2023 (3) TMI 264 - AT - Income Tax

Short Foreign Tax Credit - Credit of TDS deducted by employer - revised computation of income furnished during assessment proceedings on the premise that the claim cannot be entertained unless made in the return of income (original or revised) - AO while including the overseas income has omitted to grant the excess foreign tax credit - CIT(A) dismissed the appeal of the assessee on the grounds that the employer has not at revised his TDS return and hence the order of the Assessing Officer is affirmed - As argued that the assessee qualified as a Resident and Ordinarily Resident of India and filed his return of income for AY 2014-15 in India duly reporting his Kenya sourced salary income and claimed relief under the provisions of Section 90 read with Article 25 sub article 2(a) of the India Kenya DTAA - HELD THAT - Placing reliance on the judgment of Hon ble Supreme Court in the case of Goetz (India) Ltd. 2006 (3) TMI 75 - SUPREME COURT the appellate authorities are empower to accord the right relief to the assessee. Hence we hereby direct the AO to consider the entire taxes paid in India and Tanzania and give due credit to the taxes deposited of Rs.19, 26, 610/- as per Form 26AS. AO shall also accord foreign tax credit as per the revised claim filed by the assessee. The tax credit to the assessee cannot be denied merely on the grounds that the deductor has not filed its revised TDS return which is beyond the control of the assessee. Ordered accordingly.

Summary

Issues Involved:
Appeal against CIT(A) orders dated 25.06.2018; Consideration of revised computation of income during assessment proceedings; Non-applicability of Goetze (India) Ltd. case; Principles of natural justice; Foreign Tax Credit; Double Tax Avoidance Agreement between India and Kenya; Denial of Foreign Tax Credit by AO; Non-revised TDS return impact on tax credit; Relief under Section 90 of the Act; Residency status of the assessee; Assessment of worldwide income; Grant of foreign tax credit based on revised claim; AO's failure to grant full foreign tax credit; CIT(A) dismissing appeal due to non-revised TDS return; Appellate authorities' power to provide relief; Consideration of taxes paid in India and Tanzania; Form 26AS details; Denial of tax credit due to deductor's non-revised TDS return.

Analysis:

The assessee filed appeals against the orders of CIT(A)-21, New Delhi dated 25.06.2018, with similar issues in both appeals being heard and adjudicated together. In ITA No. 5840/Del/2018, the assessee raised grounds related to the non-acceptance of revised computation of income during assessment proceedings and the denial of Foreign Tax Credit. The appellant, a Resident of India, voluntarily disclosed overseas salary income omitted earlier, leading to a revised foreign tax credit claim of Rs. 66,74,802, resulting in a refund. However, the AO only allowed a partial credit of Rs. 44,85,507, ignoring the revised claim. The Assessing Officer's failure to grant the full credit of Rs. 21,89,295 led to the appeal.

The primary issue in the appeal was the denial of the full relief claimed under Section 90 of the Act, concerning the Double Tax Avoidance Agreement between India and Kenya. The appellant, being a Resident and Ordinarily Resident of India, reported worldwide income and claimed relief under the India-Kenya DTAA. The appellant provided necessary documentation to support the foreign tax credit claim, including proof of taxes paid in Kenya. The AO's omission to grant the excess credit due to the assessee led to the dispute.

The CIT(A) dismissed the appeal citing the non-revised TDS return by the employer as a reason, affirming the AO's decision. However, the appellate tribunal, referring to the Goetze (India) Ltd. case, emphasized the authority to provide rightful relief to the assessee. The tribunal directed the AO to consider all taxes paid in India and Tanzania, granting due credit and foreign tax credit as per the revised claim. The denial of tax credit based on the deductor's non-revised TDS return was deemed beyond the assessee's control, leading to the allowance of the appeals.

In conclusion, the appellate tribunal allowed the appeals, directing the AO to provide the appropriate relief and grant the foreign tax credit as per the revised claim, emphasizing the authority to consider taxes paid and the impact of non-revised TDS returns on tax credits. The judgment highlighted the importance of ensuring rightful relief to the assessee based on legal provisions and the Double Tax Avoidance Agreement.