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2015 (6) TMI 164 - AT - Income TaxMistake rectifiable u/s 154 - order u/s 154 read with section 143(3) and 250 withdrawing the claim for credit of foreign TDS - period of limitation - Held that:- In the instant case, the assessee has sought for rectification in the order u/s 143(3) passed by the A.O. on 26-12- 2008 which is within the period of 4 years from the end of the financial year in which the assessment order was passed. Accordingly we hold that the application u/s 154 of the Act was within the time limit laid down u/s 154(7) of the Act. Eligibility to claim credit for the tax deducted in Japan - whether income on which the assessee was charged tax in Japan was not chargeable to tax in India being exempt under the provision of section 10A? - India Japan DTAA - Held that:- This view of the lower authorities are not in consonance with the provisions of section 10A as amended by Finance Act 2000 w.e.f. 1-4-2001 and do not take into account the sea change made in the provision after the aforesaid amendment. Prior to the amendment by Finance Act 2000, the Act provided that any profits and gains to which the provisions of section 10A apply “shall not be included in the total income of the assessee”. However, after the amendment w.e.f. A.Y. 2001-02 the profits and gains to which the provisions of section 10A apply are not excluded from total income and instead “a deduction of such profits and gains…..” shall be allowed from the total income of the assessee”. It means “total income” must first be determined from which deduction u/s 10A shall be allowed. After amendment by Finance Act, 2000 w.e.f. 1-4-2001 deduction u/s 10A being from the total income leads to the conclusion that there is charge of income tax in India also on the income that has been subjected to tax in Japan. The tax liability of the assessee is equal to the tax payable in India at normal rates. Accordingly assessee qualifies for tax relief under para 2a of Article 23 of Double Tax Avoidance Convention between India and Japan as applicable to the assessment years under consideration. Since here we are concerned with the treatment to be given to the resident of India in relation to taxes paid in Japan., the same is covered by Paragraph 2 of Article 23 and not by paragraph 3 of Article 23 which provides for treatment to be given in relation to taxes paid in India by resident of Japan. On the one hand the assessee is being discriminated against a resident of Japan to whom the incentive of section 10A is expressly passed over in the double taxation relief granted to him against his tax liability in Japan. On the other hand the assessee is being discriminated against an Indian resident who does not earn export income and does business in domestic market only. Thus the treatment sought to be given by Revenue in the case of the assessee yields absurd result. Accordingly assessee should be treated to have paid tax in India without giving effect to the provision of section 10A for the reason also of Article 24 of Double Taxation Avoidance Convention between India and Japan. Thus we direct the A.O. to allow credit for foreign TDS against the tax levied on the corresponding income eligible for deduction u/s 10B of the Act in India for all the three years under consideration i.e. assessment years 2003-04, 2004-05 and 2005-06.
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