FORTH A MAXIM UM CREDIT THAT MUST BE GRANTED. THE AMOUNT OF TAX WHICH MUST BE CREDITED MAY NOT EXCEED THE TAX THAT THE RESI DENT WOULD PAY IN THE RESIDENCE STATE ON THE SAME (FOREIGN) ITE M OF INCOME. THIS IS KNOWN AS 'ORDI NARY CREDIT.' THIS MEANS THAT IN ORDER FOR A CRE DIT TO BE GRANTED, A TAX ON THE SAME (FOREIGN) ITEM OF INCOME MUST FIRST OF ALL BE DUE IN THE RE SIDENCE STATE . IF NO TAX IS DUE IN THE RESIDENCE STATE IN THE SAME TAX PERIO D, THE TAX PAID IN THE SOURCE STATE IS NOT CREDITED. ACCORDING TO THE OECD COMMENTAR Y ON ART. 23A AND 23B (AT PARA. 32.8), THE RESIDENCE STATE MUST NONETHELESS GRANT THE CREDIT WHE N THE LACK OF TAX DUE IN THE RESIDENCE STATE IS THE CONSEQUENCE OF A TIMING MISMATCH. [EMPHASIS, BY UNDERLINING, IS SUPPLIED BY US] 25. EX PLAINING THE ME CHANISM OF F OREIGN TAX CREDIT, AND RECOGNIZING THE D I STINCTION BE TWEEN ORDINARY (OR PROPORTIONATE) FOREIGN T AX CR EDIT SYSTEM VIS - - VIS ITS RATHER RA RELY USED VAR IANT FULL FOREI GN TAX CREDIT SYSTEM, PE TE R HARRIS AND DAVID OLIVER , IN THEIR BOOK INTERNATIONAL COMME RCIAL TAX (PUBLISHED BY CAMBRIDGE UNIVERSITY PRESS; 2010 EDITION; ISBN 978 - 0 - 521 - 85 311 - 8 H AR DBACK), STATE AS FOLLOWS: * [ TH ESE OBSERVAT IONS FREQUENT LY REFER TO T HE BETH EXAMPLE WH ICH RE FERS TO A SIMPLE CROSS BORDER TAX SITUATION , SET OUT AT PAGE 5 OF T HIS B OO K, IN WHI CH ALLAN , RESIDENT OF COUNTRY A, RENTS AN OFFICE IN COUNTRY A , AND PAYS BETH, A RESIDENT OF C OUNTRY B OWNING THE SAID OFFICE IN COUNTRY A , THE RENT F OR THE SAID OFFICE] CREDIT THE CREDIT METHOD IS OFTEN VIEWED AS A COMPLEX METHOD OF FOREIGN TAX RELIEF, PARTICULARLY IN THE FORM OF THE UNDERLYING OR INDIRECT FOREIGN TAX CREDIT, DISCUSSED BELOW A T 4.1.2.1. RETURNING TO THE EXAMPLE WITH BETH * , UNDER THIS METHOD COUNTRY B WOULD IN ITIALLY CALCULATE BETH'S RESIDENCE TAX LIABILITY WITHOUT ANY RELIEF FOR THE SOURCE TAX OF COUNTRY A. FURTHER, BETH'S COUNTRY A INCOME WOULD BE CALCULATED WITHOUT A DEDUCTIO N FOR THE COUNTRY A TAX. THE INCLUSION OF TAX IN CALCULATING INCOME IS REFERRED TO A S GROSS - UP. SO INITIALLY, BETH'S COUNTRY B TAX LIABILITY WOULD BE 40, I.E. 40 PER CENT ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 19 OF 49 OF 100. THIS AMOUNT IS THEN REDUCED BY SOURCE COUNTRY TAX, I.E. 30. SO BETH'S COUNTRY B TAX LIABILITY WOULD BE 10 (40 LESS 30). HER OVER ALL TAX LIABILITY IS 40 (30 COUN TRY A TAX AND 10 COUNTRY B TAX), WHICH IS CONSISTENT WITH HER RESIDENCE COUNTRY PROGRESSIVE TAX RATE. FOR THIS REA SON, THE FOREIGN TAX CREDIT METHOD IS VIEWED AS CONSISTEN T WITH CAPITAL EXPORT NEUTRALITY (SEE ABOVE AT 2.2.1). LIKE THE EXEMPTION METHOD, TH E FOREIGN TAX CREDIT METHOD GIVES RISE TO SUBSTANTIAL DIFFICULTIES. ITS APPARENT PURPOSE IS TO MAINTAIN CONSISTENCY WITH THE RESIDENCE COUNTRY'S PROGRESSIVE TAX RATE SYSTE M. THIS IS CONSIST ENT WITH THE RESIDENCE COUNTRY BEING IN A BETTER POSITION THAN THE SOURCE COUNTRY TO ADJUST OVERALL TAX LIABILITY ACCORDING TO A PERSON'S ABILITY TO PAY TAXES, I.E. ACCORDING TO THE PRINCIPLE OF EQUITY. HOWEVER, WHETHER CONSIST ENCY WITH PROGRESSIVE TAXATION IS MAINTAINED (AND SO CONSISTENCY WITH CAPITAL EXPORT NEUTRALIT Y) DEPENDS ON HOW THE RESIDENCE COUNTRY TREATS THE SITUATION IN WHICH THE FOREIGN TAX EXCEEDS THE TAX LIABILITY IN THE RESI DENCE COUNTRY. RETURNING TO THE EXAMPLE OF BET H, NOW PRESUME THAT HER COUNTRY B MARGINAL TAX RATE IS 20 PER CENT, SO HER COUNTRY B T AX WITH RESPECT TO THE COUNTRY A INCOME IS 20. THIS IS LESS THAN THE COUNTRY A TAX OF 30 AND THE QUESTION IS WHAT HAPPENS TO THE EXTRA 10 (20 LESS 30). THIS EXTRA AMOUNT IS REFERRED TO AS EXCESS FOREIGN TAX CREDITS. IF BETH CAN USE THE EXCESS AGAINST COUNT RY B TAX ON HER COUNTRY B SOURCE INCOME (OR GET A REFUND FROM COUNTRY B OF THE EXTRA COUNTRY A TAX), THEN THE SYSTEM IS A FULL FOREIGN TAX CREDIT. IN THE EXAMPLE, BETH HA S 100 COUNTRY B SOURCE INCOME IN ADD ITION TO THE 100 COUNTRY A SOURCE INCOME. UNDER A FULL FOREIGN TAX CREDIT, COUNTRY B WOULD CALCULATE BETH'S WORLDWIDE COUNTRY B TAX LIABILITY AS 40, I.E. 20 PER CENT OF 200 (100 COUNTRY A INCOME AND 100 COUNTRY B INCOME ). THIS AMOUNT WOULD BE REDUCED BY TH E CREDIT FOR THE COUNTRY A TAX, LEAV ING 10 COUNTRY B TAX TO BE PAID (40 LESS 30). IT WILL BE SEEN THAT THE FULL FOREIGN TAX CREDIT PERMITS COUNTRY A TAX TO NOT ONLY EXHAUST BETH'S COUNTRY B TAX LIABILITY WITH RESPECT TO COUNTRY A INCOME BUT ALSO REDUCE BE TH'S COUNTRY B TAX LIABILITY WITH RESPECT TO COUNTRY B SOURCE INCOME. IT PROVIDES AN INDUCEMENT FOR FOREIGN COUNTRIES TO SUBJECT RESIDENTS OF FOREIGN TAX CREDIT COUNTRIES TO HIGH TAX RATES. SUCH A SUBSIDY FOR DERIVING INCOME FROM HIGH TAX COUNTRIES IS VIEW ED AS UNACCEPT ABLE BY VIRTUALLY ALL FOREIGN TAX CREDIT COUNTRIES AND SO THERE ARE NO MAJOR EXAMPLES OF COUNTRIES THAT PROVIDE A FULL FOREIGN TAX CREDIT. RATHER, FOREIGN TAX CREDIT COUNTRIES LIMIT THE AMOUNT OF FOREIGN TAX THAT MAY BE CREDITED TO THE AMOUN T OF TAX LEVIED BY THE RESIDENCE COUNTRY WITH RESPECT TO FOREIGN SOURCE INCOME. THIS IS REFERRED TO AS AN ORDINARY FOREIGN TAX CREDIT SYSTEM. IF COUNTRY B ADOPTS AN ORDINARY FOREIGN TAX CREDIT, BETH WILL NOT BE PERMIT TED TO USE HER EXTRA 10 COUNTRY A TAX T O OFFSET COUNTRY B TAX WITH RESPECT TO COUNTRY B INCOME. IN THIS CASE, BETH MUST CALCULATE HER COUNTRY B T AX LIABILITY WITH RESPECT TO HER COUNTRY A SOURCE INCOME SEPARATELY FROM HER COUNTRY B TAX LIABILITY WITH RESPE CT TO HER COUNTRY B SOURCE INCOME. ASSU MING BETH IS TAXED AT 20 PER CENT BY COUNTRY B, THIS MEANS HER COUNTRY B TAX LIABILITY WITH RESPECT TO HER COUNTRY A SOURCE INCOME WILL BE 20 AND HER COUNTRY B TAX LIABILITY WITH RESPECT TO HER COUNTRY B SOURCE ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 20 OF 49 INCOME WILL ALSO BE 20. THE FOREIGN TAX CREDI T FOR COUNTRY A TAX MAY REDUCE ONLY THE FORMER 20 AND NOT THE LATTER 20. THIS IS REFERRED TO AS THE LIMITATION ON CREDIT, I.E. THE FOREIGN TAX CREDIT IS LIMITED TO COUNTRY B TAX ON THE COUNTRY A INCOME. IN THE RESULT, THE FOREIGN TAX CREDIT WILL EXHAUST BE TH'S COUNTRY B TAX LIABILITY ON THAT INCOME BUT NOT REDUCE BETH'S COUNTRY B TAX ON COUNTRY B SOURCE INCOME. BETH PAYS 30 TAX TO COUNTRY A (ON HER COUNTRY A SOURCE INCOME) AND 20 TAX TO COUNTRY B (ON HER COUNTRY B SOUR CE INCOME) . 2 6 . IN PRINC IPLE THUS, THERE CANNOT BE ANY OCCASION OF RE FUND OF TAXES PAID IN THE SOURCE JURISDICTION BY THE RESIDENC E JURISDICTION. MUCH AS WE RESEARCHED, THAT IS THE ONLY APPROACH WE COULD FIND SO FAR AS THE OPERATION OF THE CREDIT SYSTEM I N THE TAX TREATIES IS CONCERNED. IN OTHER WORDS, THEREFORE, WE COULD NOT FIND ANY ACA DEMIC SUPPORT FOR THE PROPOSITION THAT UNDER THE TAX TREATIES, THE TAXES PAID IN THE SOU RCE JURISDICTION COULD EXCEED THE ACTUAL INCOME TAX PAYABLE IN RESPECT OF THE SAID INCOME IN THE RESIDENC E JURISDICTION. ON THE FIRST PRINCIPLES, THEREFORE, UNDER THE B ILATERAL TAX TREATY ARRANGEMENTS, WHICH ARE DEALT WITH UNDER SECTION 90 OF INCOME TAX AC T 1961, THE SCHEME OF ELIMINATING DOUBLE TAXATION UNDER THE CREDIT METHOD, IN PRINC IPLE, FOR TAX CREDITS, IN RESPECT OF TAXES IN SOURCE JURISDICTION, IN EXCESS OF THE R ESIDENCE JURISDICTION TAX LIABILITY . Q UITE CONTRARY TO THE PROPOSITION CANVASSED BEFORE US, A WELL - KNOWN INDIAN INTERNATIONAL TAX SCHOLAR, PROF ROY ROHTAGI , IN HIS BOOK B AS IC INTERNATIO NAL TAXATION; SECOND EDITION, VOLUME I: PRINCIPLES [ISBN 81 - 74 96 - 732 - X] HAS CATEGORICALLY STATES THAT EXCESS FOREIGN TAX CREDITS CAN NEVER EXCEED DOME STIC TAX PAYABLE. THE RELEVANT OBSERVATIONS, AT PAGES 280 - 281 ARE AS FOLLOWS: GENERAL TH E CREDIT METHOD PROVIDES TAX NEUTRALITY AT HOME IRRESPECTIVE OF WHETHER THE I NCOME EARNED AT HOME OR ABROAD. THE RESIDENCE STATE TAXES ITS RESIDENTS ON THEIR WORLDWI DE INCOME BUT PROVIDES A CREDIT FOR THE FOREIGN TAX PAYMENTS. THE FOREIGN TAX CREDIT OFFSET S THE FOREIGN T AX ACTUALLY PAID AGAINST THE HOME TAX PAYABLE. IF THE HOME TAX ON THE FOREIGN - SOURCE INCOME IS MORE THAN THE FOREIGN TAX, THE TAXPAYER MUST PAY THE DE FICIT AS ADDITIONAL TAX AT HOME. HOWEVER, IF THE FOREIGN TAX EXCEEDS THE HOME TAX ON THE SA M E INCOME, THE EXCESS TAX CREDIT MAY BE CARRIED FORWARD (OR BACK) OR FORFEITE D. THE FOREIGN TAX CREDIT MAY BE EITHER FULL CREDIT OR ORDINARY CREDIT. THE FULL CREDIT LEAVES THE TAXPAYER WITH THE SAME POST - TAX INCOME AT HOME, IRRESPECTIVE OF THE SOURCE OF T H E INCOME. THE TAXPAYER RECEIVES FULL CREDIT FOR THE FOREIGN TAX PAID, AND IS LIABLE TO PAY ONLY THE DIFFERENCE BETWEEN THE HOME AND FOREIGN TAX DUE ON THE SAME IN COME. IF THE FOREIGN TAX EXCEEDS THE HOME TAX. THE RESIDENCE STATE REFUNDS THE EXCESS TAX P A YMENT. THE FUL L CREDIT METHOD IS RARELY USED. MOST COUNTRIES USING THE CREDI T METHOD GRANT ORDINARY CREDIT RELIEF FOR FOREIGN TAXES. UNDER THE ORDINARY CREDIT RELI EF METHOD, THE FOREIGN TAX CREDIT CANNOT EXCEED THE DOMESTIC TAX PAYABLE ON THE INCOME IN T H E COUNTRY OF R ESIDENCE. IT LIMITS THE TAX CREDIT TO THE TAX ON THE SAME INCO ME, AS COMPUTED UNDER ITS DOMESTIC TAX LAW, AS IF IT WERE EARNED AT HOME IN THE SAME ACC OUNTING PERIOD. THEREFORE, THE TAXPAYER PAYS THE DEFICIT AS TAX IF THE HOME EQUIVALENT TAX E XCEEDS THE FOR EIGN TAX PAID ON THE SAME ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 21 OF 49 INCOME, BUT THE EXCESS TAX IS NOT RE FUNDED IF THE FOREIGN TAX EXCEEDS THE HOME TAX. HE ENDS UP PAYING THE HIGHER OF THE SOUR CE AND RESIDENCE TAXES. UNLIKE THE EXEMPTION METHOD, THE CREDIT METHOD AVOIDS DOUBLE TAXAT I ON WITHIN THE WORLDWIDE TAX PRINCIPLE. IF THE HOME TAX EXCEEDS THE FOREIGN T AX PAID, THE DIFFERENCE IS PAYABLE AS A RESIDUAL TAX . EXCESS FOREIGN TAX CREDIT ARISES I F THE FOREIGN TAX PAID EXCEEDS THE FOREIGN TAX CREDIT GIVEN AT HOME. SOME COUNTRIES ALLOW T H E EXCESS FOREI GN TAX CREDIT TO BE CARRIED FORWARD OR BACK FOR OFFSET. MANY O F THEM, HOWEVER, DO NOT HAVE PROVISIONS FOR THE CARRY - OVER OF EXCESS CREDITS, WHICH ARE THEN LOST. [EMPHASIS, BY UNDERLINING, IS SUPPLIED BY US] 27. SIMILAR IS THE POSITION TAKEN BY THE INSTITU TE OF CHARTERED ACCOUNTANTS OF INDIA, WHICH, IN THE STUDY MATE RIAL FOR INTERNATIONAL TAX - PRACTICE AT PAGE 3.452, STATES AS FOLLOWS: CARRY FORWARD/CA RRY BACK OF EXCESS FOREIGN TAX CREDIT A TAXPAYER CANNOT CLAIM FULL FTC IN INDIA IF THE AMO U NT OF INCOME T AX PAID IN THE FOREIGN COUNTRY IS HIGHER THAN THE AMOUNT OF IN COME TAX PAYABLE IN INDIA ON THAT FOREIGN SOURCE INCOME. SOME COUNTRIES ALLOW CARRY FORW ARD/CARRY BACK OF EXCESS FOREIGN TAX CREDIT. SUCH OPTION IS NOT AVAILABLE IN INDIA AND THUS , RESULT IN ADD ING TO THE COST OF THE TAXPAYER IN INDIA. [EMPHASIS, BY UNDER LINING, IS SUPPLIED BY US] 28. CLEARLY, THEREFORE, THE SCHEME OF TAX CREDITS, AS EVIDEN T FROM THE INTERNATIONAL TAX LITERATURE AND MODEL CONVENTION COMMENTARIES, DO NOT ENVISAGE A NY SITUATION I N WHICH THE EXCESS FOREIGN TAX CREDIT CAN RESULT IN A SITUATIO N IN WHICH A TAXPAYER CAN GET REFUNDS, FROM THE EXCHEQUER OF RESIDENCE JURISDICTIONS, IN RESPECT OF TAXES PAID TO THE EXCHEQUERS OF THE SOURCE JURISDICTIONS. IF THE TAXES PAID IN T HE SOURCE JURI SDICTIONS COULD BE REFUNDED IN THE RESIDENCE JURISDICTIONS, IT WOULD HAVE BEEN PERHAPS POSSIBLE TO BE FISCALLY DOMICILED IN A NO TAX OR LOW TAX TREATY PARTNER JURISDICTION AND TAKE REFUND OF ALL THE TAXES PAID IN ALL THE TREATY PARTNER TAX J U RISDICTIONS. W HEREVER TAX CREDITS EXCEED THE TAX LIABILITY, AT BEST A CARRY FORWARD OR BACK OF EXCESS TAX CREDIT CAN BE GIVEN - WHEN PERMITTED BY THE DOMESTIC LAW, O R AT BEST WHEN NOT RESTRICTED BY THE DOMESTIC LAW. 29. AT THIS JUNCTURE, WE WOULD LIKE TO BRIEFLY TOUCH UPON THE PLEA OF THE LEARNED COUNSEL THAT THE ASSESSEE WILL BE SUBJECTED TO DOUBLE JEOPARDY INASMUCH AS, ON THE ONE HAND, THE ASSESSEE HAS BEEN SUBJECTED TO TAX A BROAD IN RESPECT OF THE FOREIGN - SOURCED INCOME, AND, ON THE OTHER HAND, THE SAI D INCOME WILL A LSO END UP REDUCING ITS LOSSES CARRIED FORWARD, AND THUS ENHAN CE THE DOMESTIC TAX LIABILITY. IN LEGAL PARLANCE, DOUBLE JEOPARDY HAS VERY NARROW CONNOTATION IN THE CRIMINAL LAW, BUT, LEST SUCH TECHNICALITIES MAY DETAIN THE FLOW OF OUR DISCUSS I ON, LET US TAK E THIS EXPRESSION IN A LIBERAL SENSE OF DOUBLE DISADVANTAGE. T HERE ARE TWO IMPORTANT POINTS IN THIS REGARD. THE FIRST POINT IS THAT THE DOUBLE JEOPARDY, IF ONE CA N CALL THESE TWO ASPECTS OF IMPACT ON THE TAX LIABILITY OF THE TAXPAYER AS A D O UBLE JEOPARDY, WILL ARISE IN THE YEAR IN WHICH THE LOSSES INCURRED IN INDIA IN THIS YEAR WILL BE ELIGIBLE FOR SET OFF AGAINST THE ELIGIBLE PROFITS - IF AT ALL SO HAPPENS. FOR EXAMPL E, IF IN THE CURRENT YEAR, TOTAL LOSSES ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 22 OF 49 INCURRED BY THE ASSESSEE (EXCLUDING THE PROFITS OF RS 50 CRORES SO TAXED ABROAD, AND REDUCED FROM THE LOSSES CAR RIED FORWARD) ARE RS 100 CRORES, AND THE ASSESSEE HAS A TOTAL TAXABLE INCOME (BEFORE SETTING OFF THE LOS SES CARRIED FORWARD) OF RS 150 CRORES IN THE NEXT YEAR, THE ASSESSEE WILL H A VE ONLY RS 100 CRORES SET OFF AGAINST THAT YEARS INCOME WHEREAS ASSESSEES ACTUAL ELIGIBILITY FOR SET OFF, EXCLUDING THE FOREIGN PROFIT OF RS 50 CRORES, COULD HAVE BEEN RS 150 CRO RES. THATS THE YEAR IN WHICH THE SO - CALLED DOUBLE JEOPARDY WILL HIT THE AS S ESSEE. IN CASE THE ASSESSEE IS NOT TO MAKE ANY PROFITS DURING THE PERIOD ELI GIBLE FOR SET OFF, THERE CANNOT BE ANY DOUBLE JEOPARDY. THEREFORE, THE SO CALLED DOUBLE JEOPARDY, AS IN THE PRESENT YEAR, IS NOTHING MORE THAN A MERE POSSIBILITY, IN THE REALM OF A CONTINGENT EV ENT. THE TAXATION RELIEFS CANNOT BE ON THE BASIS OF POSSIBILIT IES. THE SECOND POINT IS THAT ONE