Shri Bhaskar Sreedharan , Bangalore V. Income Tax officer WArd-5(3)(1), Bangalore

ITA 986/BANG/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 5932 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 01-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 28-03-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABDUL HAKEEM M
• Assessee Lawyers: LOKESH JAIN
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 9 86 / BANG/201 8 ASSESSMENT YEAR : 20 1 3 - 14 SHRI BHASKAR SREEDHARAN, C/O. SRI G. SREEDHARAN, DOOR NO. AB/F3, BLOCK A, BALAMBIGAI APARTMENTS, GANAPATHI STREET, NANGANALLUR, CHENNAI 600 061. PAN: ANAPS2871E VS. THE INCOME TAX OFFICER, WARD 5 (3) (1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI LOKESH JAIN, CA RESPONDENT BY : SHRI ABDUL HAKEEM .M, JCIT (DR) DATE OF HEARING : 2 6 . 0 4 .2018 DATE OF PRONOUNCEMENT : 11 . 0 5 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE AND IT IS DIRE CTED AGAINST THE ORDER OF LD. CIT(A)-5, BANGALORE DATED 21.02.2018 FOR ASSESS MENT YEAR 2013-14. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW, FACTS AND CIRCUMSTANCES OF THE C ASE. 2. THE ORDER IS PASSED IN HASTE, WITHOUT PROVIDING SUFFICIENT AND REASONABLE OPPORTUNITY OF BEING HEARD. 3. THE ORDER IS PASSED AGAINST THE PRINCIPLE OF NAT URAL JUSTICE AND THUS LIABLE TO BE QUASHED. 4. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE LD. AO, WHO ERRED IN RESTRICTING THE FOREIGN TAX RELIEF TO ONLY RS. 1,67,677/- AS AGAINST RS. 6,64,162/- CLAIMED BY THE APPELLANT IN HIS RETURN OF INCOME. 5. THE LD. AO ERRED IN LIMITING THE BENEFIT OF FORE IGN TAX CREDIT TO THE EXTENT OF FEDERAL TAXES PAID IN USA. THE LD. CIT(A) ERRED IN ITA NO.986/BANG/2018 PAGE 2 OF 5 CONFIRMING THE SAME. 6. THE LD. CIT(A) AND THE LD. AO ERRED IN NOT TAKIN G COGNIZANCE OF THE PROVISIONS LAID DOWN IN SECTION 90(2) AND 91 OF THE INCOME TAX ACT. 7. THE LD. CIT(A) AND THE LD. AO OUGHT TO HAVE CONS TRUED THAT ALL THE TAXES PAID IN THE FOREIGN COUNTRY ON THE DOUBLY TAX ED INCOME ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 91 R.W.S. 90(2 ) OF THE ACT. THE APPELLANT SEEKS YOUR LEAVE TO ADD, ALTER, AMEND OR DELETE ANY OF THE GROUNDS URGED AT THE TIME OF HEARING. 3. THE ASSESSEE HAS ALSO RAISED ADDITIONAL GROUNDS WHICH ARE AS UNDER. A. THE LD AO ERRED IN TREATING THE GROSS INCOME I.E. S ALARY INCOME AS PER PAYSLIP INSTEAD OF TOTAL INCOME AS PER US TAX R ETURN FILED [FORM 1040]; B. THE LD. AO OUGHT TO HAVE ACCEPTED THE APPELLANT SUBMISSION DATED 31-03-2016 OF ACCEPTING THE TOTAL INCOME AS PER US RETURN FILED WHILE COMPUTING THE TOTAL INCOME I.E. ASSESSED INCOME OF THE APPELLANT; 4. REGARDING THE MAIN GROUNDS RAISED IN THE MEMO OF APPEAL, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE CLAIM OF THE ASSESSEE R EGARDING RELIEF ON ACCOUNT OF TAXES PAID IN A FOREIGN COUNTRY HAS BEEN RESTRICTED BY AO TO RS. 1,67,677/- AS AGAINST RS. 6,64,162/- ON THIS BASIS THAT ONLY FEDE RAL TAXES PAID ARE ELIGIBLE FOR FOREIGN TAX CREDIT AND