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2023 (7) TMI 998 - HC - Income TaxDouble taxation - claim tax credit on dividend income received from its Thai subsidiary - interpretation of Article 23 of the Indo-Thai DTAA - HELD THAT:- We agree with the Tribunal, that the respondent/assessee was entitled to claim tax credit on dividend income received from its Thai subsidiary, in respect of "Thai Tax Payable", which it would have to pay, but for the exemption accorded to it under the provisions of Section 34 of the Investment Promotion Act. If the exemption available u/s 34 of the Investment Promotion Act had not kicked in, the dividend income would have suffered tax at the rate of 10% under Section 70 of the Thai Revenue Code. The appellant/revenue's appeals are based on the proposition that tax credit as claimed, could not be extended to the respondent/assessee, because it had not paid tax in Thailand, i.e., that benefit under Article 23 of the Indo-Thai DTAA could only be extended in a situation where the tax had actually been paid. In view of the rationale provided by us hereinabove, this argument is completely misconceived. The concept of tax sparing is embedded in several DTAAs which have been executed by India, such as with France, Jordan and Oman, apart from Thailand. Insofar as the Indo-Thailand DTAA is concerned, credit for tax sparing works for residents of Thailand, as well as India. This is a mechanism which is engrafted in DTAAs to incentivize investment for economic development. Interdiction of such provisions would, in our view, be detrimental to the larger public interest. Thus, for the foregoing reasons, we are disinclined to interfere with the impugned order passed by the Tribunal. No substantial question of law arises for our consideration.
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