HAS TO SEE THE LEGAL POSITION IN THE YEAR IN WHICH THE DOUBLE JEOPARDY ACTUALLY HITS THE ASSESSEE. RULE 128 OF THE INCOME TAX RULES 1962, INTRODU C ED WITH EFFECT FROM 1 ST APRIL 2017, SPECIFICALLY RESTRICTS THE FOREIGN TAX C REDIT IN THE MANNER AND TO THE EXTENT AS SPECIFIED THEREIN [SEE RULE 128(1)], AND, THEREFORE, SO FAR A S THE ASSESSMENT YEARS 2017 - 18 ONWARD ARE CONCERNED, A TAXPAYER CANNOT EVEN CLAIM CARRY FO RWARD OF THE EXCESS TAX CREDITS. IT IS WELL SETTLED IN LAW, AN D AS PROVIDED IN THE RELEVANT TREATY ARTICLE ITSELF, FOREIGN TAX CREDITS ARE ADMISSIBLE SUBJECT TO THE DOMES TIC LAW PROVISIONS INASMUCH AS THESE CREDITS ARE SUBJECT TO THE PROVIS I ONS OF THE LAW REGARDING T H E ALLOWANCE AS A CREDIT AGAINST INDIAN TAX OF TAX PAID IN A TERRITORY OUTSIDE INDIA [ARTICLE 24(2)]. SO FAR AS THE PERIOD PRIOR TO 1 ST APRIL 2017 IS CONCERNED, WITHOUT EXPRESSING ANY MERITS ON THE ADMISSIBILITY OR OTHERWISE , OF CARRY ING FORWA RD FOREIGN TAX CREDITS , ALL WE CAN SAY IS THAT EVEN FOR SUCH A DOUBLE DISADVANTAGE, THE DOUBLE DISADVANTAGE COULD AT BEST ARISE IN WHICH THE TAXPAYER IS DENIED THE FULL SET - OFF O F THE CARRIED FORWARD LOSS - EXCLUDING THE FOREIGN INCOME IN RES P ECT OF WHICH F OREIGN TAX CREDIT IS DECLINED. THIS ISSUE CANNOT, THEREFORE, B E ADDRESSED IN THE PRESENT ASSESSMENT YEAR. THE CLAIM OF THE ASSESSEE REGARDING DOUBLE DISADVANTAGE, IN TERMS OF TAX ATION OF AN INCOME ABROAD AND THE CORRESPONDING REDUCTION IN LO S SES CARRIED FO RWARD HAVING TAX IMPLICATIONS IN THE SOURCE JURISDICTION, IS T HUS PREMATURE IN ANY CASE. FOR THIS REASON, WHILE WE REJECT THE PLEA OF THE ASSESSEE AT PRESENT, WE LEAVE THE ISSUE OPEN FOR ADJUDICATION, IF AND SO NECESSARY, AT AN APPROPRIATE S T AGE. THE ISSUE WHETHER IN THE ABSENCE OF ANY SPECIFIC LEGAL BAR ON CARRY ING FORWARDS ON FOREIGN TAX CREDITS, THE TAXPAYER CAN NEVERTHELESS, ON THE GROUNDS OF EQUITY AND DOUBLE DISADVANTAGE, CLAIM THO SE TAX CREDITS IN THE YEAR IN WHICH THE TAXPAYER IS ACTU A LLY SUBJECTED TO A HIGHER TAX BURDEN ON ACCOUNT OF REDUCED ELIGIBLE SET OFF OF LOSSES CARRIED FORWARD, THUS PERHAPS REMAINS AN OPEN ISSUE FOR ADJUDICATION. IN ALL FAIRNESS, WE MUST ADD THAT, AS WE HA VE SEEN IN OUR SURVEY OF ACADEMIC LITERATURE ON THE SUBJ E CT A SHORT WHI LE AGO, ACCORDING TO ONE SCHOOL OF THOUGHT, IN THE ABSENCE OF DOMESTIC LAW PROVISIONS FOR CARRY FORWARD OR BACK FOR OFFSET FOR FOREIGN TAX CREDITS, THE EXCESS TAX CREDITS ARE LOST. TO W HAT EXTENT THIS SCHOOL OF THOUGHT IS CORRECT OR NOT IS A CALL TO BE TAK EN AS AND WHEN THE OCCASION COMES FOR THAT ADJUDICATION. OUR O BSERVATIONS ABOVE ARE IN THE CONTEXT OF HOLDING THAT NO DOUBLE DISADVANTAGE TO THE ASSESSEE, BY DENIAL OF THE TAX CREDIT, AT LE AST IN THE PRESENT ASSESSMENT YEAR, AND, THESE OBSER V ATIONS SHOULD BE SEEN IN THIS CONTEXT ALONE. AS TO WHAT IS THE IMPACT OF THI S DEDUCTION BEING CL AIMED ON THE POSSIBLE CLAIM OF THE ASSESSEE WITH RESPECT TO THE CARRY FORWARD OF THE TAX CREDIT, EVEN IF THAT BE ADMISSIBLE, IT MAY INDEED APPEAR THAT ONCE THE ASSESSEE IS AL LOWED A DEDUCTION FOR EXPENSES, THE CLAIM OF THE ASSESSEE FOR CARRY ING FORWARD OF THE TAX CREDIT, WHETHER PER MISSIBLE IN THE PRE 1 ST APRIL 2017 PERIOD OR NOT , MAY CEASE TO BE INADMISSIBLE FOR THE SHORT REASON OF THIS DEDUCTION HAVING BEEN AL L OWED ALONE. IT COULD BE SO FOR THE REASON THAT THERE MAY BE NO DOUBLE DISADV ANTAGE IN THAT CASE. HOWEVER, WE NEED NOT DEAL WITH THAT ASPECT OF THE MATTER AT THIS STAGE. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 23 OF 49 30. LET US NOW TAKE UP THE JUDGMENT RENDERED BY HONBLE KARNATAKA HIGH COURT IN WIPRO S CASE (SUPRA) . 3 1 . WE MAY, AT THE OUTSET, POINT OUT THAT THE QUESTIO NS WH ICH CAME UP FOR CONSIDERATION BEFORE HONBLE KARNATAKA HIGH COURT, WAS WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT CREDIT FOR INCOME TAX PAID IN A COUNTRY OUTSIDE INDIA IN REL A TION TO AN INC OME ELIGIBLE FOR DEDUCTION UNDER SECTION 10A WOULD NOT BE AVAI LABLE UNDER SECTION 90(1)(A). THEIR LORDSHIPS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE AND CONCLUDED THAT MERELY BECAUSE THE EXEMPTION HAS BEEN GRANTED IN RESPECT OF THE TAX A BILITY OF THE SAID SOURCE OF INCOME, IT CANNOT BE POSTULATED THAT THE A SSESS EE IS NOT LIABLE TO TAX. THE SAID EXEMPTION GRANTED UNDER THE STATUTE HAS THE EFFECT OF SUSPENDING THE COLLECTION OF INCOME TAX FOR A PERIOD OF 10 YEARS. IT DOES NOT MAKE THE SAID INCOME NOT LEV IABLE TO INCOME TAX. THE SAID EXEMPTION GRANTED UNDER THE STAT UTE STANDS REVOKED AFTER A PERIOD OF 10 YEARS. THEREFORE, THE CASE FALLS UNDER SECTION 90(1)(A)(II ) . WHATEVER OBSERVATIONS, RELIED UPON BY THE LEARNED COUNSEL, HAVE BEEN MADE BY THEIR LORDSHIP S ARE THE OBSERVATIONS MADE IN THIS CONTEXT, AND, SHOULD, THER EFORE, BE CONSTRUED AS SUCH ONLY. AS OBSERVED BY HONBLE SUPREME COURT IN THE CASE OF CIT VS SUN ENGINEERING WORKS (PVT) LTD [(1992) 198 ITR 297 (SC)], IT IS NEITHER DESIRABLE N OR PERMISSIBLE TO PICK OUT A WORD OR A SENTENCE FROM THE JUDGMENT OF TH IS CO URT, DIVORCED FROM THE CONTEXT OF THE QUESTION UNDER CONSIDERATION AND TREAT IT TO BE THE COMPLETE 'LAW' DECLARED BY THIS COURT. THE JUDGMENT MUST BE READ AS A WHOLE AND THE OBSER V ATIONS FROM TH E JUDGMENT HAVE TO BE CONSIDERED IN THE LIGHT OF THE QUES TIONS WHICH WERE BEFORE THIS COURT. A DECISION O F THIS COURT TAKES ITS COLOUR FROM THE QUESTIONS INVOLVED IN THE CASE IN WHICH IT IS RENDERED AND WHILE APPLYING THE DECISION TO A LATTE R CASE, THE COU RTS MUST CAREFULLY TRY TO ASCERTAIN THE TRUE PRINCIPLE LA ID DO WN BY THE DECISION OF THIS COURT AND NOT TO PICK OUT WORDS OR SENTENCES FROM THE JUDGMENT, DIVORCED FROM THE CONTEXT OF THE QUESTIONS UNDER CONSIDERATION BY THIS COURT, TO SUPPORT THEIR REASONIN GS. IN H.H. MAHARAJADHIRAJA MADHAV RAO JIWAJI RAO SCINDIA BAHA DUR V. UNION OF INDIA [1971] 3 SCR 9 THIS COURT CAUTIONED. IT IS NOT PROPER TO REGARD A WORD, A CLAUSE OR A SENTENCE OCCURRING IN A JUDGMENT OF THE SUPREME COURT, DIVORCED FROM I T S CONTEXT, AS CONTAINING A FULL EXPOSITION OF THE LAW ON A QUESTION WHE N THE QUESTION DID NOT EVEN FALL TO BE ANSWERED IN THAT JUDGMENT . IT WOULD, THEREFORE, BE GROSSLY INCORRECT TO PICK OUT SOME OBSERVATIONS FROM THIS JUDICIAL PRECEDENT AND TREAT THE S A ME AS COMPLETE LAW DECLARED BY THE HONBLE HIGH COURT. WE MAY ALSO, AT THIS STAGE, TAKE NOTE OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. SUDHIR JAYANTILAL MULJI [(1995) 214 ITR 154 (BOM)] WHEREIN IT IS OBSERVED THAT , A JUDICIAL PRECEDENT I S ONLY ' AN AUTH ORITY FOR WHAT IT ACTUALLY DECIDES AND NOT WHAT MAY COME TO FO LLOW FROM SOME OBSERVATIONS WHICH FIND PLACE THEREIN '. IN ANY CASE, WE MUST ALWAYS BEAR IN MIND THE FUNDAMENTAL FACT THAT AT BEST THE WIPRO DECISION (SUPRA) CAN BE SEEN AS AN AUT H ORITY FOR FULL TAX CREDIT - SOMETHING SIMILAR TO INDIAN TAX CREDITS UNDER THE IN DO NA MIBIAN TAX TREATY DISCUSSED IN PARAGRAPH 21 EARLIER, RATHER THAN AN ORDINARY TAX CREDIT, ON ACCOUNT OF PECULIARITIES OF SECTION 10A EXEMPTION. A FULL TAX C REDIT WILL MEAN T HAT IRRESPECTI VE OF THE ACTUA L RESIDENC E JURISDICTION TAX LIABILITY IN RESPECT OF AN INCOME TAXED IN THE TREATY PAR TNER JURISDICTION, THE RESIDENCE JURISDICTION WILL GRANT CREDIT FOR THE ENTIRE TAX PAID IN THE SOURCE JURISDICTION , BUT E VEN TH EN , AS IS THE GLOB AL CONSENS US , FORE I GN T A X CR EDIT CANNOT EXCEED THE DOMESTIC TAX LIA BILITY - SAVE AND EXCEPT FOR CARRY FORWAR D OR CARRY BACK OF THE EXCESS FOREIGN TAX CREDITS . THAT PROPOSITION REMAINS INTACT . A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF MAHARASH T RA STATE ELECT RICITY BOARD VS. JCIT [(2002) 82 ITD 422 (MUM )], HAS , SPEAKING TH ROUGH SHRI M K C HATURVEDI, THE THEN VICE PRES I DENT, OBSERVED THAT LEGAL ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 24 OF 49 PRECEDENTS ARE LIKE STATISTICS. IF YOU M ANIPULATE THEM, YOU C AN PROVE ANYTHING. EACH CASE DEPENDS ON IT S OWN FACTS, AN D A CLOSE SIMILARITY BETWEEN ONE CASE AND ANOTHER IS NOT ENOUGH BECAUSE EVEN A SINGLE SIGNIFICANT DETAIL MAY ALTER THE ENTIRE ASPECT. MINUTEST DIFFERENCES ON FACTS HAVE SWAYED T HE JUDICIAL DECISIONS ONE WAY OR THE OTHER. IN DECIDING SUCH CAS ES, ONE SHOULD AVOID TEMPTATION AS SAID BY CORDOZO, BY MATCHING THE COLOUR OF ONE CASE AGAINST THE COLOUR OF ANOTHER . LET US , IN THIS LIGHT , LOOK AT A VERY SIGNIFICANT FACET OF THE CASE , SO FAR AS RELEVANT FOR OUR FACT SITUATION . AS A SIMPLE LOOK AT TH E FI GURES SET O UT IN THE SAID DECISION WOULD SHOW, THE AMOUNT OF FOREIGN TAX CREDIT CLAIME D WAS SUBSTANTIALLY LESS THAN THE INDIAN TAX LIABILITY. FOR EXAMPLE, IN THE ASSESSMENT YEAR 2003 - 04, THE RETURNED INCOME OF THE ASSESSEE WAS RS 164.86 CRORES, AND THE FOR EIGN TAX CR EDIT WAS RS 20.99 CRORES. NONE OF THE SITUATIONS DEALT WITH IN THE SAID ORD ER WAS TO RESULT IN A REFUND IN INDIA OF THE TAXES PAID ABROAD. FOR THIS SHORT REASON ALONE, THE LEARNED COUNSEL M UST FAIL IN HIS AMBITIOUS ARGUMENT. OF C OURSE, T HERE ARE MANY DECIS IONS THAT HE HAS CITED IN WHICH, WHILE FOLLOWING THE WIPRO DECISION, THIS ASPECT OF THE MATTER HA S NOT BEEN LOOKED AT , BUT THEN NEITHER THERE IS A CATEGORICAL DECISION , IN THOSE JUDICIAL PRECEDENTS, THAT WHEN THE FOREIGN TAX CREDITS EXCEED D OMES T IC TAX L IA BILITY , THE ASSESSEE WILL BE ENTITLED TO REFUND IN THE RESIDENCE JURISDICTION, NOR, JU ST BECAUSE THE SE COORD INATE BENCHES HA VE NO T EXAMINED THIS ASPECT OF THE MATTER, WE CANNOT EXAMINE THIS ASPECT EITHER. 3 2 . IN VIEW OF THE ABOVE DISCUSSIO NS, IN OUR HUMB LE UNDERSTANDING, U NDER NO CIRCUMSTANCES, THEREFORE, THIS DECISION CAN BE SEEN AS A JUDICIAL PRECEDENT IN SUPPORT OF THE PROPOSI TION THAT THE T AXES PAID OUTSIDE INDIA CAN BE REFUNDED IN INDIA IN A SITUATION IN WHICH THE INCOME HAS SUFFERED T AX A BROAD BUT H AS NOT BEEN SUBJECTED TO TAX IN INDIA, WHICH PRECISELY IS THE ISSUE BEFORE US. THE INFERENCE THAT THE SITUATION ENVISAGED IN THE WIPRO DECISION CAN ALSO RESULT IN A REFUND SITUATION OF THE TAXES PAID ABROAD IS NEITHER DEALT WITH BY THE SAID DECI SION NOR IM PLICIT FROM THE CONCL USIONS ARRIVED THEREIN - AND, IN ANY CASE, CONTRARY TO THE FIRST PRINCIPLES. IT IS OUR CONSIDERED VIEW THAT T H E QUESTION A S TO WHETHER A REF UND CAN BE GRANTED BY THE IN DIAN TAX ADMINISTRATION A S A RESULT OF F OREIGN TAX C REDI TS BEING IN EXCESS OF THE DOMESTIC TAX LIABILI TY , AS IS CLAIMED TO BE SETTLED IN FAVOUR OF THE ASSESSEE BY T HIS DECISION, HAS NOT BEEN THE SUBJECT MATTER OF CONSIDERATION AND HAS BEEN THUS LEFT INTACT BY THIS JUDICIAL PRE CEDENT. 33. IN ANY CASE, IN THE PRESENT CAS E , THERE IS A SPECI FIC TAX CREDIT ENTITLEMENT REQUIREMENT OF THE UK SOURCED INCOME BEING SUBJECTED TO TAX IN INDIA , WHICH WAS NOT THE CASE BEFORE THEIR LORDSHIP IN T HE WIRPOS CASE (SUPRA) . 3 4 . BE THAT AS IT MAY, IT IS ALSO ESSENTIAL TO BEAR IN MIND TH E FACT THAT THE SAID JUDICIAL PRECEDENT FROM A NON - JURISDICTIONAL HI GH COURT. IT IS NECESSARY TO DEAL WI TH THIS ASPECT FOR TWO FUNDAMENTAL REASONS . THE F IRST REASON IS THAT WHETHER OR NOT THIS D ECISION APPLIES TO THE PRESENT FACT SITUATION, THERE ARE CERTA INLY OTHER ASPECTS OF DECISIONS, WHICH MAY BE RELEVANT AND CRITICAL IN DIFFERENT FACETS OF FOREIGN TAX CREDIT SITUATIONS . THEREFORE, ONE HAS TO TAKE A CONSCIOUS CALL ABOUT THE BINDING NATURE OF T HIS JUDICIA L PRECEDENT OUTSIDE OF HON BLE KARN ATAKA HIGH COUR T JURISDICTION . THE SECOND REASON IS THAT THIS JUDICIAL PRE CEDENT IS WIDEL Y PERCEI VED TO HOLD , EVEN THO UGH WRONGLY SO, THAT THE FULL TAX CREDIT IS REQUIRED TO BE GIVEN IN MOST OF THE TREATY SITUATIONS BASED ON THE WORD ING OF THE TREATIES , GO ING MUCH BEYOND THE TAX CREDIT PROP ORTIONATE TO THE RELATED DOMESTIC TAX LIABILITY - AS IS , BY AND LARGE, SCHEME OF INDIAN TAX T REATIES, AN D FURTHER , THIS TREATMENT MAY EVEN RESULT IN A REFU ND OF TAXES PAID ABROAD. THE MATTER BEING OF WIDE RAMIFICATIONS NO T O NL Y ON FUNDA MENTALS ON THE SCHEME OF TAX TREATIES ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 25 OF 49 BEING GIVEN EFFECT IN INDIA BUT ALSO HAS A HUGE IMPACT ON THE NATIONAL EXCHEQUER , THE MATTER DESERVES TO BE DEALT WITH IN SOME DETAIL. LET US , IN THIS BACKGROUND, EXAMI NE THE BINDING NATURE OF THIS JUDIC IAL PRECEDENT O UTSIDE HON BLE KARNATAKA HIGH COURT S JU RISDICTION. WHILE DEALING WITH JUDICIAL PRECEDENTS FROM NON - JURISDICTIONAL HIGH COURTS, WE MAY USEFULLY TAKE OF OBSERVATIONS OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS THANA ELECTRICITY CO LTD [(1994) 206 ITR 727 (BOM)], TO THE EFFECT THE DE CISION OF ONE HIGH COURT IS NEITHER BINDING PRECEDENT FOR ANOTHER HIGH COURT NOR FOR THE COURTS OR THE TRIBUNALS OUTSIDE ITS OWN T ERRITORIAL JURISDICTION. IT IS WELL - SETTLED THA T THE DECISION OF A HI GH COURT WILL H AVE THE FORCE OF BINDING PRECEDENT ONLY IN THE STA TE OR TERRITORIES ON WHICH THE COURT HAS JURISDICTION . IN OTHER STATES OR OUTSIDE THE TERRITORIAL JURISDICTION OF THAT HIG H COURT IT MAY, AT BEST, HAVE ONLY PERSUASIVE E FFECT . UNLIKE THE DE CISIONS OF HON BLE JURISDICTIONAL HIGH COURT, WHICH BIND US IN LE TTER AND IN SP I RIT ON ACCOUNT OF THE BINDING FORCE OF LAW, THE DECISIONS OF HONBLE NON - JURISDICTIONAL HIGH COURT ARE FOLL OWED BY THE LOWER AUTHORITIES ON ACCOUNT OF THE PERSUASIVE EFFEC T OF THESE DECISIONS AND ON ACCOUNT OF THE CONCEPT OF JUDICIAL PROPRIETY - FACTORS W HICH ARE INHERENTLY SUBJECTIVE IN NATURE. QUIT E CLEARLY, THEREFORE, THE APPLICABILITY OF THE NON - JURISDICTIO NAL HIGH COURT IS NEVER ABSOLUTE, WITHOUT EXCEP TIONS AND AS A MATTER OF COURSE. THAT IS THE PRINCIPLE IMPLICIT IN HONBLE SUPREME COURTS