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2011 (2) TMI 1528 - AT - Income TaxAccrual of income - taxability of Foreign Dividends - whether liable to be taxed, on net basis, after deducting foreign taxes withheld abroad? - CIT(A) did not accept the assessee’s contention to the effect that foreign dividends are liable to be taxed, on net basis, after deducting foreign taxes withheld abroad - HELD THAT:- Issue as decided in favour of assessee as relying on case of AMBALAL KILACHAND [1994 (4) TMI 67 - BOMBAY HIGH COURT] as held that amount initially available for distribution by the U.K. company cannot be considered as income accruing to the assessee, because the assessee does not have any right to receive the amount so initially declared. He does not have any right to claim any credit for the tax which is deducted on that amount. Therefore, under no circumstances can he claim that the gross amount available for distribution has accrued to him - A shareholder outside the United Kingdom cannot claim any credit for the tax paid by the company. Therefore, the only entitlement of a shareholder outside the United Kingdom is to receive dividend as reduced by the deduction of the corporation tax. Deduction u/s 80HHE - exclusion on account of maintenance of software and technical support, from the export turnover, to arrive at the deduction - reason for which receipts in respect of software maintenance and technical support have been not been taken into account for the purpose of computing deduction as deduction under section 80HHE is restricted to receipts in respect of ‘development and production of software’ - HELD THAT:- We find that the connotations of ‘software maintenance’ are quite distinct and separate in scope than ‘maintenance’ per se - we direct the Assessing Officer to take receipts, in respect of ‘software maintenance’, into account for the purpose of computing deduction under section 80HHE. To this extent, grievance of the assessee is upheld. Receipts for technical support services - We uphold the action of the authorities below, but, in view of the Special Bench decision in the case of ITO v. Sak Soft Ltd. [2009 (3) TMI 243 - ITAT MADRAS-D] direct the Assessing Officer to exclude these receipts, both from the export turnover and from the total turnover, which are the numerator and the denominator, respectively, in the formula. The assessee will get the relief accordingly.
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