NOT STATE TAXES. IN THIS RE GARD, HE SUBMITTED THAT AS PER SECTION 91 OF IT ACT, EVEN STATE TAXES PAID BY THE ASSESSEE ARE ELIGIBLE FOR FOREIGN TAX CREDIT. IN SUPPORT OF HIS CONTENTION, RELIANCE WAS PLACED BY HIM ON THE JUDGEMENT OF HON'BLE KARNATAKA HIGH COURT RENDE RED IN THE CASE OF WIPRO LTD. VS. DCIT IN ITA NO. 879/2008 DATED 25.03.2015, COPY AVAILABLE ON PAGES 85 TO 283 OF PAPER BOOK AND IN PARTICULAR, MY ATTEN TION WAS DRAWN TO PAGE NO. 167 OF PAPER BOOK AND IT WAS POINTED OUT THAT IT WA S HELD IN THAT CASE THAT INDIA HAS ENTERED INTO AGREEMENT WITH THE FEDERAL COUNTRY AND NOT WITH ANY STATE WITHIN THAT COUNTRY AND IN ORDER TO EXTEND THE BENE FIT OF THIS RELIEF OR AVOIDANCE OF DOUBLE TAXATION, AFORESAID EXPLANATION EXPLICITL Y MAKES IT CLEAR THAT INCOME TAX IN RELATION TO ANY COUNTRY INCLUDES THE INCOME TAX PAID TO THE GOVERNMENT OF ANY PART OF THAT COUNTRY OR A LOCAL AUTHORITY IN TH AT COUNTRY AND THEREFORE, EVEN THOUGH, INDIA HAS NOT ENTERED INTO ANY AGREEMENT WI TH THE STATE OF A COUNTRY ITA NO.986/BANG/2018 PAGE 3 OF 5 BUT IF THE ASSESSEE HAS PAID INCOME TAX TO THAT STA TE, THE INCOME TAX PAID IN RELATION TO THAT STATE IS ALSO ELIGIBLE FOR BEING G IVEN CREDIT TO THE ASSESSEE IN INDIA. RELIANCE WAS ALSO PLACED ON TRIBUNAL ORDER RENDERED IN THE CASE OF DCIT VS. TATA SONS LTD. IN ITA NO. 4776/MUM/2004 DA TED 24.11.2010, COPY AVAILABLE ON PAGES 285 TO 315 OF PAPER BOOK AND IN PARTICULAR, MY ATTENTION WAS DRAWN TO PARA NO. 20 OF THIS TRIBUNAL ORDER AND IT WAS POINTED OUT THAT IT WAS HELD BY TRIBUNAL IN THIS CASE THAT THE ASSESSEE WIL L BE ENTITLED TO RELIEF U/S. 91 IN RESPECT OF FEDERAL AS WELL AS STATE TAXES AND THAT RELIEF AS PER SECTION 91 BEING MORE BENEFICIAL TO THE ASSESSEE VIS--VIS TAX CREDI T UNDER THE APPLICABLE TAX TREATY, THE PROVISIONS OF SECTION 91 SHOULD BE CONS IDERED AND APPLIED RESULTING INTO ALLOWING OF TAX CREDIT FOR STATE INCOME TAXES AS WELL. 5. IN REPLY, IT WAS SUBMITTED BY LD. DR OF REVENUE THAT AS PER THE PROVISIONS OF SECTION 91 REPRODUCED BY HON'BLE KARNATAKA HIGH COU RT IN THIS JUDGMENT OF WIPRO LTD. VS. DCIT (SUPRA) AS CAN BE SEEN ON PAGE NO. 165 OF PAPER BOOK, FOREIGN TAX CREDIT HAS TO BE ALLOWED ONLY IF TAXES IN FOREIGN COUNTRY HAS BEEN PAID IN RESPECT OF THAT INCOME WHICH IS BEING DOUBL Y TAXED IN THE FOREIGN COUNTRY AND IN INDIA, AND SUCH BENEFIT SHOULD BE ALLOWED AT THE INDIA RATE OF TAX OR THE RATE OF TAXES BETWEEN THE SAID COUNTRY WHICHEVER IS LOWER. HE SUBMITTED THAT EVEN IF IT IS HELD THAT THE ASSESSEE IS ELIGIBLE FO R CREDIT OF STATE TAXES THEN ALSO, THE ISSUE SHOULD BE RESTORED BACK TO THE FILE OF AO TO QUANTIFY THE RELIEF ALLOWABLE TO ASSESSEE IN VIEW OF THE PROVISIONS OF SECTION 91 OF IT ACT. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND BY R ESPECTFULLY FOLLOWING THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED I N THE CASE OF WIPRO LTD. VS. DCIT (SUPRA), I HOLD THAT THE ASSESSEE IS ELIGI BLE FOR TAX CREDIT IN RESPECT OF STATE TAXES ALSO PAID BY THE ASSESSEE IN A FOREIGN COUNTRY. BUT IN ORDER TO QUANTIFY AMOUNT OF SUCH FOREIGN TAX CREDIT IN RESPE CT OF STATE TAXES PAID BY THE ASSESSEE IN USA, I FEEL IT PROPER TO RESTORE THE MA TTER BACK TO THE FILE OF AO WITH THE DIRECTION THAT HE SHOULD QUANTIFY THE AMOUNT OF FOREIGN TAX CREDIT ALLOWABLE TO ASSESSEE IN RESPECT OF STATE TAXES PAID BY THE A SSESSEE IN THE LIGHT OF PROVISIONS OF SECTION 91 OF IT ACT AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING ITA NO.986/BANG/2018 PAGE 4 OF 5 HEARD TO THE ASSESSEE. THE RELEVANT GROUNDS ON THI S ISSUE ARE ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. 7. REGARDING THE ADDITIONAL GROUNDS RAISED BY THE A SSESSEE, THE LD. AR OF ASSESSEE PLACED RELIANCE ON TRIBUNAL ORDER RENDERED IN THE CASE OF SHRI SUNIL SHINDE VS. ACIT IN ITA NO. 2149/BANG/2016 DATED 31. 08.2017 OF WHICH HE SUBMITTED A COPY WHICH IS KEPT ON RECORD. IT WAS P OINTED OUT THAT IT WAS HELD BY TRIBUNAL IN THIS CASE THAT FOR THE PURPOSE OF SECTI ON 5 (1)(C) OF IT ACT, ONLY ACTUAL INCOME WHICH IS RECEIVED IN THE HANDS OF THE ASSESS EE HAS TO BE CONSIDERED. HE SUBMITTED THAT IN THE PRESENT CASE, OUT OF GROSS INCOME AS PER PAY SLIP IN USA, VARIOUS DEDUCTIONS WERE ALLOWABLE AS PER US IT RETURN AND THEREFORE, THE SUCH NET INCOME SHOULD BE CONSIDERED INSTEAD OF GRO SS INCOME AS PER PAY SLIP. AT THIS JUNCTURE, IT WAS OBSERVED BY THE BENCH THAT WHETHER AS PER THE CLAIM OF THE ASSESSEE, STATE TAXES AND FEDERAL TAXES PAID BY ASSESSEE IN US IS ALSO TO BE DEDUCTED FROM THE INCOME OF THE ASSESSEE FOR THE PURPOSE OF TAXATION IN INDIA, IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT THE ASSESSEES REQUEST IS NOT FOR DEDUCTION OF STATE TAXES AND FEDERAL TAXES BEIN G IN THE NATURE OF INCOME TAX BUT THE ASSESSEE IS REQUESTING FOR VARIOUS ALLOWA BLE DEDUCTIONS IN THAT COUNTRY AND NOT INCOME TAX PAID IN USA BEING FEDERAL TAX OR STATE TAXES. THE LD. DR OF REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT ADDITIONAL GROUNDS RAISED BY THE ASSESSEE IS IN RESPECT OF LEGAL ISSUE AND I ADM IT THE SAME. SINCE THIS ISSUE WAS NOT RAISED BEFORE CIT(A) AND THE AO AND THEREFO RE, THERE IS NO DECISION OF THEM ON THIS ASPECT OF THE MATTER, I FEEL IT PROPER TO RESTORE THE MATTER BACK TO THE FILE OF AO FOR FRESH DECISION WITH THE DIRECTIO N THAT THE AO SHOULD DECIDE THIS ISSUE AFTER PROVIDING REASONABLE OPPORTUNITY OF BEI NG HEARD TO ASSESSEE AND AFTER CONSIDERING THE TRIBUNAL ORDER RENDERED IN TH E CASE OF SHRI SUNIL SHINDE VS. ACIT (SUPRA) AND ANY OTHER JUDGMENT ON THIS ISS UE WHICH MAY BE AVAILABLE AT THAT POINT OF TIME. THE ADDITIONAL GROUNDS RAIS ED BY THE ASSESSEE STANDS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.986/BANG/2018 PAGE 5 OF 5 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES IN THE TERMS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 11 TH MAY, 2018. /MS/ COPY TO: 1. APPELLANT 4. CIT(A) 2. RESPONDENT 5. DR, ITAT, BANGALORE 3. CIT 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.