JUDGMENT IN TH E CASE OF ACIT VS SAURASHTRA KUTCH STOCK EXCHANGE LTD [(2008) 305 ITR 227 (SC)] WHEREIN THEIR LORDSHIPS HAVE UPHELD THE PLEA THAT NON - CONSIDERATION OF A DECISION OF JURISDI CTIONAL COURT O R OF THE SUPREME COURT CAN BE SAID TO BE A MISTAKE APPARENT FROM THE RECORD . THE DECISIONS OF HONBLE NON - JURISDICTIONAL HIGH COURTS ARE THUS PLACED AT A LEVEL CERTAINLY B ELOW THE HONBLE HIGH COURT, AND ITS A CONSCIO US CALL THAT IS REQUIR ED TO BE TAKEN WITH RESPECT TO THE QUESTION WHETHER , ON THE FACTS OF A P ARTICUL AR SITU ATION, THE NON - JURISDICTIONAL HIGH COURT IS REQUIRED TO BE FOLLOWED . THE DECISIONS OF NON - JURISDICTIO NAL HIGH COURTS DO NOT, THEREFORE, CONSTITUTE A BINDING JUDICIAL PREC EDENT IN ALL SI TUATIONS. TO A FORUM LIKE US, FOLLOWING A JURISDICTIONAL HIGH COURT D ECISION IS A COMPULSION OF LAW AND ABSOLUTELY SACROSANCT THAT WAY, BUT FOLLOWING A NON - JURISDICTIONAL H IGH COURT IS A CALL OF JUDICIAL PROPRIETY WHICH IS NEVER ABSOLUTE , AS IT IS INHERENT LY REQUIRED TO BE B LENDED WITH MANY OTHER IMPORTANT CONSIDERATIONS WI THIN THE FRAMEWORK OF LAW, OR SOMETHING WHICH CANNO T BE, IN DESERVING CASES, DEVIATED FROM. THE R ATIONALE JUSTIFYING THE APPROACH THAT NON - JURISDICTIO NAL HIGH COURTS ARE TO BE FOLLOWED PR OCEEDS, INTER ALIA, ON THE BASIS THAT, AS HELD BY HONBLE SUPRE ME COURT IN THE CASE OF CIT VS VEGETABLE PRODUCTS LTD (88 ITR 192), WHEN TWO INTERPRETATIONS ARE POSSI BLE , AND ONE OF THE VIEWS IS IN FAVOUR OF THE ASSESSE E, THE VIEW IN FAVOUR OF THE ASSESSE E, AND A DECISION OF HONBLE NON - JURISDICTIONAL HIGH COURT IS RE QUIRED TO BE TREATED AT LEAST AS A POSSIBLE VIEW OF THE MATTER. THIS PRINCIPLE HAS, HOWEVER, TWO MAJOR EXCEPTIONS. IT HAS BEEN HELD THAT THE RULE OF RESOLV ING AMBIGUITIES IN FAV OUR OF TAX - PAYE R DOES NOT APPLY TO DEDUCTIONS, EXEMPTIONS , AND EXCEPTIONS WHICH ARE ALLOWABLE ONLY WHEN PLAINLY AUTHORISED. THIS EXCEPTION, LAID DOWN IN LITTMAN VS. BARRON 1952(2) A IR 393 AND FOLLOWED BY APEX COURT IN MANGALORE CHEMIC ALS & FERTILIZERS LTD. VS. DY. COMMR. OF CT (1992) SUPPL. (1) SCC 21 AND NOVOPAN INDIA LTD. VS. CCE & C 1994 (73) ELT 769 (SC), HAS BEEN SUMMED UP IN THE WORDS OF LORD LOHEN, ' IN CASE OF AMBIGUITY, A TAX ING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF A TAX - PA YER DOES NOT APPLY TO A PROVISION GIV ING TAX - PAYER RELIEF IN CERTAIN CASES FROM A SECTION CLEARLY IMPO SING LIABILITY '. THE RULE OF RESOLVING AMBIGUITY IN FAVOUR OF THE ASSESSEE DOES NOT ALSO APPLY WHERE THE INTERPRETATION IN FAVOUR OF ASSESSEE WILL HAVE TO TREAT THE PROVISIONS UNCONSTITUTIONA L, AS HELD IN THE MATTER OF STATE OF M.P. VS. DADABHOY'S NEW CHIR MIRY PONRI HILL COLLIERY CO. LTD. AIR 1972 (SC) 614 . ONCE IT IS CLEAR THAT THIS PRINCIPLE DOES NOT AP PLY TO A SITUATION IN WHICH, TO BORROW THE WORDS OF L ORD LOHEN, A PROVISIO N GIVING TAX - PA YER RELIEF IN CERTAIN ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 26 OF 49 CASES FROM A SECTION CLEARLY IMPOSING LIABI LITY, AND IT IS ALSO CLEAR THAT WE ARE DEALING WITH THE FOREIGN TAX CREDIT, WHEREIN RELIEF IS BEING GIVEN FROM UNAMBIGUOUS LEVY OF TAX, THIS PRINCIPLE OF RESOLVING AMBIGUITY D OES NOT COME IN TO PLAY AT ALL. TO THIS EXTENT, THE JUSTIFICATION FOR FOLLOWING NON - JURISDICTIONAL HIGH COURT JUDGMENTS DOES NOT HOLD GOOD AS SUCH , AND ONE OF THE FOUNDATIONAL PROPOS ITION S IN SUPPORT OF FOLLOWING THE NON - JURISDICTIONAL HIGH COURTS CEASES TO HOLD GOO D IN L AW. 3 5 . IT IS INTERESTING TO NOTE THAT IN THE CASE OF WIPRO LTD (SUP RA), IN PARAGRAPHS 58 TO 63, THEIR LORDSHIPS HAVE PROCEEDED TO INTERPRET THE PROVISIONS OF INDIA USA DOUBLE TAXATION AVOIDANCE AGREEMENT [ (1991) 187 I TR (STAT) 102; INDO US TAX TREATY , IN SHORT ] AND INDIA CANADA DOUBLE TAXATION AVOIDANCE AGREEMENT [(1998) 229 ITR (STAT) 44; INDO CANADIAN TAX TREATY , IN SHORT] AND IT IS ON THE OBSERVATIONS SO MADE IN T HE COURSE OF THIS INTERPRETATION THAT THE LEARNED COU NSEL SE EKS TO RELY UPO N. WHILE SO INT ERPRE TING THE PROVISIONS OF THE TAX TREATIES, THEIR LORDSHIPS HAVE SIMPLY PROCEEDED WITHOUT TAKING INTO ACCOUNT PECULIARITIES OF INTERPRETATION OF TAX TREATIES WHICH HAVE BEEN HIGHLIGHTED, INTER ALIA , BY HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS AZADI BACHAO ANDOLAN [(2004) 263 ITR 702 (SC) AT PAGE 751] AS FO LLOWS: A: INTERPRETATION OF TREATIES THE PRINCIPLES ADOPTED IN INTERPRETATION OF TREATIES ARE NO T THE SAME AS THOSE IN INTERPRETATION OF STATUTORY LE GISLATION. WHILE COMME NTING ON THE IN TERPRETATION OF A TREATY IMPORTED INTO A MUNICIPAL LAW, FRANCIS BEN NION OBSERVES: 'WITH INDIRECT ENACTMENT, INSTEAD OF THE SUBSTANTIVE LEGISLATION TAKING THE WELL - KN OWN FORM OF AN ACT OF PARLIAMENT, IT HAS THE FORM OF A TREATY. IN OTHER WOR DS THE FORM AND LANGUAGE FOUND SUITABLE FOR EMBODYING AN INTER - NATIONAL AGREEMENT BECOME, AT THE STROKE OF A PEN, ALSO THE FORM AND LANGUAGE OF A MUNICIPAL LEGISLATIVE INSTRUMENT. I T IS RATHER LIKE SAYING THAT, BY ACT OF PARLIAMENT, A WOMAN SHALL BE A MAN. INCONVENIENCES MAY ENSUE. ONE INCONVENIENCE IS THAT THE INTERPRETER IS LIKELY TO BE REQUIRED TO COPE WITH DISORGANIZED COMPOSITION INSTEAD OF PRECISION DRAFTING. THE DRAFTING OF TR EATIES IS NOTORIOUSLY SLOPPY USUALLY FOR VERY GOOD RE ASON. TO GET AGREEMENT , POLITIC UNCER TAINTY IS CALLED FOR. . . THE INTERPRETATION OF A TREATY IMPORTE D INTO MUNICIPAL LAW BY INDIRECT ENACTMENT WAS DESCRIBED BY LORD WILBERFORCE AS BEING 'UNCONSTRAINE D BY TECHNICAL RULES OF ENGLISH LAW, OR BY ENGLISH LE GAL PRECEDENT, BUT CON DUCTED ON BROAD PRINCIPLES OF GENERAL ACCEPTATION'. THIS ECHOES THE OPTIMISTIC DIC TUM OF LORD WIDGERY C. J. THAT THE WORDS 'ARE TO BE GIVEN THEIR GENERAL MEANING, GENERAL TO LAWYER AND LAYMAN ALIKE. . . THE MEANING OF THE DIPLOMAT RAT HER THAN THE LAWYER' .' (SEE FRANCIS B ENNION, STATUTORY INTERPRETATION, PAGE 461 (BUTTERWORTHS, 1992, SEC OND EDITION) B: 91. IN JOHN N. GLADDEN V. HER MAJESTY THE QUEEN 85 D.T.C. 5188 THE PRINCIPLE OF LIBERAL INTERPRETATION OF TAX TREATIES WAS REITERATED BY THE FEDERAL COURT, WHICH OBSERVED : ' CONTRARY TO AN ORDINARY TAXING STATUTE A TAX TREATY OR CONVENT ION MUST BE GIVEN A LIBERAL INTERPRETATION WITH A VIEW TO IMPLEMENTING THE TRUE INTENTIONS OF THE P ARTIES. A LITERAL OR LEGALISTIC INTERPRETATION MUST B E AVOIDED WHEN THE BASI C ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 27 OF 49 OBJECT OF THE TREATY MIGHT BE DEFEATED OR FRUSTRATED INSOFAR AS THE PARTICULAR ITEM UNDER CONSIDERATION IS CONCERNED. (P. 5190)' 92. JOHN N. GLADDEN CASE (SUPRA) WAS A CASE WHE RE AN AMERICAN CITIZEN RESIDENT IN U.S.A. OWNED SHARE S IN TWO PRIVATELY CONT ROLLED CANADIAN COMPANIES. UPON HIS DEATH, THE QUESTION AROSE AS TO THE CAPITAL G AINS WHICH WOULD ARISE AS A RESULT OF THE DEEMED DISPOSITION OF THE SAID SHARES. THE CANADIAN REVEN UE TOOK THE POSITION THAT THERE WAS A DEEMED DISPOSIT ION OF THE SHARES ON TH E DEATH OF THE TAX PAYER AND CAPITAL GAINS TAX WAS CHARGEABLE ON ACCOUNT OF THE D EEMED DISPOSITION. THIS VIEW OF THE REVENUE WAS UPHELD IN APPEAL BY THE TAX COURT OF CANADA. UPON F URTHER APPEAL TO THE FEDERAL COURT IT WAS HELD THAT C APITAL GAINS WERE EXEMP T FROM TAX UNDE R THE CANADA - U.S.A. TAX TREATY AS CANADA HAD NO CAPITAL GAINS TAX WHEN IT ENTERED THE TREATY AND IT COULD NOT UNILATERALLY AMEND ITS LEGISLATION. THE ARGUMENT WHICH PREVAILED WITH THE TRIAL COURT IN THIS CASE WAS SIMIL AR TO THE ONE WHICH PRE VAILED WITH THE HIGH COURT IN THE MATTER BEFORE US. INTERPRETING THE RELEVANT ART ICLE OF THE DOUBLE TAXATION AVOIDANCE TREATY THE TRIAL COURT HELD : 'THE PARTIES COULD NOT HAVE NEG OTIATED TO AVOID DOUBLE TAXATION ON A TAX WHICH DID N OT EXIST IN CANADA'. TH E FEDERAL COURT EMPHASISED THAT IN INTERPRETING AND APPLYING TREATIES THE COURTS SHOULD BE PREPARED TO EXTEND 'A LIBERAL AND EXTENDED CONSTRUCTION' TO AVOID AN ANOMALY WHICH A CONT RARY CONSTRUCTION WOULD LEAD TO. THE COURT RECOGNIZED THAT 'WE CANNOT EXPECT TO FIND THE SA ME NICETY OR STRICT DEFINITION AS IN MODERN DOCUMENTS, SUCH AS DEE DS, OR ACTS OF PARLIAMENT; IT HAS NEVER BEEN THE HABIT OF THOSE ENGAGED IN DIPLOMACY TO USE LEGAL A CCURACY BUT RATHER TO ADOPT MORE LIBERAL TERMS '. [EM PHASIS, BY UNDERLINING, SUPPLIED BY US ] 3 6 . SIMILARLY, IN THE CASE OF UNION OF INDIA VS RAM JETHMALANI [(2011) 12 TAXMAN.COM 27 (SC)], HONBLE SUPREME COURT HAS OBSERVED AS FOLLOWS: 60. ARTICLE 31, 'GENERAL RULE OF INTERPRETATION', OF THE VIENNA CONVE NTION OF THE LAW OF TREA TIES, 1969 PROV IDES THAT A 'TREATY SHALL BE INTERPRETED IN GOOD FAITH IN ACCORDANC E WITH THE ORDINARY MEANING TO BE GIVEN TO THE TERMS OF THE TREATY IN THEIR CONTEXT AND IN THE LI GHT OF ITS OBJECT AND PURPOSE .' WHILE INDIA IS NOT A PARTY TO THE VIENNA CONV ENTION, IT CONT AINS MANY PRINCIPLES OF CUSTOMARY INTERNATIONAL LAW, AND THE PRINCI PLE OF INTERPRETATION, OF ARTICLE 31 OF THE VIENNA CONVENTION, PROVIDES A BROAD GUIDELINE AS TO W HAT COULD BE AN APPROPRIATE MANNER OF INTERPRETING A TREATY IN THE INDIAN CON TEXT ALSO. 61. THIS COURT IN UNION OF INDIA V. AZADI BACHAO ANDOIAN [2003] 132 TA XMAN 373 ,APPROVINGLY NOTED FRANK BENNION'S OBSERVATIONS THAT A TREATY IS REALLY AN INDIRECT ENAC TMENT, INSTEAD OF A SUBSTANTIVE LEGISLATION, AND THAT DRAFTING OF TREATIES IS NOTORIOUSLY SL OPPY, WHEREBY INCONVENIENCES OBTAIN. IN THIS REGARD THIS COURT FURT HER NOTED THE DICTUM OF LORD WIDGERY, C.J. THAT THE WORDS 'ARE TO BE GIVEN THEIR GENERAL MEANING, GENERAL TO LAWYER AND LAYMAN ALIKE.... THE MEANING O F THE DIPLOMAT RATHER TH AN THE LAWYER.' THE BROAD PRINCIPLE OF INTERPRETATION, WITH RESPECT TO TREATIES, A ND PROVISIONS THEREIN, WOULD BE THAT ORDINARY MEANINGS OF WORDS BE GIVEN EFFECT TO, UNLESS THE CO NTEXT REQUIRES OR OTHERWISE. HOWEVER, THE FACT THAT S UCH TREATIES ARE DRAFTED BY DIPLOMATS, AND NOT LAWYERS, LEADING TO SLOPPINESS IN DRAFTING ALSO IMPLIES THA T CARE HAS TO BE TAKEN TO NOT RENDER ANY WORD, PHRASE, OR SENTENCE REDUNDANT, ESPECIALLY WHERE RE NDERING OF SUCH WORD, PHRASE OR SENTENCE REDUNDANT WO ULD LEAD TO A MANIFESTLY ABSURD SITUATI ON, PARTICULARLY FROM A CONSTITUTIONAL PERSPECTIVE. .. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 28 OF 49 3 7 . IN THE WIP RO DECISION (SUPRA) T HERE IS NEITHER WHISPER OF A DISCUSSION ABOUT THE VARIATIONS OF GENERAL PRINCIPLES OF INTERPRETATION VIS - - VIS THE NORMAL PRI NCIPLES OF STATUTORY INT ERPRETATION, NO R THESE PRINCIPLES HAVING BEEN FOLLOWED IS EVIDENT FROM ANY PART OF THE DISCUSSIONS . WHILE THE LEGAL POSITION AS DISCUSSED ABOVE, IN THE LIGHT OF HONBLE SUPREME CO URT S QUOTING , WITH APPROVAL , THE CANADIAN FEDERAL CO URT DECISION IN T HE CASE OF JOHN N GLAD DEN (SUPRA), IS THAT A LITERAL OR LEGALISTIC INTERPRETATION MUST BE AV OIDED WHEN THE BASIC OBJECT OF THE TREATY MIGHT BE DEFEATED OR FRUSTRATED INSOFAR AS THE PAR TICULAR ITEM UNDER CONSIDERATION IS CONCERNED , THEIR LORDSHIPS HAVE SIMPLY G ONE BY THE PLAI N WORDS OF THE TREATY. WHILE DEALING WITH THE PRINCIPLES OF INTERPRETAT IONS OF TAX TREATIES, IT MAY BE ADDED THAT, TIME AND AGAIN, VARIOUS JUDICIAL FORUMS, RIGHT F ROM HONBLE SUPREME COURT TO THE COORDINATE BENCHES O F THIS TRIBUNAL, HAVE RE COGNIZED PECULI ARITIES OF THESE PRINCIPLES. HONBLE SUPREME COURT HAS, IN THE CASES OF AZADI BACHAO ANDOLAN (SUPRA) AND RAM JETHMALANI (SUPRA), HAVE REFERRED TO THE PRINCIPLES SET OUT IN VIENNA CONVENTIONS ON LAW OF TREATIES (VCLT) WHICH, INTER ALIA , REFER TO THE INTERPR ETATION OF THE TAX TREATIES IN GOOD FAITH IN ACCORDANCE WITH THE ORDIN ARY MEANING GIVEN TO THE TERMS OF THE TREATY IN THEIR CONTEXT AND IN THE LIGHT OF ITS OBJECT AND PURPOSE . HONBLE COURTS ABOVE, IN A LARGE NUMB ER OF REPORTED JUDGMENTS , INCLUDING IN HONBLE SUPREME COURTS LANDMARK JUDGMENTS IN THE CASES OF AZADI BACHAO ANDOLAN (SUPRA) AND FORMULA ONE WORLD CHAMPIONSHIP LTD [(2017) 80 TAXMANN.COM 47 (SC)], REF ERRED TO OECD COMMENTARY IN SUPPORT OF THEIR REASONIN G . NONE OF THESE AIDS TO INTERPRETATION HAVE BEEN THUS FACTORED IN THE WIPRO DECISION (SUPRA). WHEN THE CHOIC E BEFORE US IS BETWEEN THE VIEWS, EVEN OBITERS , OF HONBLE SUPREME COURT, THE BINDING FORCE OF WHICH EMANATES FROM ARTICLE 141 OF THE CONSTITUTIO N OF INDIA, AND BETWEEN THE VIEWS OF HO NBLE NON - JURISDICTIONAL HIGH COURT, WHICH, ACCORDING TO ONE OF THE BINDING JUDICIAL PRECEDENTS FROM HONBLE JURISDICTIONAL HIGH COURT, HAVE NO BINDING FORCE OF LAW OUTSIDE THE JURISDICTION OF RESPECTIVE HONBLE HIGH COURT, WE HAVE NO DIFFIC ULTY IN TAKING THAT CALL. WE WOULD RATHER BE GUIDED BY THE OBITERS OF THE HONBLE SUPREME COURT . 