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2015 (12) TMI 1586 - AT - Income TaxAssessee’s claim of relief u/s 90 - CIT(A) erred in restricting the assessee’s claim of relief u/s 90 to the extent of tax payable in India on net income i.e difference between interest earned from M/s AHPL and interest paid on borrowings made for advancing the loans to M/s AHPL - Held that:- The provisions of sec. 90 of the Act and clauses of DTAA between India and Singapore clarify that tax credit to the extent of income derived in Singapore and offered to tax in India should be granted. Relief from double taxation is provided by abatement on the basis of mutual agreement between the two States concerned whereby the assessee is given relief by credit in a particular manner even though he is taxed in both the countries. Relief can be in the form of credit for tax payable in another country or by charging tax at lower rate. The procedure to be adopted by the Assessing Officer for granting relief is to determine in the first place, the total income of the person liable to tax in India in accordance with the provisions of the Act, and then allow relief as per the terms of the tax treaty entered with the other contracting country where the income has suffered double taxation. Article 25 of the DTAA between India and Singapore deals with relief to be granted in respect of double taxed income. The said Article restricts the allowability of credit to an amount not exceeding the tax payable in India in respect of such income from Singapore. In similar circumstances, the Mumbai Bench of the Tribunal in the case of JCIT vs Digital Equipments India Ltd [2004 (3) TMI 711 - ITAT MUMBAI ], has observed that credit of tax paid in USA cannot exceed the income tax liability payable in India in view of clause 25(2)(a) of DTAA between India and USA. Thus we remit this issue in dispute to the file of the Assessing Officer for reconsideration. Addition towards loss on foreign exchange derivatives transactions - Hel that:- We remit this issue back to the file of the Assessing Officer. The Assessing Officer shall reconsider the issue afresh in the light of the above order of this Tribunal in Deputy Commissioner Of Income Tax Company Circle-I (1) , Chennai Versus M/s Asvini Fisheries Pvt Ltd [2016 (1) TMI 538 - ITAT CHENNAI] after giving adequate opportunity to the assessee wherein held Assessing Officer has to consider the foreign exchange derivative in proportion to export turnover as regular business transaction of the assessee. If the derivative transaction undertaken by the assessee is in excess of export turnover then that loss suffered in respect of that portion of excess transaction has to be considered as speculative loss only and that excess derivative transaction has no proximity with export turnover and the Assessing Officer is directed to compute accordingly. Further, the Assessing Officer has to see whether there is any premature cancellation of forward contract of foreign exchange and that transaction should be taken out for the purpose of considering the business loss and only the transactions which are completed to be considered for the purpose of determining the business loss from these foreign exchange forward contract. With this observation, we remand this issue to the file of the Assessing Officer for fresh consideration. Addition u/s 14A - Held that:- We make it clear that if the assessee has already disallowed more than 5% of the exempted income, the same has to be sustained. Ordered accordingly. This ground of appeal is partly allowed. Eligibility for deduction u/s 35D in respect of total expenditure incurred towards share issue - Held that:- Extension of the industrial undertaking cannot be considered as complete in the relevant previous year. Ld. CIT(Appeals) was justified in denying assessee claim under Section 35D of the Act for the impugned assessment year. Disallowance u/s 40(a)(ia) on payment of catering charges to catering contractor - Held that:- This issue is squarely covered in favour of the assessee by the decision of Special Bench in the case of Merilyn Shipping and Transports vs Addl. CIT [2012 (4) TMI 290 - ITAT VISAKHAPATNAM] wherein it was held that only the amount outstanding at the close of the financial year has to be disallowed u/s 40(a)(ia) of the Act. Being so, in our opinion, the Assessing Officer has to see whether any amount is outstanding at the close of the financial year and that portion is to be disallowed. Accordingly, this issue is remitted back to the file of the Assessing Officer with the above direction. Disallowance u/s 40(a)(i) - payments made to non-residents in respect of which tax deduction has been made at lower rates without obtaining a certificate u/s 195(2)- Held that:- Assessee was right in effecting deduction of tax at source considering se 44BB of the Act. The disallowance was rightly deleted by the ld. CIT (Appeals) Disallowance u/s 40(a)(i) in respect of dry-docking charges paid to Fair Mount Marine BV Netherlands - Held that:- The assessee took the plea for the first time that the said service was covered under Article 8A of DTAA before the CIT(A) and there was no such claim made before the Assessing Officer. In our opinion, the Assessing Officer has to examine the issue whether Article 8A of India-Netherlands DTAA is applicable to the assessee's case or not. Accordingly, this issue is remitted back to the file of the Assessing Officer for fresh consideration.
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