3 8 . VIEWED THUS AND FOLLOWING THE PATH SHOWN BY HONBLE SUPREME COURT , WHAT IS T O BE ESSENTIALLY SEEN IS WHETHER THE INTERPRETATION B EING ASSIGNED BY THE LEA RNED COUNSEL, I .E. , SEEKING A REFUND OF TAXES PAID IN THE UK FROM INDIAN TAX AUTHORITIES, COULD BE SAI D TO BE A CORRECT MEANING IN THE LIGHT OF THE CONTEXT OF THE TREATY TERMS AND IN THE LIGHT OF ITS OBJECT AND PURPOSE , OR IN THE LI GHT OF THE PRINCIPLES BA SED ON WHICH TA X TREATIES ARE REQUIRED TO BE INTERPRETED. UNLESS THAT IS SO, THE CONDITION LAID DOWN UNDER A RTICLE 31(1) OF VIENNA CONVENTION, WHICH HAS BEEN QUOTED, WITH APPROVAL , BY HONBLE SUPREME COURT IN THE LANDMARK JUDGMENTS IN THE CASES OF AZADI BA CHAO ANDOLAN (S UPRA) AND RAM JETHMALANI (SUPRA) , AS ALSO THE OBSERVATIONS MADE BY THE HONBLE S UPREME COURT WITH RESPECT TO PRINCIPLES OF TAX TREATY INTERPRETATIONS WILL NOT BE SA TISFIED. IT IS ALSO IMPORTANT TO BEAR IN MIND THE FA CT THAT THESE EXPRESSION S BEING TERMS E MPLOYED IN THE TAX TREATI ES, REQUIRING INTERPRETATION IN THE CONTEXT OF THE TAX TREATIES, THE PRINCIPLES OF INTERPRETATIONS OF THESE TERMS ARE NOT THE SAME AS THE INTERPRETATION OF STATUTES. WHILE ON THIS ASPECT OF TH E MATTER, IT MAY BE USEF UL TO REFER TO THE FOLLOWING OBSERVATION S MADE BY A COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE JCIT VS MERRILL LYNCH CAPITAL MARKET ESPANA SA SV [(2019) 180 ITD 627 (MUM)]: 42. AS WE DEAL WITH THE PRINCIPLES OF INTERPRETATION O F TAX TREATIES, IT MAY A LSO BE APPROPRI ATE TO REFER TO SOME OF THE OBSERVATIONS MADE BY A COORDINATE BENCH, IN THE CASE OF HINDALCO INDUSTRIES LTD. V. ASSTT. CIT [2005] 94 ITD 242 (MUM.) IN THE CONTEXT OF PRINCIPLES GOVERNING THE INTERPRETATION OF TAX TREA TIES. THAT WAS A ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 29 OF 49 CASE IN WHICH THE COOR DINATE BENCH, AFTER AN ELABORATE ANALYSI S OF THE RELATED JUDICIAL PRECEDENTS FROM EVEN OUTSIDE INDIA AND THE RELATED FIRST PRINCIPLES, INTER ALIA, OBSERVED THAT 'A TAX TREATY IS TO REQUIRED TO BE INTERPRETED AS A WHOL E, WHICH ESSENTIALLY IMP LIES THAT THE P ROVISIONS OF THE TREATY ARE REQUIRED TO BE CONSTRUED IN HARMONY WITH EACH OTHER', THAT 'THE WORDS EMPLOYED IN THE TAX TREATIES NEED NOT BE EXAMINED IN PRECISE GRAMMATICAL SENSE OR IN LITERAL SENSE' AND 'EVEN DEPART URE FROM PLAIN MEANING O F THE LANGUAGE IS PERMISSIBLE WHENEVER CONTEXT SO REQUI RES, TO AVOID THE ABSURDITIES AND TO INTERPRET THE TREATY UT RES MAGIS VALEAT QUAM PEREAT . I.E., IN SUCH A MANNER AS TO MAKE IT WORKABLE RATHER THAN REDUNDANT'. IT WAS ALSO OBSE RVED THAT 'A LITERAL OR LEGALISTIC MEAN ING MUST BE AVOIDED WHEN THE BASIC OBJEC T OF THE TREATY MIGHT BE DEFEATED OR FRUSTRATED WHEN THE BASIC OBJECT OF THE TREATY MIGHT BE DEFEATED OR FRUSTRATED INSOFAR AS PARTICULAR ITEMS UNDER CONSIDERATION ARE CONCERNED . WORDS ARE TO BE UNDERS TOOD WITH REFER ENCE TO THE SUBJECT - MATTER, I.E., VERBA ACCIPIENDA SUNT SECUNDUM SUBJECTAM MATERIAM .' DOUBLE TAXATION AVOIDANCE AGREEMENTS ARE INTERNATIONAL AGREEMENTS ENTERED INTO BETWEEN STATES. THE CONCLUSION AND INTERPRETATION OF SUCH CONVENTIONS IS GOV ERNED BY PUBLIC INTERNATIONAL LAW, AND PARTICULARLY, BY THE VIENNA CONVENTION ON THE LAW OF TREATIES OF 23RD MAY, 1969. THE RULES OF INTERPRETATION CONTAINED IN THE VIENNA CONVENTION, BEING CUSTOMARY INTERNATIONAL LAW, ALSO APPLY TO THE INTERPRETATION OF T AX TREATIES. TH IS VIEW ALSO FINDS MENTION IN THE TRIBUN AL'S ORDER IN THE CASE OF MODERN THREADS (I) LTD. V. DY. CIT [1999] 69 ITD 115 (JP.)(TM). ALTHOUGH INDIA IS NOT A SIGNATORY TO VIENNA CONVENTION ON LAW OF TREATIES (VCLT), OUR J UDICIAL FORUMS, RIGHT UP TO HON'BLE SUPR EME COURT, HAVE CONSISTENTLY REFERRED TO , AND RELIED UPON, VIENNA CONVENTION ON LAW OF TREATIES (VCLT), E.G. IN THE CASE OF AZADI BACHAO ANDOLAN (SUPRA). ELABORATING UPON THE PRINCIPLES GOVERNING INTERPRETATION OF TAX TREATIES, LORD DENNING, IN BULMER LTD. V. S.A. BOLLINGER [1972] 2 AER 1226, HA S OBSERVED THAT ' . THE TREATY . IS QUITE UNLIKE ANY OF THE ENACTMENTS WE HAVE BEEN ACCUSTOMED IT LAYS DOWN GENERAL PRINCIPLES. IT EXPRESSES AIMS AND PURPOSES .. WHAT ARE E NGLISH COURTS TO DO WHEN THEY ARE FACED WITH A PROBLEM OF INTERPRETATION? THEY MUST FOLLOW THE EUROPEAN PATTERN. NO LONGER MUST THEY EXAMINE THE WORDS IN METICULOUS DETAIL. NO LONGER MUST THEY ARGUE ABOUT THE PRECISE GRAMMATICAL SENSE. THEY MUST LOOK TO TH E PURPOSE OR INTENT ' ECHOING THESE V IEWS AND JUSTIFYING HIS DEPARTURE FROM T HE PLAIN MEANING OF THE WORDS USED IN THE TREATY, GOULDING J. IN IRC V. EXXON CORPN. [1982] STC 356 AT PAGE 359, OBSERVED THAT 'IN COMING TO THE CONCLUSION, I BEAR IN MIND THAT THE WORDS OF THE CONVENT ION ARE NOT THO SE OF A REGULAR PARLIAMENTARY DRAUGHTSMA N BUT A TEXT AGREED ON BY NEGOTIATIONS BETWEEN THE TWO CONTRACTING GOVERNMENTS. ALTHOUGH I AM THUS CONSTRAINED TO DO VIOLENCE TO THE LANGUAGE OF THE CONVENTION, I SEE NO REASONS TO INFLICT A DEEPER WOU ND THAN NECESSA RY. IN OTHER WORDS, I PREFER TO DEPART F ROM THE PLAIN MEANING OF LANGUAGE ONLY IN THE SECOND SENTENCE OF ARTICLE XV AND I ACCEPT THE CONSEQUENCE (STRANGE THOUGH IT IS) THAT SIMILAR WORDS MEAN DIFFERENT THINGS IN THE T WO SENTENCES.' 43. ARTI CLE 31(1) OF TH E VIENNA CONVENTION STATES THAT ' A TREAT Y SHALL BE INTERPRETED IN GOOD FAITH IN ACCORDANCE WITH THE ORDINARY MEANING GIVEN TO THE TERMS OF THE TREATY IN THEIR CONTEXT AND IN THE LIGHT OF ITS OBJECT AND PURPOSE '. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 30 OF 49 3 9 . AS WE HAVE SEEN IN A LAR GE NUMBER OF FO REIGN AND INDIAN ACADEMIC LITERATURE AS ALSO IN THE MODEL CONVENTION COMMENTARY , RIGHT FROM THE VIEWS OF BRIAN ARNO LD, KLAUS VOGEL, MICHAEL LANG , PETER HARRIS AND ROY RO H TAGI, TO THE OECD MODEL CON VENTION COMMENTARY, THERE IS A COM PLETE UNAN IMITY THAT FORE IGN TAX CREDIT S CAN NOT EXCEED THE DOMESTIC TAX LIABILITY. THER EFORE, AT THE MINIMU M, NORMAL , EVEN IF NOT UNIVERSAL, MEANING OF THE FO REIGN TAX CREDIT . , MUST BE HELD TO BE IN CONSONANCE OF SUCH AN APPROACH. THE ORDINARY MEANINGS GIVEN TO THE EXPRESSION FOREIG N TAX CRED IT DOES NO T THUS VISUALIZE TH E POSSIBILITY OF REFUND OF TAXES PAID IN THE SOURCE JURISDICT ION BY THE RESIDENC E JU RISDICTION. IN VIEW OF TH IS POSITIO N, INTERPRETATION THAT RESULTS IN THE REFUND OF TAXES PAID ABROAD BY THE INDIA N EXCHEQUER IS SOMETHING WHICH CAN NOT BE SAID TO BE IN GOOD FAITH IN ACCORDANCE WITH THE ORDINARY MEANING GIVEN TO THE TERMS OF THE TREATY IN THEIR CONTEXT AND IN THE LIGHT OF I TS OBJECT AND PURPOSE AND THUS CLEARLY CONTRARY TO ARTICLE 31 OF VIENNA CONVE NTION OF LAW OF TREATIES. ON THE F IRST PRINCIPLES AND IN THE LIGHT OF THE WORDS OF GUIDANCE OF HONBLE SUPREME COURT AS WE LL , THEREFORE, TH E CLAIM OF THE ASSESSEE US IS NOT TENAB LE IN LAW, AND MUST BE REJECTED AS SUCH. 40 THE NEXT CLAIM IS FOR THE FOREIGN TAX CREDIT OF RS 148.75 CRORES IN RESPECT OF TAXES PAID BY THE ASSESSEE IN SINGAPORE , IN RESPECT OF PROFITS EARNED BY ITS B RANCH OFFICE IN SINGAPORE. 41 . SO FAR AS INDIA SINGAP ORE DOUBLE TAXATION AVOIDANCE AGREEMENT [(1994) 209 ITR (STAT) 1; INDO SINGAPO RE TAX TREATY , IN SHORT] IS CONCERNED, THE RELEVANT TREATY PROVISION IS AS FOLLOWS: ARTICLE 25 - AVOIDANCE OF DOUBLE TAXATIO N 2. WHERE A R ESIDENT OF INDIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, MAY BE TAXED IN SINGAPORE , INDIA SHALL ALLOW AS A DEDUCTION FROM TH E TAX ON THE INCOME OF THAT RESIDENT AN AMOUNT EQUAL TO THE SINGAPORE TAX PAID, WH ETHER DIRECTLY OR BY DEDUCTION . WHERE THE INCOME IS A DIVIDEND PAID BY A COMPANY WHICH IS A RESIDENT OF SINGAPORE TO A COMPANY WHICH IS A RESIDENT OF INDIA AND WHICH OWNS DIR ECTLY OR INDIRECTLY NOT LESS THAN 25 PER CENT OF THE SHARE CAPITAL OF THE COMPANY PAYING THE DIVI DEND, THE DEDUCTION SHALL TAKE INTO ACC OUNT THE SINGAPORE TAX PAID IN RESPECT OF THE PROFITS OUT OF WHICH THE DIVIDEN D IS PAID. SUCH DEDUCTION IN EITHER CASE S HALL NOT, HOWEVER, EXCEED THAT PART OF THE TAX (AS COMPUTED BEFORE THE DEDUCTION I S GIVEN) WHICH IS ATTRIBUTABLE TO THE INCOME WHICH MAY BE TAXED IN SINGAPORE . 42 . IN ADDITION TO THE DISCUSSIONS EARLIER IN THE CO NTEXT OF FOREIGN TAX CREDIT CLAIM FOR TAX ES PAID BY THE ASSESSEE IN THE UK, IT IS CLEAR THAT IN THIS CASE ALSO THE FOREIGN TAX CREDIT IS R ESTRICTED TO THE INDIAN TAX ATTRIBUTABLE TO THE INCOME WHICH HAS BEEN TAXED IN SINGAPORE. LEARNED COUNSEL FAIRLY AGREE S THAT SO FAR AS THE YEAR BEFORE US IS CONCER NED, NO PART OF THE SAID INCOME HAS BEEN TAXED IN INDIA INASMUCH THE TOTAL INC OME OF THE ASSE SSEE WAS A NEGATIVE FIGURE. THERE IS NO QUESTION OF ANY ADMISSIBLE FOREIGN TAX CREDIT IN THIS YEAR. IN ANY EVENT, ANY SUCH FOREIGN TAX CREDIT, ON THE FACTS OF THIS CASE, WILL RESULT IN A REFUND OF TAXES PAID TO SINGAPORE EXCHEQUER BY THE IND IAN TREASURY - S OMETHING CLEARLY IMPERMISSIBLE, IN THE L IGHT OF THE FOREGOING DISCUSSIONS. WE, THEREFORE, REJECT THIS CLAIM AS WELL. 43 . THE FOREIGN TAX CREDIT CLAIM OF RS 148. 75 CRORES, PAID IN SINGAPORE, IS THUS REJECTED. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 31 OF 49 4 4 . THE NEXT FOREIGN TAX CREDIT CLAIM IS OF RS 134.29 CRORES PAID BY THE ASSESSEE IN R ESPECT OF PROFITS EARNED BY ITS BRANCHES IN THE UNITED STATES OF AMERICA. 4 5 . THIS ISSUE IS COVERED, BY A DECISION OF A COORDINATE BENCH OF THIS TRIBUNAL, IN THE CASE OF JCIT VS DIGITAL EQUIPMENT INDI A PVT LTD [(200 4) 94 ITD 340 (MUM)] , WHEREIN SPEAKING T HROUGH ONE OF US (I.E. , THE VICE PRESIDENT) , THE BENCH HAD OBSERVED AS FOLLO WS: 4. WE CONSIDER IT USEFUL TO REPRODUCE T HE TEXT OF ARTICLE 25(2)( A ) OF THE INDO US DTAA WHICH IS AS FOLLOWS: 'WHERE A RESIDENT OF IND IA DERIVES INCOME WHICH, IN ACCORDANCE W ITH THE PROVISIONS OF THIS CONVENTION, MAY BE TAXED IN THE UNITED STATES, INDI A 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 INCOME TAX (AS COMPUTED BEFORE THE DEDUCTION I S GIVEN) WHICH IS ATTRIBUTABLE TO THE INCOME WHICH IS TAXED IN THE UNITED STATES .' [ EMPHASIS SUPPLIED ] A PLAIN READING OF THE ABOVE PROVI SION MAKES IT CLEAR THAT THE DEDUCTION O N ACCOUNT OF INCOME TAX PAID IN THE US, FROM INCOME TAX PAYABLE IN INDIA, CANN OT EXCEED INDIAN INCOME TAX LIABILITY IN RES PECT OF SUCH AN INCOME. THIS RESTRICTION ON THE DEDUCTION IS UNAMBIGUOUS AND BE YOND ANY CONTRO VERSY, AS EVIDENT PARTICULARLY FROM THE LAST SENTENCE IN ARTICLE 25(2)( A ) WHICH IS UNDERLINED AS ABOVE THE SUPPLY THE EMPHASIS ON THE SAME. AS A MATTER OF FACT, W E ARE UNABLE TO APPRECIATE ANY BASIS WHATSOEVER FOR THE CIT(A)S CONCLUSION THA T THE TAXES PAI D IN THE US, IN THE INSTANT CASE, ARE TO BE CREDITED TO THE ASSESSEES 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 FOR THE COMMISSIONER (APPEALS)S OBSERVATIO N, REFERRING TO PAYMENT OF INCOME - TAX IN THE UNITED STA TES ON AN INCOME AND RETURNING A LOSS IN RESPECT OF THAT INCOME IN INDIA, TO T HE EFFECT THAT 'THIS IS AN ABSURD SITUATION AND WAS NOT VISUALIZED BY THE TREATY', IT CANNOT BUT STEM FROM HIS INABILITY TO TAKE NOTE OF T HE FACT THAT CERTAIN INCOMES ( E.G., ROYA LTIES, 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 LEG ISLATION NORMAL LY, IN THE COUNTRY OF WHICH THE ASSESSEE IS RESIDENT. IN SUCH SITUATIONS, IT IS QUITE POSSIBLE THAT WHILE AN ASSESSEE PAYS TAX IN THE SOURCE COUNTRY WHICH IS ON G ROSS BASIS, HE ACTUALLY ENDS UP INCURRING LOSS WHEN ALL THE ADMISSIBLE DEDUCTIO NS, IN RESPECT OF THAT EARNING, ARE TAKEN INTO ACCOUNT. THERE IS NOTHING ABSURD ABOUT IT. THE UNDERLYING PHILOSOPHY OF THE SOURCE RUL E ON GROSS BASIS, WHICH PRESCRIBES TAXATION OF CERTAIN INCOMES ON GROSS BASIS IN THE SOURCE COUNTRY, IS THAT IRRESPECTIVE O F ACTUAL OVERAL L PROFITS AND LOSSES IN EARNING THOSE IN COMES, THE ASSESSEE MUST PAY A CERTAIN AMOUNT OF TAX, AT A NEGOTIATED LOWER RA TE THOUGH, IN THE COUNTRY IN WHICH THE INCOM E IN QUESTION IS EARNED. IT IS ALSO NOTEWORTHY THAT THE HEADING OF ARTICLE 25 I S 'ELIMINATION OF DOUBLE TAXATION' BUT THEN THERE HAS T O 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 ASSESSEE COMPANY HAS PAID TAXES, IN RESPECT OF THAT EARNING, ONLY I N ONE COUNTRY, I.E., THE UNITED STATES, AND CLAIMED LOSSES, ON TAKING INTO ACCOUNT THE ADMISSIBLE DEDUCTIONS THEREFROM , IN THE OTHER COUNTRY I.E., INDIA. THIS IS SURELY NOT, ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 32 OF 49 BY ANY STRETCH OF LOGIC, A CASE OF DOUBLE TAXATION OF AN INCOME. AR TICLE 25 DOES N OT, THEREFORE, COME INTO PLAY AT ALL. TU RNING TO THE COMMISSIONER (APPEALS)S OBSERVATION THAT 'THE TREATY NOWHERE STI PULATES THAT THE CREDIT FOR THE TAXES PAID I N THE USA HAS TO BE GIVEN ON PROPORTIONATE BASIS', ALL WE NEED TO SAY IS THAT T HE INDO US DTAA , AS INDEED OTHER DTAAS AS WELL, DOES ST IPULATE THAT THE FOREIGN TAX CREDIT CANNOT EXCEED THE INCOME TAX LEVIABLE IN R ESPECT OF THAT INCOME IN THE COUNTRY OF WHIC H THE ASSESSEE IS RESIDENT. IT IS BECAUSE OF THIS LIMITATION THAT THE ASSESSING OFFICER DECLIN ED THE REFUND IN RESPECT OF TAXES PAID B Y THE ASSESSEE IN THE UNTIED 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 CASE THERE IS NO TAX LIABILITY IN INDIA IN RESPECT OF THAT INCOME, AS ENUNCIATED AND ADOPTED BY THE COMMISSIONER (APPEALS), IS WHOLL Y UNSUSTAINABLE IN LAW. WHERE IS THE QUESTIO N OF REFUND OF TAXES PAID ABROAD WHEN FTD ( I.E., FOREIGN TAX CREDIT), IN VIEW O F SPECIFIC PROV ISIONS TO THAT EFFECT IN THE DTAAS, CANN OT EVEN EXCEED THE INDIAN INCOME TAX LIABILITY? IT IS NOT THE TAX PAYMENT ABRO AD WHICH IS THE MATERIAL FIGURE FOR THE PURP OSE OF COMPUTING INDIAN INCOME TAX LIABILITY, BUT IT IS THE ADMISSIBLE FOREIGN TAX CREDIT IN R ESPECT 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 LIABILIT Y IN RESPECT OF THE INCOME ON WHICH INCOME TAX IS PAID IN US. UNLESS ONE ENTIRE LY IGNORES THIS RESTRICTION ON DEDUCTION, AS UNAMBIGUOU SLY PLACED IN THE LAST SENTENCE OF ARTICLE 25(2)( A ) ITSELF, THE INTERPRETATION APPROVED BY THE CIT(A) IS NOT EVEN A POSSIB LE VIEW OF THE MATTER. WE CANNOT, THEREFORE, APPROVE THE SAME. WE HOLD THAT THE CIT(A) INDEED ERRED IN DIRECTING THE ASSESSING OFFICER TO GRANT THE REFUND TO THE ASSESSEE BY GIVING CREDIT FOR THE TAXES PAID IN TH E USA. ACCORDINGLY, WE VACATE THE ORDER OF T HE CIT(A) ON THIS ISSUE AND UPHOLD THE STAND TAKEN BY THE ASSESSING OFFICER. 4 6 . AS FOR THE L EARNED COUNSELS PLEA THAT THIS DECISION IS NO LONGER GOOD LAW IN THE LIGHT OF HONBLE KARNATAKA HIGH COURTS DECISION IN WIPROS CASE (SUPRA), ALL WE CAN SAY IS THAT THE ISSUE BEFORE HONBLE KARNATAKA HIGH COURT WAS MATERIALLY DIFFERENT, TH AT THE DECISION OF A NON - JURISDICTIONAL HIGH COURT IS N OT BINDING IN ALL THE SITUATIONS, AND THAT , WHETHER THE RELATED FOREIGN TAX CR EDIT CAN BE GIVEN IN THIS FACT SITUATION OR NOT, NO SUCH CREDIT, FOR THE DETAILED REASONS EARLIER, SUCH CREDIT , IN THIS CAS E, WILL RESULT IN A SITUATION IN WHICH TAXES PAID TO TH E US EXCHEQUER WILL HAVE TO BE REFUNDED BY THE INDIAN EXCHEQUER - SOMETHING, FO R THE DETAILED REASONS SET OUT EARLIER, CLEARLY IMPERMISSIBLE, AND, OF COURSE, UNINTENDED, UNDER THE SCHEME OF THE TAX TREA TIES. 4 7 . THE FOREIGN TAX CREDIT CLAIM OF RS 134.29 C RORES, BEING TAXES PAID IN THE USA, IS ALSO THUS REJECTED. 4 8 . SO FAR AS FORE IGN TAX CREDIT CLAIM OF RS 115.31 CRORES, BEING TAXES PAID IN RESPECT OF PROFITS EARNED BY THE BRANCH OFFICES OF THE ASSESS EE IN JAPAN, AR E CONCERNED, THE RELEVANT TAX TREATY PRO VISIONS IN INDIA JAPAN DOUBLE TAXATION AVOIDANCE AGREEMENT [( 1990 ) 182 ITR (ST AT) 380 - AS AMENDED UP TO THE RELEVANT POINT OF T IME ] ARE AS FOLLOWS: ARTICLE 23 - ELIMINATION OF DOUBLE TAXATION 2. DOUBL E TAXATION SHAL L BE AVOIDED IN THE CASE OF INDIA AS FOL LOWS: ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 33 OF 49 (A) WHERE A RESIDENT OF INDIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, MAY BE TAXED IN JAPAN, INDIA SHALL ALLOW AS A DEDUCTION FROM THE TAX ON THE INCOME OF T HAT RESIDENT AN AMOUNT EQUAL TO THE JAPANESE TAX PAID I N 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 CASE MAY BE, T O THE INCOME WHICH MAY BE TAXED IN JAPAN . FURTHER, WHERE SUCH RESIDENT IS A COMPANY BY WHICH SURTAX IS PAYABLE IN INDI A, THE DEDUCTION IN RESPECT OF INCOME - TAX PAID IN JAPAN SHALL BE ALLOWED IN THE FIRST INSTANCE FROM INCOME - TAX PAYABLE BY T HE COMPANY IN I NDIA AND AS TO THE BALANCE, IF ANY, FROM SURTAX PAYABLE BY IT IN INDIA. (B) WHERE A RESIDENT OF INDIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, SHALL BE TAXABLE ONLY IN JAPAN, INDIA MAY INCLUDE THIS INCOME IN THE TAX BAS E BUT SHALL ALLOW AS A DEDUCTION FROM TH E INCOME - TAX THAT PART OF THE INCOME - TAX WHICH IS ATTRIBUTABLE, AS THE CASE MA Y BE, TO THE INCOME DERIVED FROM JAPAN. 4 9 . IN A DDITION TO THE DISCUSSIONS EARLIER IN THE CONTEXT OF FOREIGN TAX CREDIT CL AIM FOR TAXES P AID BY THE ASSESSEE IN THE UK, IT IS CLE AR THAT IN THIS CASE ALSO THE FOREIGN TAX CREDIT IS RESTRICTED TO THE INDIAN T AX ATTRIBUTABLE TO THE INCOME WHICH HAS BEEN TAXED IN JAPAN. LEARNED COUNSEL FAIRLY AGREES THAT SO FAR AS THE YEAR BEFORE U S IS CONCERNED, NO PART OF THE SAID INCOME HAS BEEN TAX ED IN INDIA INASMUCH THE TOTAL INCOME OF THE ASSESSEE WAS A NEGATIVE FIGURE. T HERE IS NO QUESTION OF ANY ADMISSIBLE FOREIGN TAX CRE DIT IN THIS YEAR. IN ANY EVENT, ANY SUCH FOREIGN TAX CREDIT, ON THE FA CTS OF THIS CAS E, WILL RESULT IN A REFUND OF TAXES PAID TO THE JAPANESE EXCHEQUER BY THE INDIAN EXCHEQUER - SOMETHING CLEARLY IMPERMIS SIBLE, IN THE LIGHT OF THE FOREGOING DISCUSSIONS. WE, TH EREFORE, REJECT THIS CLAIM AS WELL. 50 . THE FOREIGN TAX CREDIT CLA IM OF RS 115.31 CRORES, PAID IN JAPAN, IS THUS ALSO REJECTED . 51 . THE NEXT FOREIGN TAX CREDIT CLAIM IS FOR THE TAX OF RS 29.27 CRORE S PAID IN RESPECT OF PROFITS EARNED BY THE BELGI AN BRANCH OF THE ASSE SSEE BANK. 52 . SO FAR AS THIS CLAIM OF THE ASSESSEE IS CON CERNED, WE FIND THAT THE RELATED TAX TREATY PROVISION U NDER THE INDIA BELGIUM DOUBLE TAXATION AVOIDANCE AGREEMENT [ ( 1997 ) 228 IT R (STAT) 79; INDO BELGIAN TAX TREATY, IN SHORT ] IS AS FOLLOWS: ARTI CLE 23 - ELIMINATION OF DOUBLE TAXATION 1. THE LAWS IN FORC E IN EITHER OF THE CONTRACTING STATES WILL CONTINUE TO GOVERN THE ASSESSMENT AND TAXATION OF INCOME IN THE RESPECTIVE CONTRACTING STATES EXCEPT WHERE EXPRESS PROVISION TO THE CONTRARY IS MADE IN TH IS AGREEMENT. 2. IN THE CASE OF INDIA, DOUBLE TAXATION SHA LL BE AVOIDED A S FOLLOWS : (A) WHERE A RESIDENT OF IN DIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEME NT, MAY BE TAXED IN BELGIUM, INDIA SHALL ALLOW AS A ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 34 OF 49 DEDUCTION FROM THE TAX ON THE INCOME OF THAT RESIDENT AN AMOUNT EQUAL TO TH E INCOME - TAX PA ID IN BELGIUM WHETHER DIRECTLY OR BY DED UCTION. SUCH DEDUCTION SHALL NOT, HOWEVER, EXCEED THAT PART OF THE INCOME - TAX (AS COMPUTED BEFORE THE DEDUCTION IS GIVEN) WHICH IS ATTRIBUTAB LE TO THE INCOME WHICH MAY BE TAXED IN BELGIUM. FURTHER, WHE RE SUCH RESIDEN T IS A COMPANY BY WHICH SURTAX IS PAYABL E IN INDIA, THE DEDUCTION IN RESPECT OF INCOME - TAX PAID IN BELGIUM SHALL B E ALLOWED IN THE FIRST INSTANCE FROM INCOME - TAX PAYABLE BY THE COMP ANY IN INDIA AND AS TO THE BALANCE, IF ANY, FROM SURTAX PAYA BLE BY IT IN IN DIA. (B) WHERE A RESIDENT OF INDIA DER IVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THE AGREEMENT, SHA LL BE TAXABLE ONLY IN BELGIUM, INDIA MAY INCLUDE THIS INCOME IN THE TAX BASE BUT SHALL ALLOW AS A DEDUCTION FROM THE INCOME - TAX THAT PART OF T HE INCOME - TAX WHICH IS ATTRIBUTABLE TO T HE INCOME DERIVED FROM BELGIUM. 53 . ONCE AGAIN, IN ADDITION TO THE DISCUS SIONS EARLIER IN THE CONTEXT OF FOREIGN TAX CREDIT CLAIM FOR TAXES PAID BY THE ASSESSEE IN THE UK, IT IS CLEAR THAT IN THIS CAS E ALSO THE FORE IGN TAX CREDIT IS RESTRICTED TO THE INDI AN TAX ATTRIBUTABLE TO THE INCOME WHICH HAS BEEN TAXED IN BELGIUM. LEARNED COUNSEL FAIRLY AGREES THAT SO FAR AS THE YEAR BEFORE US IS CONCERNED, NO PART OF THE SAID INCOME HAS BEEN TAXED IN INDIA INASM UCH THE TOTAL I NCOME OF THE ASSESSEE WAS A NEGATIVE FIG URE. THERE IS NO QUESTION OF ANY ADMISSIBLE FOREIGN TAX CREDIT IN THIS YEA R. IN ANY EVENT, ANY SUCH FOREIGN TAX CREDIT, ON THE FACTS OF THIS CASE , WILL RESULT IN A REFUND OF TAXES PAID TO BELGIUM EXCHE QUER BY THE IND IAN EXCHEQUER - SOMETHING CLEARLY IMPERMI SSIBLE, IN THE LIGHT OF THE FOREGOING DISCUSSIONS. WE, THEREFORE, REJECT THIS CLAIM AS WELL. 5 4 . THE FOREIGN TAX CREDIT CLAIM OF RS 29.27 CRORE S, PAID IN BELGIUM , IS THUS REJECTED. 5 5 . THE NEXT FOR EIGN TAX CREDIT CLAIM IS FOR THE TAX OF RS 27.25 CRORES PAID IN RESPECT OF PROFITS EARNED BY THE KENYA N BRANCH OF THE ASSESSEE BA NK. 5 6 . SO FAR AS THIS CLAIM OF THE ASSESSEE IS CONCERNED, WE FIND THAT THE REL ATED TAX TREATY PROVISION UNDER THE INDIA KENYA DOUBLE TAXATIO N AVOIDANCE AGREEMENT [ (1986) 157 ITR (S TAT) 8; INDO KENYAN TAX TREATY , IN SHORT ] IS AS FOLLOWS: ARTICLE 24 - METH ODS FOR ELIMINATION OF DOUBLE TAXATION 1. THE LAWS IN FORCE IN EITHER OF THE CO NTRACTING STATES WILL CONTINUE TO GOVERN THE TA XATION OF INCOM E IN THE RESPECTIVE CONTRACTING STATES E XCEPT WHERE PROVISIONS TO THE CONTRARY ARE MADE IN THIS AGREEMENT. 2. DO UBLE TAXATION SHALL BE ELIMINATED IN INDIA AS FOLLOWS: (A) WHERE A RESIDENT OF INDIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, MAY BE TAXED IN KENYA , INDIA SHALL ALLOW AS A DEDUCTION FROM THE TAX ON THE INCOME OF THAT RESI DENT, AN AMOUNT EQUAL TO THE TAX PAID IN KENYA. SUCH DEDUCTION SHALL NOT, HOWEVE R, EXCEED THAT PORTION OF THE TAX AS COMPUTED B EFORE THE DEDUC TION IS GIVEN, WHICH IS ATTRIBUTABLE, AS THE CASE MAY BE, TO THE INCOME WHICH MAY BE TAXED IN KENYA . ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 35 OF 49 (B) WHERE IN ACCORDANCE WITH ANY PROVISION OF THE AGREEMENT INCOME DERIVED BY A RESIDENT OF I NDIA IS EXEMPT FROM TAX IN INDIA, INDIA MAY NE VERTHELESS, IN CALCULATING THE AMOUNT OF TAX ON THE REM AINING INCOME OF SUCH RESIDENT, TAKE INTO ACCOUNT THE EXEMPTED INCOME. 5 7 . ONCE AGAIN, IN ADDITION TO THE DISCUSSIONS EARLIER IN THE CONTEXT OF FOREIGN TA X CREDIT CLAIM FOR TAXES PAID BY THE ASSESSEE IN UK, IT IS CL EAR THAT IN THIS CASE ALSO THE FOREIGN T AX CREDIT IS RESTRICTED TO THE INDIAN TAX ATTRIBUTABLE TO THE INCOME WHICH HAS BEEN TAXED IN KENYA. LEARNED COUNSEL FAIRLY AGREES THAT SO FAR AS THE YEAR B EFORE US IS CONCERNED, NO PART OF THE SAID INC OME HAS BEEN TA XED IN INDIA INASMUCH THE TOTAL INCOME O F THE ASSESSEE WAS A NEGATIVE FIGURE. THERE IS NO QUESTION OF ANY ADMISSIB LE FOREIGN TAX CREDIT IN THIS YEAR. IN ANY EVENT, ANY SUCH FOREIGN TAX CREDIT, ON THE FACTS OF THIS CASE, WILL RESULT IN A REFU ND OF TAXES PAI D TO THE KENYAN EXCHEQUER BY THE INDIAN EXCHEQUER - SOMETHING CLEARLY IMPERMISSIBLE, IN THE LIGHT OF THE FOREGOING DISCUSSIONS. WE, THEREFORE, REJECT THIS CLAIM AS WELL. 5 8 . THE FOREIGN TAX CREDIT CLAIM OF RS 27.25 CRORES, PAID IN KENYA IS T HUS REJECTED. 5 9 . THE NEXT FOREIGN TAX CREDIT CLAIM IS FOR THE TAX OF RS 11.38 CRORES PAID IN RESPECT OF PROFITS EARNED BY THE C HIN ESE BRANCH OF THE ASSESSEE BANK. 60 . SO FAR AS THIS CLAIM OF THE ASSESSEE IS CONCERNED, W E FIND THAT THE RELATED TAX TREATY PROVISION UNDE R THE INDIA CHINA DOUBLE TAXATION AVOIDA NCE AGREEMENT [ (1995) 214 ITR (STAT) 160; INDO CHINA TAX TREATY , IN SHORT ] , AS IT STOOD AT THE RELEVANT POINT OF TIME, WAS AS FOLLOWS: ARTICLE 23 - METHOD OF ELIMINAT ION OF DOUBLE TAXATION 2. IN INDI A, DOUBLE TAXAT ION SHALL BE ELIMINATED AS FOLLOWS: WHE RE A RESIDENT OF INDIA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVIS IONS OF THIS AGREEMENT, MAY BE TAXED IN CHINA, INDIA SHALL ALLOW AS A DEDUCTION FROM THE TAX ON THE INCOME OF THAT RESIDENT AN AMOUNT EQUAL TO THE INCOME - TAX PAID IN CHINA WHETHER DI RECTLY OR BY DEDUCTION. SUCH DEDUCTION SHALL NOT, HOWEVER, EXCEED THAT PAR T OF THE INCOME - TAX (AS COMPUTED BEFORE THE DEDUCTION IS GIVEN) WHICH IS ATTRIBUTABLE, AS THE CASE MAY BE, TO THE INCOME WHICH MAY BE TAXED IN CHINA . 61 . ONCE AGAIN, IN ADDITION TO THE DISCUSSIONS EARLIER IN THE CONTEXT OF FOREIGN TAX CREDIT CLAIM FOR TAX ES PAID BY THE ASSESSEE IN UK, IT IS CLEAR THAT IN THIS CASE ALSO THE FOREIGN TAX CREDIT IS R ESTRICTED TO THE INDIAN TAX ATTRIB UTABLE TO THE I NCOME WHICH HAS BEEN TAXED IN CHINA . LEA RNED COUNSEL FAIRLY AGREES THAT SO FAR AS THE YEAR BEFORE US IS CONCERNED, NO PART OF THE SAID INCOME HAS BEEN TAXED IN INDIA INASMUCH THE TOTAL INCOME OF THE ASSESSEE WAS A NEGATIVE FIGURE. THERE IS N O QUESTION OF A NY ADMISSIBLE FOREIGN TAX CREDIT IN THIS YEAR. IN ANY EVENT, ANY SUCH FOREIGN TAX CREDIT, ON THE FACTS OF THIS CAS E, WILL RESULT IN A REFUND OF TAXES PAID TO CHINA EXCHEQUER BY THE INDIAN EXCHEQUER - SOMETHIN G CLEARLY IMPERMISSIBLE, IN THE LI GHT OF THE FORE GOING DISCUSSIONS. WE, THEREFORE, REJECT THIS CLAIM AS WELL. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 36 OF 49 62 . THE FOREIGN TAX CREDIT CLAIM OF RS 11.38 CRORES, PAID IN CHINA , IS THUS REJECTED. 63 . THE NEXT FOREIGN TAX CREDIT CLAIM IS FOR THE TAX OF RS 4 .07 CRORES PAID IN RESPECT OF P ROFITS EARNED B Y THE FRENCH BRANCH OF THE ASSESSEE BANK . 64 . SO FAR AS THIS CLAIM OF THE ASSESSEE IS CONCERNED, WE FIND THAT THE RELATED TAX TREATY PROVISION UNDER THE INDIA FRANCE DOUBLE TAXATION AVOIDANCE AGREEMENT [ (1994) 209 ITR (STAT) 130; INDO FRENC H TAX TREATY , I N SHORT ], IS AS FOLLOWS: ARTICLE 25 - EL IMINATION OF DOUBLE TAXATION 1. DOUBLE TAXATION SHALL BE AVOIDED IN THE F OLLOWING MANNER: IN THE CASE OF INDIA: (A) WHERE A RESIDENT OF INDIA DERIVES INCOME OR OWNS CAPITA L WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, MAY BE TAXED IN FRA NCE, INDIA SHALL ALLOW AS A DEDUCTION FROM THE TAX ON THE INCOME OF THAT R ESIDENT AN AMOUNT EQUAL TO THE INCOME - TAX PAID IN FRANCE, WHETHER DIRECTLY OR BY DEDUCTION; AND AS A DEDUCTION FROM THE TAX ON THE CAPITAL OF THAT RESIDENT AN AMOUNT EQUAL TO THE CAP ITAL TAX PAID IN FRANCE . SUCH DEDUCTION IN EITHER CASE SHALL NOT, HOWEVER, EXCEED THAT PART OF THE INCOME - TAX OR CAPITAL TAX (AS COMPUTED BEFORE THE DEDUCTION IS GIVEN) WHICH IS ATTRIBUTABLE, AS THE CA SE MAY BE, TO T HE INCOME OR THE CAPITAL WHICH MAY BE TA XED IN FRANCE. FURTHER, WHERE SUCH RESIDENT IS A COMPANY BY WHICH SURTAX I S PAYABLE IN INDIA, THE DEDUCTION IN RESPECT OF INCOME - TAX PAID IN FRANCE SHALL BE ALLOWED IN THE FI RST INSTANCE FROM INCOME - TA X PAYABLE BY TH E COMPANY IN INDIA AND AS TO THE BALANCE , IF ANY, FROM SURTAX PAYABLE BY IT IN INDIA. (B) WHERE A RESIDENT OF IND IA DERIVES INCOME WHICH, IN ACCORDANCE WITH THE PROVISIONS OF THIS CONVENTION, SHALL BE TAXABLE ONLY IN FRANCE, INDIA MAY INCLU DE THIS INCOME IN THE TAX BASE BUT SHALL ALLOW AS A DED UCTION FROM THE INCOME - TAX THAT PART OF THE INCOME - TAX WHICH IS ATTRIBUTAB LE TO THE INCOME DERIVED FROM FRANCE. 65 . ONCE AGAIN, IN ADDITION TO THE DISCUSSIONS EARLIER IN THE CONTEXT OF FOREIGN TAX CRE DIT CLAIM FOR T AXES PAID BY THE ASSESSEE IN THE UK, IT IS CLEAR THAT IN THIS CASE ALSO THE FOREIGN TAX CREDIT IS RESTRICTED TO TH E INDIAN TAX ATTRIBUTABLE TO THE INCOME WHICH HAS BEEN TAXED IN FRANCE . LEARNED COUNSEL FAIRLY AGREES TH AT SO FAR AS THE YEAR B EFORE US IS CON CERNED, NO PART OF THE SAID INCOME HAS B EEN TAXED IN INDIA INASMUCH THE TOTAL INCOME OF THE ASSESSEE WAS A NEGATIV E FIGURE. THERE IS NO QUESTION OF ANY ADMISSIBLE FOREIGN TAX CREDIT IN THIS YEAR. IN ANY EVENT, ANY SUCH FOREIGN TAX CREDIT, ON THE FACTS OF T HIS CASE, WILL RESULT IN A REFUND OF TAX ES PAID TO THE FRENCH EXCHEQUER BY THE INDIAN EXCHEQUER - SOMETHING CLEARLY IMPERMISSIBLE, IN THE LIGHT OF THE FOREGOING DISCUSSIONS. WE, THEREFORE, REJECT THIS CLAIM AS WELL. 66 . T HE FOREIGN TAX CREDI T CLAIM OF RS 4 .07 CRORES, PAID IN FRANCE , IS THUS REJE CTED. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 37 OF 49 67 . TO SUM UP, ALL THE FOREIGN TAX CREDIT CLAIMS, IN RESPECT OF THE TAXES PAID ABROAD IN TREATY PARTNER JURISDICTIONS, ARE THUS REJECTED INASMUCH REFUND OF THESE TAXES BY THE INDIAN TAX ADMINIST RATION IS DECLI NED. 68 . LET US NOW TURN TO THE ASSESS EES CLAIM FOR THE FOREIGN TAX CREDIT IN RESPECT OF THE TAXES PAID ABROAD IN NON - TAX TREATY PARTNER JURISDICTIONS. 6 9 . AS FAR AS NON - TAX TREATY PARTNER JURISDICTIONS ARE CONCERNED, THE FOREIGN TAX CRE DITS ARE GRANTE D UNILATERALLY UNDER SECTION 91(1) OF TH E INCOME TAX ACT, 1961, WHICH SPECIFICALLY PROVIDES THAT IF ANY PERSON WH O IS RESIDENT IN INDIA IN ANY PREVIOUS YEAR PROVES THAT , IN RESPECT OF HIS INCOME WHICH ACCRUED OR AROSE DURING THAT PREVIOUS Y EAR OUTSIDE IND IA (AND WHICH IS NOT DEEMED TO ACCRUE OR ARISE IN INDIA), HE HAS PAID IN ANY COUNTRY WITH WHICH THERE IS NO AGREEM ENT UNDER SECTION 90 FOR THE RELIEF OR AVOIDANCE OF DOUBLE TAXATION, INCOME - TAX, BY DEDUCTION OR OTHERWISE, UND ER THE LAW IN FO RCE IN THAT COU NTRY, HE SHALL BE ENTITLED TO THE DEDUCT ION FROM THE INDIAN INCOME - TAX PAYABLE BY HIM OF A SUM CALCULATED ON SUCH DOUBLY TAXED INCOME (EMPHASIS SUPPLIED) AT THE INDIAN RATE OF TAX OR THE RATE OF TAX OF THE SAID COUNTRY, WHIC HEVER IS THE LOW ER , OR AT THE I NDIAN RATE OF TAX IF BOTH THE RATES ARE EQUAL. A PLAIN READING OF THIS STATUTORY PROVISION SHOWS THAT DOUBLE TAXA TION OF AN INCOME IS A CONDITION PRECEDENT FOR THIS RELIEF BECAUSE THE RELIEF IS GRANTED ONLY WITH RESPECT TO SUCH DOUBLY TAXE D INCOME, AND WHEN THERE IS NO INCOME WHICH HAS BEEN T AXED DOUBLY, THERE IS NO QUESTION RELIEF BEING GRANTED UNDER SECTION 91(1) . LEARNED COUNSELS RELIANCE ON THE JUDGMENT OF HONBLE KARNATAKA HIGH COURT, IN THE CASE OF WIPRO (SUPRA), IS OF NO AVAIL INA SMUCH AS ALL TH AT THIS DECISION HOLDS IS THAT EVEN THO UGH INDIA HAS NOT ENTERED INTO ANY AGREEMENT WITH THE STATE OF A COUNTRY A ND IF THE ASSESSEE HAS PAID INCOME TAX TO THAT STATE, THE INCOME TAX PAID IN RELATION TO THAT STATE IS ALSO EL IGIBLE FOR BEING GIVEN CREDIT TO THE ASSESSEE IN INDIA BUT THEN THE IS SUE IS NOT THE ADMISSIBILITY OF FOREIGN TAX CREDIT BUT THE QUANTUM OF THE TAX CREDIT. NO DOUBT FOREIGN TAX CREDIT IS ADMISSIBLE IN PRINCIPLE , BUT THE QUANTUM OF THIS CREDIT, IN THE PRESENT CASE, IS NIL INASMUCH AS TH ERE IS NO DOUBLY TAXED INCOME AND THERE IS NO INCOME TAX LIABILITY IN INDIA. IT WOULD THUS APPEAR THAT, ON THE FIR ST PRINCIPLES, UNDER THE DOMESTIC LAW PROVISIONS, THERE CANNOT BE A SITUATION IN WHICH FOREIGN TAX CREDITS GRANTED TO A RESIDEN T ASSESSEE CAN LEAD TO A SITUATION IN WHICH THE INDIAN TAX AUTHORITIES HAVE TO REFUND THE TAXES PAID BY THE ASSESSEE OUTSIDE INDI A, WHICH IS INCLUDED IN ITS GLOBAL INCOME - WHETHER SUCH GLOBAL INCOME IS ACTUALLY A FIGURE OF POSITIVE INCOME OR NO T. 70 . ELAB ORATING UPON TH E SCHEME OF FOREIGN TAX CREDITS UNDER SE CTION 91, HONBLE ANDHRA PRADESH HIGH COURT, IN THE CASE OF M A MORRIS (SU PRA), HAS OBSERVED AS FOLLOWS: TO APPRECIATE THE CONTENTION OF LEARNED COUNSEL FOR THE ASSESSEE IT IS RELEVANT TO HAVE A LOOK AT SUB - SECTION (1) OF SECTION 91 OF THE ACT, WHICH READ S AS FOLLOWS : '91. (1) IF ANY PERSON WHO IS RESIDENT IN INDIA IN ANY PRE VIOUS YEAR PROVES THAT, IN RESPECT OF HIS INCOME WHICH ACCRUED OR AROSE DURING THAT PREVIOUS YEAR OUTSIDE INDIA (AN D WHICH IS N OT DEEMED TO AC CRUE OR ARISE IN INDIA), HE HAS PAID IN ANY COUNTRY WITH WHICH THERE IS NO AGREEMENT UNDER SECTION 90 FOR THE RELI EF OR AVOIDANCE OF DOUBLE TAXATION, INCOME - TAX, BY DEDUCTION OR OTHERWISE, UNDER THE LAW IN FORCE IN THAT COUNTRY, HE SHALL BE ENTITLED TO THE DEDUCTION FROM THE INDIAN INCOME - TAX PA YABLE BY HIM OF A SUM CALCULATED ON SUCH DOUBLY TAXED ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 38 OF 49 INCOME AT THE INDIAN RATE OF TAX OR THE RATE OF TAX OF THE SAID COUNTRY, WHICHEVER IS THE LOWER, OR AT THE INDIAN RATE OF TAX IF BOTH T HE RATES ARE EQUAL.' FROM A PERUSAL OF THE ABOVE SECTION, IT IS CL EAR THAT FOR AVOIDANCE OF DOUBLE TAXATION RELIEF IS PROVIDED TO ANY PERSON , WHO IS A RESIDENT IN INDIA IN ANY PREVIOUS YEAR, IN RESPECT OF HIS INCOME WHICH ACCRUED OR AROSE DURING THE PREVI OUS YEAR OUT SIDE INDIA AND IF HE HAS PAID THE TAX UNDER THE LAW IN FORCE IN THAT COUNTRY, A DEDUCTION OF A SUM CALCULATED ON SUCH DOUBLY TAXE D INCOME HAS TO BE MADE FROM THE INDIAN INCOME - TAX PAYABLE BY THAT PERSON. THE TAX HAS TO BE CALCULATED AT THE INDI AN RATE OF T AX OR IF THE RA TE OF TAX IN THAT COUNTRY IS LOWER THAN THE INDIAN INCOME - TAX AT THE RATE APPLICABLE IN THE FOREIGN COUNTRY AND IF BOTH ARE EQUAL AT THE INDIAN RATE OF TAX. THE RELIEF GRANTED IN INDIA IS BY WAY OF REDUCTION OF TAX BY DEDUCTING T HE TAX PAID IN THE FOREIGN COUNTRY ON DOUBLY TAXED INCOME FROM OUT OF THE AMOUNT OF INCOME - TAX PAYABLE BY HIM IN INDIA. THE INDIAN TAX IS RED UCED BY THE AMOUNT OF TAX PAID BY THE ASSESSEE IN THE FOREIGN COUNTRY ON SUCH DOUBLY TAXED INCOME. IN A GIVEN CASE, THE FOREIGN INCOME THAT HA S GONE INTO COMPUTATION MAY BE MUCH MORE THAN THE INCOME WHICH ACTUALLY SUFFERED DOUBLE TAXATION. THE INTENTION OF THE LEGISLATURE IS NOT TO EXEMPT FROM TAX THE WHOLE FOREIGN INCOME WHICH HASGONE INTO COMPUTATION ; NOT ALSO THAT THE WHOLE OF THE TAX PAID B Y AN ASSESSEE IN A FOREIGN COUNTRY BE DE DUCTED FROM OUT OF INCOME - TAX PAYABLE BY HIM IN INDIA. UNILATERAL RELIEF I S GRANTED TO A PERSON RESIDENT IN INDIA IN RESPECT OF HIS INCOME WHICH ACCRUED OR AROSE OUTSIDE INDIA IN COUNTRIES WITH WHICH N O AGREEMENT FOR DOUBLE TAXATION EXISTS UNDER SECTION 90 OF THE ACT TO THE EXTENT HIS FOREIGN INCOME SUFFERS DOUBLE TAXATION IN IN DIA. THE RELIEF GRANTED BY SECTION 91 OF THE ACT IS DIFFERENT FROM AND INDEPENDENT OF RELIEF BY WAY OF THE REDUCTI ON OF INCOME BY OPERATION O F SECTION 80RRA OF THE ACT. FOR GRANTING RELIEF UNDER SECTION 91 OF THE ACT, THE TEST IS WHAT IS THE INCOME OF THE ASSESSEE WHICH IS BEING DOUBLY TAXED. RELIEF IS AVAILABLE ONLY IN RESPECT OF SUCH INCOME WHICH IS DOUBLY TAXED BY ALLOWING DED UCTION OF TAX O N THAT INCOME AT THE INDIAN RATE UNLESS RATE OF TAX IN THE FOREIGN COUNTRY IS LESS IN WHICH CASE AT THE RATE APPLI CABLE IN THAT COUNTRY. IN K.V.AL.M. RAMANATHAN CHETTIAR V. CIT [1973] 88 ITR 169 (SC), HIS LORDSHIP JUSTICE JAGANM OHAN REDDY, SPEAKING FOR TH E MAJORITY, OBSERVED AS FOLLOWS (AT PAGE 191) : '...THE RELIEF TO WHICH AN ASSESSEE WOULD BE ENTITLED WOULD BE TH E AMOUNT OF TAX PAID ON THE FOREIGN INCOME WHICH BY ITS INCLUSION IN THE TOTAL INCOME ONCE AGAIN BEARS TAX UNDER TH E ACT.' IT IS THIS OBSERVA TION WHICH IS RELIED ON BY SRI RAVI S. I N SUPPORT OF HIS CONTENTION THAT THE RELIEF SHOULD BE GRANTED ON THE AMOUN T OF INCOME WHICH HAS GONE INTO COMPUTATION OF THE TOTAL INCOME. WE ARE UNABLE TO ACCEDE TO HIS CONTENTION. THE OBS ERVATIONS OF THE SUPREME CO URT HAVE TO BE UNDERSTOOD IN THE CONTEXT IN WHICH THEY ARE USED. THEIR TRUE IMPORT WILL BE LOST OR DISTORTED IF TH EY ARE TAKEN IN ISOLATION AND OUT OF CONTEXT. THAT OBSERVATION IS ELUCIDATED IN THE PASSAGE THAT FOLLOWS IT WHICH R EADS THUS (A T PAGE 191) : ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 39 OF 49 'THE WORD 'SUCH' IN THE PHRASE 'SUCH DOU BLY TAXED INCOME' HAS REFERENCE TO THE FOREIGN INCOME WHICH IS AGAIN BEING SUBJECTED TO TAX BY ITS INCLUSION IN THE COMPUTATION OF THE INCOME UNDER THE ACT AND NOT THE SAME INCOME UNDER AN IDENTICAL HE AD OF INCOME UN DER THE ACT.' THUS, IT IS CLEAR THAT TH E RELIEF UNDER SECTION 91 OF THE ACT IS LIMITED ONLY TO THE AMOUNT OF TAX PAID ON SUCH DOUBLY TAXED INCOME AT THE INDIAN RATE OF TAX OR THE RATE OF TAX OF THE FOREIGN COUNTRY, WHICHEVER IS THE LOWER, O R AT THE INDIAN RATE OF TAX, IF BOTH THE RATES ARE EQUA L. A DIVISION BENCH OF THIS COURT IN CIT V. C.S. MURTHY [1988] 169 ITR 68 6 UNDERSTOOD THE JUDGMENT OF THE SUPREME COURT IN RAMANATHANCHETTIAR'S CASE [1973] 88 ITR 169 IN THE SAME WAY AS WE DID. THAT W AS ALSO A CASE OF AN ASSESSEE RESIDENT IN INDIA WHO WAS HAVING FOREIGN INCOME IN RESPECT OF WHICH DOUBLE TAXATION RELIEF WAS CLAI MED. THE DIVISION BENCH HELD THAT BY MERELY INCLUDING THE FOREIGN INCOME IN THE TOTAL INCOME IT COULD NOT BE SAID T HAT THE WHOL E FOREIGN INCOM E WAS SUBJECTED TO TAX IN INDIA. IT LAID DOWN THE CRITERIA THAT NOT ONLY THE FOREIGN INCOME MUST BE INCLUDED IN TH E TOTAL INCOME IN THE ASSESSMENT MADE UNDER THE INCOME - TAX ACT IN INDIA, BUT IT SHOULD ALSO BE SUBJECTED TO TAX IN INDIA. FOR C LAIMING RELIEF UNDER SECTION 91 OF THE ACT, THESE TWO C ONDITIONS MUST BE SATISFIED. RESPECTFULLY WE AGREE WITH THIS TEST. FOR TH E ABOVE REASONS, WE ANSWER THE QUESTION IN THE NEGATIVE, THAT IS, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE . 71 . ON A SIMILAR NOTE, H ONBLE RAJASTHAN HIGH COURT, IN THE CASE OF DR R N JHANJI (SUPRA) , HAS OBSERVED AS FOLLOWS: 8. WE SHALL FIRST REF ER TO THE SUPREME COURT DECISION IN K.V. AL. M. RAMANATHAN CHETTIAR'S CASE (SUPRA) WHICH IS THE SHEET ANCHOR OF THE ARGUMENT OF THE LEARNED CO UNSEL FOR THE ASSESSEE. THIS DECISION WA S RENDERED IN RELATION TO SECTION 49D OF THE INDIAN INCOME - TAX ACT, 1922 ( 'THE 1922 ACT') CORRESPONDING TO SECTION 91(1) OF THE INCOME - TAX ACT, 1961. IT MAY BE MENTIONED AT THE OUTSET THAT THERE WAS NO PROVISION CORR ESPONDING TO SECTION 80RRA OF THE 1961 A CT IN THE 1922 ACT, TAUT SECTION 49D WAS AMENDED BY THE INDIAN INCOME - TAX (AMENDMENT) ACT, 1953 AND IT IS WITH REFERENCE TO THE PROVISIONS OF SECTION 49D AS IN EXISTENCE PRIOR TO AND AFTER THE AMENDMEN T THAT THE CASE WAS DECIDED. PRIOR TO THE 1953 AMENDMEN T, SECTION 49D PROVIDED FOR DOUBLE TAXATION RELIEF BY GIVING A DEDUCTION F ROM THE INDIAN INCOME - TAX PAYABLE OF A SUM EQUAL TO ONE - HALF OF SUCH INDIAN INCOME - TAX OR TO ONE - HALF OF SUCH TAX P AYABLE IN FO REIGN COUNTRY, WHICHEVER WAS LESS, 'IN RESPECT OF THE S AME INCOME'. AFTER THE AMENDMENT THE RELIEF GIVEN WAS OF DEDUCTION FROM TH E INDIAN INCOME - TAX PAYABLE OF A SUM CALCULATED ON 'SUCH DOUBLY TAXED INCOME' AT THE INDIAN RATE OF TAX OR THE RATE OF TAX OF T HE FOREIGN COUN TRY, WHICHEVER WAS LOWER. QUESTION AROSE ABOUT THE MEANING OF 'IN RESPECT OF THE SAME INCOME' IN SECTION 49D PRIOR TO THE AMENDMENT AND 'SUCH DOUBLY TAXED INCOME' AFTER THE AMENDMENT. THE SUPREME COURT HELD THAT PRIOR TO THE AMEN DMENT THE BE NEFIT GIVEN WAS OF DEDUCTION OF ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 40 OF 49 ONLY ONE - HALF OF THE AM OUNT OF TAX, WHEREAS AFTER THE AMENDMENT THE BENEFIT GIVEN WAS OF DEDUCTIO N OF THE ENTIRE AMOUNT OF TAX PAID ON THE FOREIGN INCOME WHICH WAS TAXED ALSO IN INDIA. THE OBJECT OF THE AMENDMENT IN SECTION 49D WAS TO ENCO URAGE INDIAN RESIDENTS TO START BUSINESS IN FOREIGN COUNTRY AND TO GIVE FULL RELIEF AT THE INDIAN RATE OF TAX OR T HE RATE OF TAX OF THE FOREIGN COUNTRY, WHICHEVER WAS LOWER. UNDER THE 1922 ACT NO SUCH DEDUCTION WAS GIVEN AS IS PR OVIDED IN SE CTION 80RRA OF THE 1961 ACT IN COMPUTING THE 'TOTAL INC OME', AND, THEREFORE, THE TOTAL FOREIGN INCOME WAS TAXED IN INDIA ALSO. TH IS SUPREME COURT DECISION DOES NOT SUPPORT THE ASSESSEE'S CONTENTION IN THE PRESENT CASE. 9. THE CONSEQUENCE OF TH E CONSTRUCTI ON WE HAVE MADE OF SECTION 91(1) IS THAT THE ENTIRE FOR EIGN INCOME WHICH IS ACTUALLY TAXED IN INDIA BEING INCLUDED IN COMPUTING T HE 'TOTAL INCOME' IS ONLY 50 PER CENT OF THE TOTAL FOREIGN INCOME BY VIRTUE OF THE DEDUCTION GIVEN UNDER SECTION 80 RRA. THIS EN TIRE AMOUNT WHI CH ALONE IS TAXED IS IN EFFECT DOUBLY TA XED AND, THEREFORE, RELIEF FROM DOUBLE TAXATION UNDER SECTION 91(1) CAN BE GIVEN ONLY BY ALLOWING DEDUCTION OF THE AMOUNT OF TAX PAID ONCE AGAIN IN INDIA ON HALF OF THE TOTAL FOREIGN INCOME . THE PRINCI PLE ENUNCIATED IN THE ABOVE SUPREME COURT DECISION SUPP ORTS THIS CONSTRUCTION. 10. WE FIND THAT THE ANDHRA PRADESH HIGH COURT IN CIT V. C.S. MURTHY [1988] 169 ITR 686 HAS TAKEN THE SAME VIEW AND CONSTRUED THE SUPREME COURT DECISION IN K.V.AL.M . RAMANATHAN CHETTIAR'S CAS E (SUPRA) SIMILARLY. THE CONCLUSION REAC HED BY THE ANDHRA PRADESH HIGH COURT IS AS UNDER : '... THE RELIEF BY WAY OF DEDUCTION OF TAX UNDER SECTION 91 OF THE ACT SHOULD BE CONFINED TO THE AMOUNT DOUBLY TAXED IN ACCORDANCE WITH T HE PROVISION S OF THE ACT AN D NOT TO THE FULL AMOUNT RECEIVED BY THE ASSESSEE FROM THE FOREIGN EMPLOYER. IT IS REASONABLE TO ASSUME THAT IN EN ACTING SECTION 80RRA, THE LEGISLATURE INTENDED TO GRANT RELIEF UNDER SECTION 91 WITH REFERENCE TO THE AMOUNT OF FOR EIGN INCOME DOUBLY TAXED IN ACCORDANCE WITH THE PROVISIONS OF THE A CT AND NOT WITH REFERENCE TO THE FULL AMOUNT WHICH DID NOT BEAR TAX IN THI S COUNTRY. . . .THE LEGISLATURE ONLY INTENDED TO PREVENT DOUBLE TAXATION BUT NOT TO PROVIDE AN ADDITIONAL BENEFIT I N RESPECT OF FOREIGN INCOME WHICH IS NOT SUBJECTED TO TAX IN THIS C OUNTRY, . . WE ARE UNABLE TO AGREE THAT THE MAJORITY JUDGMENT OF THE SUPR EME COURT IN RAMANATHAN CHETTIAR'S CASE [1973] 88 ITR 169, SUPPORTS THE ASSESSEE'S CLAIM FOR DEDUCTION OF TAX TREAT ING THE ENTI RE INCOME AS DO UBLY TAXED INCOME IGNORING THE FACT THAT ONE - HALF OF SUCH INCOME WAS NOT SUBJECTED TO TAX AT ALL IN THIS COUNTRY.' (P. 694) WITH RESPECT WE CONCUR WITH THIS VIEW. NO OTHER DECISION ON THE POINT WAS CITED AT THE BAR. 11. AS A RES ULT OF THE A BOVE DISCUSSION , WE HOLD THAT THE TRIBUNAL WAS NOT JUST IFIED IN HOLDING THAT THE ASSESSEE IS ENTITLED TO RELIEF UNDER SECTION 91( 1) OF THE FULL AMOUNT OF TAX PAID ON THE TOTAL FOREIGN INCOME IN THE FOREIGN COUNTRY ; AND THAT THE ASSESSEE IS ENT ITLED TO THE RELIEF UNDER S ECTION 91(1) ONLY OF THE AMOUNT OF TAX P AID ON 50 PER CENT OF THE TOTAL FOREIGN INCOME. THE REFERENCE IS ANSWERED ACCORDINGLY. NO COSTS. ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 41 OF 49 72 . IN VIEW OF THE ABOVE DISCUSSIONS, AND AS NO PART OF THE INCOME EARNED ABROAD HAD ACTUAL LY SUFFERED TAX IN INDIA, RELIEF UNDER SECTION 91 IS NOT ADMISSIBLE IN RESPECT OF THE SAME. WE, THEREFORE, REJECT THE FOREIGN TAX CREDIT CLAI M OF RS 15,79,80,943 IN RESPECT OF TAXES PAID IN NON - TAX TREATY PARTNER JURISDICTIONS AS WELL. 73 . AS REGARDS DIVI DEND TAXES OF RS 87,54,6 56 PAID ABROAD, THE ASSESSEE HAS NOT ADDRE SSED ANY SPECIFIC ARGUMENTS IN RESPECT OF THE SAME, AND IT, THEREFORE, APP EARS THAT THE ASSESSEE HAS NOT PROCEEDED ON THE BASIS THAT IF THE ASSESSEE IS TO BE ALLOWED ANY FOREIGN TAX CREDITS IN RESPECT OF THE TAXES PAID ABROAD IN RESPECT OF THE PROFITS OF I TS PES, THE SAME FATE MUST FOLLOW FOR THE TAXES PAID ABROAD ON THE DIVIDEN D. FOR THE DETAILED REASONS SET OUT ABOVE, WE HAVE REJECTED THESE CLAIMS. IN THIS VIEW OF THE MATTER, AND IN THE ABSENCE OF ANY OTHER SPECIF IC ARGUMENTS, THIS CLAIM OF THE ASSESSEE I S ALSO DISMISSED AS DEVOID OF LEGAL MERITS. O UR CONCLUSIONS ON THE FIRST ISSUE 74 . IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND, WE ANSWER THE FIRST QUESTION THAT WE HAD IDENTIFIED F OR OUR ADJUDICAT ION, I.E. , WHETHER OR NOT THE ASSESSEE IS ELIGIBLE FOR FOREIGN TAX CREDITS OF RS 165,96,87,349 FOR TAXES PAID IN TRE ATY PARTNER JURISDICTIONS, OF RS 15,79,80,943 IN NON - TREATY PARTNER JURISDICTIONS, AND OF RS 87,54,656 IN RESPECT OF FOREIGN DIVIDENDS, WE A NSWER THE SAME IN NEGATIVE, AND AGAINST TH E TAXPAYER. THESE CLAIMS FOR THE FOREIGN TAX CREDITS ARE THUS DISMISSED. CLAIM FOR DEDUCTION IN RESPECT OF TAXES PAID ABROAD 75 . THAT BRING S US TO OUR NEXT QUESTION, AND THAT IS WHETHER OR NOT THE ASSESSEE IS ELIGIBLE FOR A DEDUCTIO N OF RS 182,64,22,94 8 BEING TAXES PAID ABROAD ON ITS INCOME IN THE RESPECTIVE TAX JURISDICTION IN RESPECT OF WHICH THE ASSESSEE HAS NOT BEEN GRANTED ANY TAX CREDIT. 76 . WE FIND TH AT T HIS ISSUE IS SQUARELY COVERED , IN FAVOUR OF THE ASSESSEE, BY A JUDGMENT OF HONBLE JURISDICT IONAL HIGH COURT, IN THE CASE OF RELIANCE INFRASTRUCTURE LIMITED VS CIT [( 2016) 390 ITR 271 (BOM)], WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA , OBSERVED AS FOLLOWS: (I) WE HAVE CONSIDERED THE RI VAL SUBMISSIONS. SO FAR AS THE QUESTION RE LATING TO THE TRIBU NAL NOT FOLLOWING ITS ORDER IN THE CASE OF THE APPLICANT ITSELF FOR A.Y. 1 979 - 80, WE FIND THAT THERE IS A JUSTIFICATION FOR THE SAME. THIS IS SO AS THE DECISION OF THIS COURT IN S. INDER SINGH GI LL (SUPRA) WAS N OTED BY THE TRIBUNAL ON AN IDENTICAL ISSUE WH ILE PASSING THE ORDER FOR THE SUBJECT ASSESSMENT YEAR. THUS, THE TRIBUNAL HAD NOT ERRED IN NOT FOLLOWING ITS ORDER FOR A.Y. 1979 - 80. IN FACT, THE DECISIONS OF THIS COURT IN SOUTH EAST ASIA SHIPPI NG CO. (SUPRA) A ND TATA SONS LTD. (SUPRA), WHICH ARE BEING RE LIED UPON IN PREFERENCE 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 SECTIO N 256(2) OF THE ACT AND AT THE STAGE OF AD MISSION UNDER SECTI ON 260A OF THE ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 42 OF 49 ACT. THIS UNLIKE THE JUDGMENT RENDERED IN A REFERENCE BY TH IS COURT IN S. INDER SINGH GILL (SUPRA). MOREOVER, THE DECISION IN SOUTH EAST ASIA SHIPPING CO. (SUPRA) IS NOT AVAILABLE IN ITS ENTIRETY. THEREFORE, IT WOULD NOT B E SAFE TO RELY UPON IT AS ALL FACTS AND ON WHAT CONSIDERATION OF LAW, IT WAS RENDERED IS NOT KNOWN. SIMILARLY, THE DECISION OF THIS COURT IN TATA SONS (SUPRA) BEING INCOME TAX APPEAL NO.209 OF 2001 PRODUCED BEFORE US, DISMISSED TH E APPEAL OF THE REVENUE BY ORDER DATED 2ND AP RIL, 2004 BY MERELY FOLLOWING ITS ORDER DATED 23RD MARCH, 1993 REJECTING T HE REVENUE'S APPLICATION FOR REFERENCE UNDER SECTION 256(2) OF THE ACT. THUS, IT ALSO CANNOT BE RELIED UPON TO DECIDE THE CONTROVERSY. MO REOVER, THE ORDER OF THIS COURT IN TATA SONS LTD. (SUPRA) AS PRODUCED BEFORE US FOR ASSESSMENT YEAR 1985 - 86 HAD NOT NOT ICED THE DECISION OF THIS COURT IN S. INDER SINGH GILL (SUPRA) ON A REFERENCE. THEREFORE, IT IS RENDERED PER INCURIAM. ( J) THIS COURT I N S. INDER SINGH GILL (SUP RA) WAS REQUIRED TO ANSWER THE QUESTION WHETHER FOR THE PURPOSE OF COMPUTING TOTAL WORLD INCO ME OF THE ASSESSEE AS DEFINED IN SECTION 2(15) OF THE I. T. ACT, THE INCOME ACCRUING IN UGANDA HAS TO BE REDUCED BY THE T AX PAID TO THE U GANDA GOVERNMENT IN RESPEC T OF SUCH INCOME? T HE COURT WHILE ANSWERING THE QUESTION IN THE NEGATIVE OBSERVED THAT IT IS NOT AWARE OF ANY COMMERCIAL PRINCIPLE/PRACTICE WHICH LAYS DOWN THAT THE TAX PAID BY ONE ON ONE'S INCOME IS ALLOWED AS A D EDUCTION IN DETE RMINING THE INCOME FOR THE PURPOSES OF TAXATI ON. (K) IT IS AXIOMATIC THAT INCOME TAX IS A CHARGE ON THE PROFITS/ INCO ME. THE PAYMENT OF INCOME TAX IS NOT A PAYMENT MADE/INCURRED TO EARN PROFITS AND GAINS OF BUSINESS. THEREFORE, IT CANNOT BE ALLOWED AN AS EXPENDITURE TO DETERMINE THE PROFITS OF THE BUSINESS. TAXES SUCH AS EXCISE DUTY, CUSTOMS DUTY, OCTROI ETC., ARE INCURR ED FOR THE PURPOSE OF DOING BUSINESS AND EARNING PROFITS AND/OR GAINS FROM BUSINESS OR PROFESSION. THEREFORE, SUCH EXPEND ITURE IS ALLOWAB LE AS A DEDUCTION TO DETER MINE THE PROFITS OF THE BUSINESS. IT IS ONLY AFTER DEDUCTING ALL EXPENSES INCURRED FOR THE PU RPOSE OF BUSINESS FROM THE TOTAL RECEIPTS THAT PROFITS AND/OR GAINS OF BUSINESS/ PROFESSION ARE DETERMINED. IT IS THIS DE TERMINED PROFITS OR GAINS OF BUSINESS/PROF ESSION WHICH ARE SU BJECT TO TAX AS INCOME TAX UNDER THE ACT. THE MAIN PART OF SECTION 40(A)(I I) OF THE ACT DOES NOT ALLOW DEDUCTION IN COMPUTING THE INCOME I.E. PROFITS AND GAINS OF BUSINESS CHARGEABLE TO TAX TO TH E EXTENT, THE TA X IS LEVIED/ PAID ON THE P ROFITS/ GAINS OF BU SINESS. THEREFORE, IT WAS ON THE AFORESAID GENERAL PRINCIPLE, UNIVERSALLY ACCEPTED, THAT THIS COURT ANSWERED THE QUESTION POSED TO IT IN S. INDER SINGH GILL (SUPRA) IN FAVOUR OF THE REVENUE. (L) WE WOULD HAVE ANSWERED THE QUESTION POSE D FOR OUR CONSIDERA TION BY FOLLOWING THE DECISION OF THIS COURT IN S. INDER SINGH GILL (SUPRA ). HOWEVER, WE NOTICE THAT THE DECISION OF THIS COURT IN S. INDER SINGH GILL (SUPRA) WAS RENDERED UNDER THE INDIAN INCOME TAX ACT, 1922 A ND NOT UNDER THE ACT. WE F URTHER NOTE THAT JU ST 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 TAX ACT, 1922 ACT ALSO CONTAINS A SIMILAR PROVISION IN SECTION 10(4) T HEREOF. HOWEVER, THE INDIAN INCOME TAX ACT , 1922 CONTAINS NO DEFINITION OF 'TAX' AS PROVIDED IN SECTION ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 43 OF 49 2(43) OF THE ACT. CONSEQUENTLY, THE TAX PAID ON INCOME/PROFITS AND GAINS OF BUSINESS/PROFESSION ANYWHERE IN THE WORLD WOULD NOT BE ALLOWED AS DEDUCTION FOR DETERMINING THE PROFITS/GAINS OF THE B USINESS UNDER SECTI ON 10(4) OF THE INDIAN INCOME TAX ACT, 1922. THEREFORE, ON THE STATE OF TH E STATUTORY PROVISIONS AS FOUND IN THE INDIAN INCOME TAX ACT, 1922 THE DECISION OF THIS COURT IN S. INDER SINGH GILL (SUP RA) WOULD BE UNE XCEPTIONABLE. HOWEVER, THE RATIO OF THE AFORE SAID DECISION IN S. INDER SINGH GILL (SUPRA) CANNOT BE APPLIED TO THE PRES ENT 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 U NDER THE ACT ALONE ON THE PROFITS AND GAINS OF BUSINESS ARE NOT ALLOWED TO BE DEDUCTED NOTWIT HSTANDING SECTIONS 30 TO 38 OF THE ACT. (M) IT THEREFORE, FOLLOWS THAT THE TAX WHICH HAS BEEN PAID ABROAD WOULD NOT BE COVERED WITH IN THE MEANING OF SECTION 40( A) (II) OF THE ACT IN VIEW OF THE DEFINITION OF THE WORD 'TAX' IN SECTION 2(43) OF THE ACT. T O BE COVERED BY SECTION 40(A)(II) OF THE ACT, IT HAS TO BE PAYABLE UNDER THE ACT. WE ARE CONSCIOUS OF THE FACT THAT SECTI ON 2 OF THE ACT, WHILE DEFINING THE VARIOU S 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 WH EREVER IT OCCURS IN THE ACT. IT IS NOT EVE N URGED BY THE REVE NUE THAT THE CONTEXT OF SECTION 40(A)(II) OF THE ACT WOULD REQUIRE IT TO M EAN TAX PAID ANYWHERE IN THE WORLD AND NOT ONLY TAX PAYABLE/ PAID UNDER THE ACT. (N) HOWEVER, TO THE EXTENT TAX IS PAID ABROAD, THE EXP LANATION TO SECTION 40(A)( II) OF THE ACT PROV IDES/CLARIFIES THAT WHENEVER AN ASSESSEE IS OTHERWISE ENTITLED TO THE BENE FIT OF DOUBLE INCOME TAX RELIEF UNDER SECTIONS 90 OR 91 OF THE ACT, THEN THE TAX PAID ABROAD WOULD BE GOVERNED BY SECTION 40(A)(II) OF TH E ACT. THE OCCASION TO INS ERT THE EXPLANATION TO SECTION 40(A)(II) OF THE ACT AROSE AS ASSESSEE WAS CLAIMING TO BE ENTI TLED TO OBTAIN NECESSARY CREDIT TO THE EXTENT OF THE TAX PAID ABROAD UNDER SECTIONS 90 OR 91 OF THE ACT AND ALSO CLAIM TH E BENEFIT OF TAX PAID ABROAD AS EXPENDITUR E ON ACCOUNT OF NOT BEING COVERED BY SECTION 40(A)(II) OF THE ACT. THIS IS EVIDENT FROM THE E XPLANATORY NOTES TO THE FINANCE ACT, 2006 AS RECORDED IN CIRCULAR NO.14 OF 2006 DATED 28TH DECEMBER, 2006 ISSUED BY THE C BDT. THE ABOVE C IRCULAR INTER ALIA, RECORD S THE FACT THAT SOM E OF THE ASSESSEE WHO ARE ELIGIBLE FOR CREDIT AGAINST THE TAX PAYABLE IN I NDIA ON THE GLOBAL INCOME TO THE EXTENT THE TAX HAS BEEN PAID OUTSIDE INDIA UNDER SECTIONS 90 OR 91 OF THE ACT, WERE ALSO CLAIMING DEDUCT ION OF THE TAX PAID ABROAD AS IT WAS NOT TAX UNDER THE ACT. IN VIEW OF THE ABOVE, EXPLANATION INSERTED IN 2006 TO SECTI ON 40(A)(II) OF THE ACT, WOULD REQUIRE IN THE CONTEXT THEREOF THAT THE DEFINITION OF THE WORD 'TAX' UNDER THE ACT TO MEAN ALSO THE TAX WH ICH IS ELIGIBLE TO THE BEN EFIT OF SECTIONS 90 AND 91 OF THE ACT. HOWEVER, THIS DEPARTURE FROM THE MEANING OF THE WORD ' TAX' AS DEFINED IN THE ACT IS ONLY RESTRICTED TO THE ABOVE AND GIVES NO LICENSE TO WIDEN THE MEANING OF THE WORD 'TAX' AS DEFINED IN THE ACT TO INCLUDE ALL TAXES O N INCOME/PROFITS PA ID ABROAD. (O) THEREFORE, ON THE EXPLANATION BEING INSERTED IN SECTION 4 0(A)(II) OF THE ACT, THE TAX PAID IN SAUDI ARABIA ON INCOME WHICH HAS ACCRUED AND/OR ARISEN IN ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 44 OF 49 INDIA IS NOT ELIGIBLE TO D EDUCTION UNDER S ECTION 91 OF THE ACT. THER EFORE, NOT HIT BY S ECTION 40(A)(II) OF THE ACT. SECTION 91 OF THE ACT, ITSELF EXCLUDES INCOME WHICH IS DEEMED TO ACCRUE OR ARISE IN INDIA. THUS, THE BENEFIT OF THE EXPLANATION WOULD NOW BE AVAILABLE AND ON APPLICAT ION OF REAL INCO ME THEORY, THE QUANTUM OF TAX PAID IN SAUDI A RABIA, ATTRIBUTABLE TO INCOME ARISING OR ACCRUING IN INDIA WOULD BE REDUCE D FOR THE PURPOSES OF COMPUTING THE INCOME ON WHICH TAX IS PAYABLE IN INDIA. (P) IT IS NOT DISPUTED BEFORE US THAT SOME PART OF THE INC OME ON WHICH THE TAX HAS B EEN PAID ABROAD IS ON THE INCOME ACCRUED OR ARISEN IN INDIA. THEREFORE, TO THE EXTENT, THE TA X IS PAID ABROAD ON INCOME WHICH HAS ACCRUED AND/OR ARISEN IN INDIA, THE BENEFIT OF SECTION 91 OF THE ACT IS NOT AVAILABL E. IN SUCH A CAS E, AN ASSESSEE SUCH AS THE APPLICANT ASSESSEE IS ENTITLED TO A DEDUCTION UNDER SECTION 40(A)(II) OF THE ACT. THIS IS SO AS IT IS A TAX WHICH HAS BEEN PAID ABROAD FOR THE PURPOSE OF ARRIVING GLOBAL INCOME ON WHICH THE TAX PAYABLE IN INDIA. T HEREFORE, TO THE EXTENT THE PAYMENT OF TAX IN SAUDI ARABIA ON INCOME WHICH HAS ARISEN/ACCRUED IN INDIA HAS TO BE CONSIDERED IN THE NATU RE OF EXPENDITURE INCURRED OR ARISEN TO EARN INCOME AND NOT HIT BY THE PROVISIONS OF SECTION 40(A)(II) OF THE ACT. (Q) THE EXPLANATION TO SECTION 40(A)(II) OF TH E ACT WAS INSERTED INTO THE ACT BY FINANCE ACT, 2006. HOWEVER, THE USE OF THE WORDS 'FOR REMO VAL OF DOBUTS' IT IS HEREBY DECLARED '....' IN THE EXPLANATION INSERTED IN SECTION 40(A)(II) OF THE ACT, MAKES IT CLEAR T HAT IT IS DECLAR ATORY IN NATURE AND WOULD HAVE RETROSPECTIVE EFFECT. THIS IS NOT EVEN DISPUTED BY THE REVENUE BEFORE US AS THE ISSUE OF THE NATURE OF SUCH DECLARATORY STATUTES STANDS CONSIDERED BY THE DECISION OF THE SUPREME COURT IN CIT V. VATIKA TOWNSHIP (P) LTD. [2014] 367 ITR 466/227 TAXMAN 12 1/49 TAXMANN.COM 24 9 AND CIT V. GOLD COIN HEALTH FOODS (P.) LTD. [2008] 304 ITR 308/172 TAXMA N 386 (SC). (R) IN THE ABOVE FACTS AND CIRCUMSTANCES, QUESTION (III)(A) IS ANSWERED IN THE NEGATIVE I.E. AGAINST THE RE VENUE AND IN FAV OUR OF THE APPLICANT ASSES SEE. QUESTION (III) (B) IS ANSWERED IN THE NEGATIVE I.E. AGAINST THE REVENUE AND IN FAVOUR OF THE APPLICANT ASSESSEE. 77 . LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVER, INVITES OUR ATTENTION TO A DECISION OF AHMEDAB AD BENCH OF THI S TRIBUNAL, IN THE CASE OF DCIT VS ELITECORE T ECHNOLOGIES PVT LTD [(2017) 80 TAXMANN.COM 6 (AHD)] , WHEREIN EVEN AFTER TA KING NOTE OF HONBLE BOMBAY HIGH COURTS JUDGMENT IN THE CASE OF RELIANCE INFRASTRUCTURE (SUPRA), THE COORDINATE BENCH RE JECTED THE SIMI LAR CLAIM. LEARNED DEPARTMENTAL REPRESENTATIVE ALSO INVITES OUR ATTENTION TO CERTAIN POINTS IN HONBLE BOMBAY HIGH COURT DECISION AND SUBMITS THAT THIS DECISION IS BASED ON CERTAIN CONCESSIONS DURING THE COURSE OF ARGUMENTS WHICH LEARNED DEP ARTMENTAL REPRE SENTATIVE IS SPECIFICALLY DECLI NING NOW. HE TH US URGES US TO FOLLOW THE ELITECORE DECISION (SUPRA) , AND, IN PARTICULAR, HE INVITES OUR ATTENTION TO THE FOLLOWING OBSERVATIONS THEREIN: 43. IN THE LIGHT OF THE ABOVE OBSERVATIONS IN JUDICIAL PRECEDENTS REL IED UPON BY THE LEARNED COUNSEL FOR THE ASSESSE E, AND IN THE LIGHT OF EXTRACTS FROM THE IMPUGNED ORDERS, THE CORE ISSUE, IN OUR CONSIDERED VIEW, IS WHETHER OR NOT THE ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 45 OF 49 MEANING OF EXPRESSION 'TAX' APPEARING IN SECTION 40(A)(II) MUST REMAIN CONF INED TO A TAX LEVIED UNDER THE INDIAN INCOME - T AX ACT, 1961. A S A MATTER OF FACT, HON'BLE BOMBAY HIGH COURT, IN THE CASE OF RELIANCE INF RASTRUCTURE LTD. (SUPRA), THEIR LORDSHIPS HAVE GONE TO THE EXTENT OF SAYING THAT BUT FOR DEFINITION OF TAX UNDER SECTION 2(43) 'WE (THE IR LORDSHIPS) WOULD HAVE ANSWERE D THE QUESTION POSED FOR OUR CONSIDERATION BY FOLLOWING THE DECISION OF THIS COURT IN IND ER SINGH GILL (SUPRA)' WHICH WAS RENDERED IN THE CONTEXT OF THE INCOME - TAX ACT, 1922, AND ADDED THAT 'THE RATIO OF THE AF ORESAID DECISI ON IN INDER SINGH GILL (SUPRA) C ANNOT BE APPLIE D TO THE PRESENT FACTS IN VIEW OF THE FACT THAT THE ACT (INCOME - TAX ACT, 1 961) DEFINES 'TAX' AS INCOME TAX CHARGEABLE UNDER THE PROVISIONS OF THIS ACT' IN OUR HUMBLE AND SINCERE UNDERSTANDING, GI VEN THESE FACT S, 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 E XPRESSION 'TAX' APPEARING IN SECTION 40(A)(II), AND WHEN WE ADDRESS THIS QUESTION, WE CANNOT BE OBLIVIOUS OF THE FOLLOWIN G GUIDANCE FRO M HON'BLE COURTS ABOVE: (I) HON 'BLE BOMBAY HIG H COURT IN LUBRIZOL INDIA LTD. CASE (SUPRA) WITH RESPECT, THIS ARGUMENT [ I.E. THE DEFINITION OF 'TAX' UNDER SECTION 2(433) MUST HOLD THE FIELD] DOES NOT APPEAL TO US. IT IS SIGNIFICANT TO NOTE T HAT 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 EXPRESS ION IS FURTHER QUALIFIED AS A RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A P ROPORTION OF, OR OTHERWISE ON THE BASIS OF, AN Y 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 QUALIFICATION AS TO THE NATURE OF LEVY W ILL ALSO BECOM E MEANINGLESS. FURTHERMORE, THE WORD 'TAX' AS D EFINED 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 L EVIABLE ON THE PROFITS OR GAINS OF ANY BUSINES S OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTHERWISE ON THE BASIS OF, ANY SUCH PR OFITS OR GAINS. [EMPHASIS SUPPLIED] (II) HON'BLE SUPREME COURT IN SMITHKLINE & FRENCH INDIA LTD. CASE (SUPRA) SPECIFICAL LY APPROVING T HE LUBRIZOL JUDGMENT . . . . . . FIRSTLY, IT M AY BE MENTIONED, S. 10(4) OF THE 1922 ACT OR S. 40(A)(II) OF THE PRESENT A CT DO NOT CONTAIN ANY WORDS INDICATING THAT THE PROFITS AND GAINS SPOKEN OF BY THEM SHOULD BE DETERMINED IN ACCORDANCE WI TH 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 PROFESSIO N. THE OBSERVATIONS RELIED UPON MUST BE READ IN THE SAID CONTEXT AND NOT LITERALLY OR AS THE PROVISIONS IN A STATUTE. BUT SO FAR AS THE ISSUE HEREIN IS CONCERNED, EVEN THIS LITERAL R EADING OF THE SAID OBSERVATIONS DOES NOT HELP THE ASSESSEE. AS WE HAVE POI NTED OUT HEREINABOVE THE SURTAX IS ESSENTIALLY LEVIED ON THE BUSINESS PROFITS OF THE COMPANY COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF THE IT ACT. MERELY BECAUSE C ERTAIN FURTHER DEDUCTIONS ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 46 OF 49 [ADJUSTMENTS] ARE PROVIDED BY THE SURTAX ACT FROM THE SAID PROF ITS, IT CANNOT BE SAID THAT THE SURTAX IS NOT LEVIED UPON THE PROFITS DETERMINED OR COMPUTED IN ACCORDANCE WITH THE PROVI SIONS OF THE I T ACT. SEC. 4 OF THE SURTAX ACT READ WITH THE D EFINITION OF 'CHARGEABLE PROFITS' AND THE FIRST SCHEDULE MAKE THE POSITION ABUNDANTLY CLEAR. WE AGREE WITH THE VIEW TAKEN BY THE HIGH COURTS OF CALCUTTA [MOLINS (INDIA) LTD. V. CIT [1983] 144 IT R 317 (CAL) AN D BROOKE BOND (INDIA) LTD. V. CI T [1992] 193 IT R 390 (CAL) : TC 15R.590], BOMBAY (IN) LUBRIZOL (INDIA) LTD. V. CIT [1991] 187 ITR 25 (BOM) FOLLOWED IN SEVERAL OTHER DECISIONS OF THAT COURT], KARNATAKA [CIT V. INTERNATIONAL INSTRUMENTS PVT. LT D. [1983] 144 ITR 936 (KAR), MADRAS [SUNDARAM INDUSTRIES LTD. V. CIT [1986] 159 ITR 646 (MAD), ANDHRA PRADESH [VAZIR SULTAN TOBACCO CO. LTD. V. CIT [1988] 169 ITR 35 (AP)], RAJASTHAN [ASSOCIATED STONE INDUSTRIES CO. LTD. V. CIT [1988] 170 ITR 653 (RAJ)], G UJARAT [S.L.M. MANEKLAL INDUSTRIES LTD. V. CIT [1988] 172 ITR 176 (GUJ) FOLLOWED IN SEVERAL CASES THEREAFTER], ALLAHABAD [HIMALAYAN DRU G CO. PVT. LTD. V. CIT [1996] 218 ITR 346 (ALL)] AND PUNJAB & HARYANA HIGH COURT [HIGHWAY CYCLE INDUSTRIES LTD. V. CIT [1 989] 178 ITR 6 01 (P&H) : TC 17R.807]. 44. WE ARE THEREFORE O F THE CONSIDERED VIEW THAT THE PLEA OF THE ASSESSEE DOES NOT MERIT LEGAL A CCEPTANCE. NO DOUBT IT IS A CLOSE CALL BUT WITHIN OUR LIMITATION OF KNOWLEDGE AND WISDOM, WE SINCERELY BELIEVE THAT THE P LEA OF THE ASS ESSEE MUST BE REJECTED TO PUT A QUESTION OF OUR SELVES, CAN 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 AS THE QUESTION OF CREDIT F OR TAXES ABROA D IS CONCERNED, EVEN THOUGH HON' BLE SUPREME COU RT NOTES, IN THE CASE OF SMITHKLINE & FRENCH INDIA LTD. (SUPRA), THAT S. 4 0(A)(II) OF THE PRESENT ACT DO NOT CONTAIN ANY WORDS INDICATING THAT THE PROFITS AND GAINS SPOKEN OF BY THEM SHOULD BE DE TERMINED IN AC CORDANCE 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'. WE, THEREFORE, DO NOT THINK WE HAVE THE LIBERTY OF TAKING THE VIEW THAT LEARNED COUNSEL IS U RGING US TO TA KE. 45. IN ANY CASE, HON'BLE BO MBAY HIGH COURT 'S JUDGMENT IN THE CASE OF RELIANCE INFRASTRUCTURE (SUPRA) PROCEEDS ON PEC ULIAR FACTS AND 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) REQUIRES A MEANING DIFFERENT FROM THE MEANING ASSIGNED BY SECTION 2(43). THIS IS EVID ENT FROM THE OBSERVATIONS MADE BY THEIR LORDSHIPS TO THE EFFECT THAT 'WE ARE CONSCIOUS OF THE FACT THAT SECTION 2 OF THE ACT, WHILE DEF INING THE VARIOUS TERMS USED IN THE ACT, QUALIF IES 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 O CCURS IN THE A CT. IT IS NOT EVEN URGED BY THE REVENUE THAT TH E CONTEXT OF SECTION 40(A)(II) OF THE ACT WOULD REQUIRE IT TO MEAN TAX PAI D ANYWHERE IN THE WORLD AND NOT ONLY TAX PAYABLE/ PAID UNDER THE ACT'. THAT WAS NOT THE SITUATION BEFORE US. THE VERY THR UST OF STAND O F THE REVENUE WAS THAT THE ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 47 OF 49 CONNO TATIONS OF EXPR ESSION 'TAX' 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 SECT ION WHICH REFE R TO 'ANY RATE OR TAX LEVIED ON THE PROFITS OR GAINS OF ANY BUSINESS OR PROFESSION OR ASSESSED AT A PROPORTION OF, OR OTH ERWISE ON THE BASIS OF, ANY SUCH PROFITS OR GAINS , AND THAT ITS CONNOTATIONS CANNOT BE TREATED AS RESTRICTED TO TAX UNDE R THE INCOME T AX ACT. THIS ARGUMENT, IN THE CO NTEXT OF DEDUCT ION IN RESPECT OF TAX OUTSIDE INCOME - TAX ACT, 1961, HAS ALREADY MET THE AP PROVAL OF HON'BLE SUPREME COURT. THE LAW LAID DOWN BY HON'BLE SUPREME COURT BINDS ALL OF US UNDER ARTICLE 141 OF THE CONS TITUTION OF IN DIA. ONCE WE ARE AWARE ABOUT A P ARTICULAR POSIT ION 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 THE POSITION TAKEN BY HON'BLE SUPREME COURT. MAYBE, IF THE VI EWS EXPRESSED WERE BY OUR JURISDICTIONAL HIGH COURT, OR BY AN Y OF HON'BLE HIGH COURTS AFTER TAKING INTO ACCOUNT THE VIEWS EXPRESSED BY HON'BLE SUPREME COURT ON THAT ISSUE, THINGS MAY HAVE BEEN LITTLE DIFFERENT, BUT THAT IS NOT THE CASE HERE. 7 8 . LEARNED D EPARTMENTAL R EPRESENTATIVE S PLEA IS ONLY FIT TO BE NOT ED AND REJECTED. IT IS RELEVANT TO NOTE THAT THIS DECISION WAS RE NDERED B Y A BE NCH THAT DID NOT FALL IN THE JURISDICTION OF THIS HON BLE JURISDICTIONAL H I GH COURT, AND , FOR THAT REASON, ST RICTLY SPEAKI NG , THIS HON BLE JURISDICTIONAL H IGH COURT JUDGMEN T WAS NOT C ONCLUSIVELY BINDING ON THE SAID BENCH . AS ON NOW, HOWEVER, TH E SAID JUDGM ENT OF HON BLE JURISDICTIONAL HIGH COURT JUDG ME NT IS BINDING ON THIS BENCH, WHICH IS IN THE JURISDICTION OF HON BLE BOMB AY H I GH COU RT , AND WE MOST HUMBLY AND MOST RESPECTFULLY BOW BEF ORE THE VIEWS EX PRESSED BY THEIR LORD SHIPS. AS LAID DOWN BY THE APEX COUR T IN T HE CASE OF AMBIKA PRASAD MISHRA V. STATE OF U.P. AIR 1980 SC 1762; [1980] 3 SCC 719 (PAGE 1764 OF AIR 1980 SC): EVE RY NEW DI SCOV ERY NOR ARGUMENTATIVE NOVELTY CANNOT UNDO OR COM PEL RECONSIDERATION OF A BINDING PRECEDENT.... A DECISION DOES NOT LOOSE ITS AU THORITY MERELY BECAUSE IT WAS BADLY ARGUED, INADEQUATELY CONSIDERED OR FALLACIOUSLY REASONED. ...' . SIMILARLY IN THE CASE OF K ESHO RAM & CO. V. UNION OF INDIA [1989] 3 SCC 151 , I T WAS STATED BY THE SUPREME COURT THUS (PAGE 160): ' THE BINDING EFFECT OF A DE CISION OF THIS COURT DOES NOT DEPEND UPON WHE THER A PARTICULAR ARGUMENT WAS CONSIDERED OR NOT, PROVIDED THE POINT WIT H REFEREN CE T O WHICH THE ARGUMENT IS ADVANCED SUBSEQUENTLY WA S ACTUALLY DECIDED IN THE EARLIER DECISION . WE ARE, THEREF ORE, NOT SWAY ED BY THE ARGUMENTS OF THE LEARNED DEPARTMENTAL RE PR ESENTATI VE. AS A MATTER OF FACT, EVEN IN THE ELITECORE DECISION (S UPRA ), IT IS SPEC IFICALLY STA TED T HAT THE FACT THAT TH E RELIANCE I NFRASTRUCTURE DEC I SION , BEING A NON - JURISDICTIONAL HON BLE HIGH COURT DE CISION, IS O N A DIFFERENT FOOTING AND THAT MAYBE, IF THE VIEWS EXPRESSED WERE BY OUR JURISDICTIONAL HIGH COURT, OR BY ANY OF HON'B LE H IGH COURTS AFTER TAKING INTO ACCOUNT THE VIEWS E XPRESSED BY HON'BLE SUPREME COURT ON THAT ISSUE, THINGS MAY HAVE BEEN LIT TLE DIFFERENT, BUT THAT IS NOT THE CASE HERE . ONCE THE HON BLE JURISDICTIONAL H IGH COURT HOLDS THE LAW IN A PARTICULAR W AY, IT I S OUR BOUNDEN DUTY TO FOLLOW THE SAME IN LETTER AND I N S PIRIT . WHATEVER ARGUMENTS LEARNED DEPARTMENTAL REPRESENTATI VE SEEKS TO MAKE IN SUPPORT OF ANY OTHER INTERPRETATION, THA N THE INT ERPRETATION ADOPTED B Y HON BLE JURISDICTIONAL HIGH CO URT EVEN IF WAS AD OPTED IN THE LIGHT OF A CONCESSION THEN MADE BY THE LE ARNED COUNSEL FOR THE REVENUE BEFORE THEM , BEING MORE APPROPRIATE , THESE ARGUMENTS MAY BE MADE BEFORE THEIR LORDS HIPS IF AND WHEN THAT OC CASION CO MES. IT IS FOR THEIR LORDSHIPS TO TAKE A CALL ON THESE ARGUMENT S. WE ARE NOT INCLINED TO ENTERTAIN THESE ARGUM ENTS BEFORE US. IN THE LIGHT OF THESE ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 48 OF 49 DISCUSS IONS, AS ALSO BEARING IN MIN D THE ENT IRETY OF TH E CASE, WE REJECT THE PLEA OF THE L EA RNED DEPARTMENTAL R EPRESENTATI VE, U PHOLD THE PLEA OF THE ASSESSEE, AND DI RECT THE ASSESSING OFFICER TO ALLOW THE DEDUCT IONS IN RESPECT OF TAX ES PAID BY TH E ASSESSEE ABROAD , IN RESPECT OF WHICH NO FOR EIGN TAX CREDIT IS GRANTED TO T HE ASSESSEE, IN THE LIGH T OF THE DECISION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE INFRASTRUC TU RE DECISION (SUPR A) , AND EXAMINE THE MATTER BE AFRES H IN THIS LI G HT . TO THIS EXTENT, THIS PLEA OF THE ASS ESSEE IS UPHELD . OUR CONCLU SIONS ON THE SECOND ISSUE 7 9 . THE SECOND QUESTION THAT WE HAD IDENTIFIED FOR OUR A DJUDICATION, I.E. WHETHER OR NOT THE LEARNED CIT(A) WAS JUSTIFIED IN UPHOLD ING THE ACTION OF THE ASSESS ING OFFICER IN DECLINING DEDUCTION, IN THE CO MPUTATION OF BUSINESS INCOME, OF RS 182,64,22,948 IN RESPECT OF TAXES SO PAID ABROAD, IS THUS ANSWERED IN FA VOUR OF THE ASSESSEE IN PRINCIPLE BUT THE MATTER IS REMITTED TO THE FILE OF THE ASSESSING OFFICER FOR L IMITED FACTUAL VERIFICATION. CONCLUDING REM ARKS 80 . TO SUM UP, THE ASSESSEE IS DECLINED THE FOREIGN TAX CREDITS FOR RS 182,64,22,948, AND , ACCORDINGLY, WE HOLD THAT THE ASSESSEE IS NOT ENTITLE D TO SEEK A RE FUND OF THAT MONEY F ROM THE INDIAN TAX EXCHEQUER . AS WE HOLD SO , W E MAY ADD THAT IN THE P RESENT CASE , OUR EN TIRE FO CUS WAS ON WHETHE R THESE FOREIGN TAX CREDITS COULD BE ALLOWED EVEN WHEN SUCH TAX CREDITS LEAD TO A SITUATION IN WHICH TAXES PAID ABROAD COULD BE REFUNDED IN I NDIA, BUT THAT MU S T NOT BE CONSTRUED TO ME AN THAT , AS A COROLLARY T O OUR DECISION, THE SE FOREI GN TAX CREDITS W OULD HAVE BEEN ALLOWED, EVEN IF THERE IS NO D OMESTIC TAX LIABILITY IN RESPECT OF THE RELATED INCOME IN I NDIA IF IT WAS NOT TO RESULT IN SUCH A REFU ND SITUAT ION. A T THE COST OF REPETITION, WE MAY ADD THAT , FOR THE DETAI LED REASONS SET OUT EARLIER, WE HAVE OUR RESERVATIONS ON THE APPLICABILITY OF THE WIPRO DECISION (SUP RA) ON THIS BENCH, BEING SITUATED OUTSIDE OF THE JURISDICTION OF HON BLE KARNATAKA HIGH CO URT, AND WE ARE OF THE CONSIDERED VIEW THAT FULL TAX CREDIT FOR S OURCE TAXATION CANNOT , AS SUCH AND TO THAT E XTENT , BE EXTENDED IN THE RESIDENCE JURISDICTION WHEN A TAX TREATY SANCTIONS ONLY PROP ORTIONATE CREDIT , AND DOES NO T , IN ANY CASE, SPECI FIC ALLY PROVIDE FOR THE FULL FOREIGN TAX CREDIT. A FULL TAX CREDIT , WHICH G OES BE YOND ELIMINATING DOUBLE TAXATION OF AN INCOME, ACTUALLY ENDS UP SUBSIDIZING THE FOREIGN EXCHEQUER , T O TH E EX TEN T THAT THE TAXES PAID TO T HE FOREIGN EXCHEQUER ARE ALLOWED TO DISCH ARGE EXCLUSIVE DOMES TIC TAX LIABILITY , RATHER THAN ELIMINATING DOUBLE TA XATION OF AN INCOME, AND THAT IS THE REASON T HAT EVEN IN THE SOLITARY FULL CREDIT SITUATION VI S UALIZED IN THE INDIAN TAX TREATIES, IN THE INDO NAM I BIA TAX TREATY (SUPRA) , ITS ONE - WAY TRAFFIC INASMUCH AS WHILE INDIA, AS A RELATIVELY DEVELOPED NATION , OFFER S , UNDER ARTICLE 23(2), FULL CREDIT FOR TAXES PAID IN NAMIBIA , WHEREAS, I N CONTRAST, NAMIBIA , A S A DEVELOPING NATION, OFFERS , UNDER ARTICLE 23(1), PROPORTIONATE CREDIT FOR TAXES PAID I N INDIA. IT REINFORCES OUR UNDERSTANDING T HAT THE F ULL FOREIGN TAX CRED IT S CANN OT BE INF ERRED TO BE PERMISSIBLE AS A MATTER OF COURSE AND NORMAL PRACT ICE. JUST BECAUSE THE COOR DINATE BENCHES HAVE SUBCONSCIOUSLY TAKEN A STAND THAT SEEMS T O BE CON DONING, AN D IN A WAY LEGITIMIZING , A CONTRARY PERCEPTION , EVEN IF THAT BE SO, W E C ANNO T, PARTICULARLY AFTER TAKING A CLOSER LOOK AT THE SITUATION, FOLLOW THE SAME COURSE. WHEN SU CH HUGE NATIONAL REVENUES, INVOLVING THOUSANDS OF CRORES, ARE INVOLVED IN THIS MACRO ISSUE , WE CANNOT AF FORD TO BE SUPER FICIAL , OR PERFUNCTORY , IN OUR APPROAC H. ON A SEPARATE NOTE, N EVERTHELESS, WE DO UPHOLD ITA N O : 869 /MU M/2018 ASSESSMENT YEAR: 2012 - 13 PAGE 49 OF 49 THE CLAIM OF THE ASSESSEE THAT THESE TAXES PAI D ABROAD WILL BE ALLOWED AS A DEDUCTION IN THE COMPUTATION OF THE BUSINESS INCOME OF THE ASSESSEE. 81. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTI CAL PURPOSES IN THE TERMS INDICATED ABOVE. PRONOUN CED IN THE OPEN COURT TODAY ON THE 4 TH DAY OF MARCH, 2021, SD/ - SD/ - VIKAS A W ASTHY PRAMOD KUMAR ( JUDICIAL MEMBER ) (VICE PRESIDENT) MUMBAI, DATED THE 4 TH DAY OF MARCH , 2021 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) CI T (4) CIT(A) (5) DR (6) GUARD FILE B Y ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBA I