TMI Blog2017 (4) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... ) TMI 1084 - ITAT AHMEDABAD] wherein held payer is bound to withhold tax from the foreign remittance only if the sum paid is assessable to tax in India. The assessee cannot, therefore, be faulted for not approaching the Assessing Officer under section 195 either. As regards the withdrawal of the CBDT circular holding that the commission payments to non resident agents are not taxable in India, nothing really turns on the circular, as de hors the aforesaid circular, we have adjudicated upon the taxability of the commission agent’s income in India in terms of the provisions of the Income Tax Act as also the relevant tax treaty provisions - Decided against revenue Disallowance on account of provision for warranty - Held that:- As long as the assessee has made the provision for warranty claims on a scientific basis and historical data, this is admissible as deduction in computation of business income. As noted the warranty provision was computed as a three step process to quantify such provision (a) the assessee determines, on the basis explained above, percentage of defects likely to occur in the product sold by the assessee; (b) the assessee determines, based on the past experienc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision, as is the claim of the learned counsel, does not cover the taxes paid abroad, there cannot be any occasion to include, under Explanations to Section 40(a)(ii), taxes in respect of which relief under section 90 and 91 is not admissible. These Explanations donot extend the scope of the Section 40(a)(ii) but rather explain the scope of the said section. If something is covered by the Explanation, it cannot be said that it is not covered by the main provision. If taxes in respect of which tax credit under section 90 or 91 are covered by the proviso, these are covered by the scope of Section 40(a)(ii) as well. And if these taxes are covered by Section 40(a)(ii), the theory that meaning of ‘tax’ under section 40(a)(ii) must remain confined to the taxes levied under Income Tax Act, 1961 comes to a naught since the taxes in respect of which credits are available under section 90 or 91 cannot be, under any circumstances, imposed under the Indian Income Tax Act. The argument of the learned counsel, if we have understood it correctly, is devoid of, in our considered view, legally sustainable merits. In view of the above discussions, we are of the considered view that no deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee before us is engaged in the business of developing software products. During the course of the assessment proceedings, the Assessing Officer noticed that the assessee has paid commission of ₹ 1,02,33,461 for procuring the business, out of which ₹ 65,96,434 were paid to non-resident agents. It was also noticed that no tax was withheld from the payments made to non-resident commission agents. On an examination of the supporting evidences furnished by the assessee, the Assessing Officer was not satisfied with genuineness of the commission payment mainly on the ground that there was no material to justify the reasonableness of commission payment to non-resident and evidences pertaining to services rendered by the foreign commission agent having nexus with assessee s business was not available. He was also of the view that in view of the provisions of Section 9(1)(i) income of the non resident from though or from any business connection in India or any source in India is deemed to accrue or arise in India, and under section 5(2)(b) income deemed to accrue or arise in India is also taxable in India. While he did not dispute the agent must have rendered services abr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant had not proved the identity, evidences of the services rendered and the copy of the agreements entered. On the basis of this conclusion, the learned AO made an observation that the services have not been rendered and the payments are not genuine. Against this the Appellant submitted that during the assessment proceedings it had submitted the sample copy of the invoices raised by the agents as well as purchase orders vide its submission dated 16 March 2015. A remand report was also called from the learned AO under which the learned AO has contended that in absence of the copy of the agreements, the identity of the non-resident agents have not been established and hence the genuineness of the expenditure could also not be established. The same are not acceptable as the Appellant had already submitted the documents like copy of the invoices of the agents and the purchase orders. Further I agree with the submissions of the Appellant that no tax is required to be withheld on payment of commission to non-resident agents as the same is not taxable in India. The rulings of Hon'ble Supreme court in the case of R D Aggarwal Toshoku, Delhi High Court in the case of Eon Techno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of commission to non resident agents, as learned representatives fairly agree, the issue is now covered, in favour of the assessee, by a coordinate bench decision in the case of DCIT Vs Welspun Corporation Ltd [(2017) 77taxman.165 (Ahd)], speaking through one of us, has observed as follows: 31. The scheme of taxability in India, so far as the non residents, are concerned, is like this. Section 5 (2), which deals with the taxability of income in the hands of a non-resident, provides that the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which - (a) is received or is deemed to be received in India in such year by or on behalf of such person; or (b) accrues or arises or is deemed to accrue or arise to him in India during such year . There is no dispute that since no part of the operations of the recipient non-residents is carried out in India, no income accrues to these non-residents in India. The case of the revenue hinges on income which is deemed to accrue or arise in India . Coming to the deeming provisions, which are set out in Section 9, we find that the following statuto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission paid to non-residents under section 9(!)(i), but, neither these rulings are binding precedents for us nor are we persuaded by the line of reasoning adopted in these rulings. As for the AAR ruling in the case of SKF Boilers Driers Pvt Ltd [(2012) 343 ITR 385 (AAR)], we find that this decision merely follows the earlier ruling in the case of Rajiv Malhotra [(2006) 284 ITR 564] which, in our considered view, does not take into account the impact of Explanation 1 to Section 9(1)(i) properly. That was a case in which the non-resident commission agent worked for procuring participation by other non-resident entities in a food and wine show in India, and the claim of the assessee was that since the agent has not carried out any business operations in India, the commission agent was not chargeable to tax in India, and, accordingly, the assessee had no obligation to deduct tax at source from such commission payments to the non-resident agent. On these facts, the Authority for Advance Ruling, inter alia, opined that no doubt the agent renders services abroad and pursues and solicits exhibitors there in the territory allotted to him, but the right to receive the commission aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bly come to the conclusion that we are not persuaded by these ruling . Once we come to the conclusion that the income embedded in these payments did not have any tax implications in India, no fault can be found in not deducting tax at source from these payments or, for that purpose, even not approaching the Assessing Officer for order under section 195. In our considered view, the assessee, for the detailed reasons set our above, did not have tax withholding liability from these payments. As held by Hon ble Supreme Court in the case of GE India Technology Centre Pvt Ltd Vs CIT [(2010) 327 ITR 456 (SC)], payer is bound to withhold tax from the foreign remittance only if the sum paid is assessable to tax in India. The assessee cannot, therefore, be faulted for not approaching the Assessing Officer under section 195 either. As regards the withdrawal of the CBDT circular holding that the commission payments to non resident agents are not taxable in India, nothing really turns on the circular, as de hors the aforesaid circular, we have adjudicated upon the taxability of the commission agent s income in India in terms of the provisions of the Income Tax Act as also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 62 (SC)]. These submissions, however, did not impress the Assessing Officer. He was of the view that the assessee has not been following this method consistently inasmuch as till the assessment year 2010-11, the assessee used to make such a provision but also used to add in back in the statement of taxable income whereas now he is not doing so. As for assessee s reliance of Rotork case (supra), the Assessing Officer was of the view that it is only when a consistent and scientific method of ascertain provision for warranty is followed that the same can be allowed as deduction in computation of business income. In the present case, neither the method of quantifying the provision was scientific nor the approach of the assessee consistent. The Assessing Officer further observed that such provision of contingent nature having no nexus with the actual expenditure of the business and hence, the same being a contingent liability, is not allowable as per law . Aggrieved, assessee carried the matter in appeal. Learned CIT(A) reversed the action of the Assessing Officer, and held, in the light of principles laid down by Hon ble Supreme Court in the case of Rotork Control (supra) and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stood attached to the sale price of the product. These aspects are important. As stated above, obligations arising from past events have to be recognized as provisions. These past events are known as obligating events. In the present case, therefore, warranty provision needs to be recognized because the appellant is an enterprise having a present obligation as a result of past events resulting in an outflow of resources. Lastly, a reliable estimate can be made of the amount of the obligation. In short, all three conditions for recognition of a provision are satisfied in this case. 13. In this case we are concerned with product warranties. To give an example of product warranties, a company dealing in computers gives warranty for a period of 36 months from the date of supply. The said company considers following options : (a) account for warranty expense in the year in which it is incurred; (b) it makes a provision for warranty only when the customer makes a claim; and (c) it provides for warranty at 2 per cent of turnover of the company based on past experience (historical trend). The first option is unsustainable since it would tantamount to accounting for warranty expenses on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hen the question of reversal in the subsequent two years, in the above example, may not arise in a significant way. In our view, on the facts and circumstances of this case, provision for warranty is rightly made by the appellant-enterprise because it has incurred a present obligation as a result of past events. There is also an outflow of resources. A reliable estimate of the obligation was also possible. Therefore, the appellant has incurred a liability, on the facts and circumstances of this case, during the relevant assessment year which was entitled to deduction under s. 37 of the 1961 Act. Therefore, all the three conditions for recognizing a liability for the purposes of provisioning stands satisfied in this case. It is important to note that there are four important aspects of provisioning. They are-provisioning which relates to present obligation, it arises out of obligating events, it involves outflow of resources and lastly it involves reliable estimation of obligation. Keeping in mind all the four aspects, we are of the view that the High Court should not to have interfered with the decision of the Tribunal in this case. 14. In this case the High Court has principall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tingent liability properly ascertained and discounted on an accrued basis could be deducted either under s. 28 or s. 37 of the 1961 Act. This has been explained in Shree Sajjan Mills Ltd. (supra) at p. 599. Sec. 40A(7) deals only with the case of gratuity. Even in the case of gratuity but for insertion of s. 40A(7), provision made in the P L a/c on the basis of present value of the contingent liability properly ascertained and discounted on an accrued basis was entitled to deduction either under s. 28 or under s. 37 of the said Act. This aspect, therefore, indicates that the present value of the contingent liability like the warranty expense, if properly ascertained and discounted on accrued basis, could be an item of deduction under s. 37 of the said Act. This aspect is not noticed in the impugned judgment. We may add a caveat. As stated above, the principle of estimation of the contingent liability is not the normal rule. As stated above, it would depend on the nature of business, the nature of sales, the nature of the product manufactured and sold and the scientific method of accounting being adopted by the assessee. It will also depend upon the historical trend. It would also d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 802 (SC), in which the Court has explained the meaning of the word expenditure in s. 37 of the 1961 Act. In other words, the principle enunciated in Metal Box Company of India (supra) which has been reiterated in Shree Sajjan Mills Ltd. (supra) (upto 1st April, 1973) which deals with making of provision on the basis of estimated present value of contingent liability holds good during the assessment years in question qua warranty claims. [Emphasis, by underlining, supplied by us] 14. Quite clearly, therefore, as long as the assessee has made the provision for warranty claims on a scientific basis and historical data, this is admissible as deduction in computation of business income. We have noted, earlier in this order, that the warranty provision was computed as a three step process to quantify such provision (a) the assessee determines, on the basis explained above, percentage of defects likely to occur in the product sold by the assessee; (b) the assessee determines, based on the past experience and the repair cost estimate received from the vendors, average per unit likely repair costs; and (c) the assessee determines the likely number of units which are likely to have s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as erred in confirming the action of the learned AO of disallowing the employees' contribution to ESI of ₹ 43,908 under section 2(24)(x) r.w.s. 36(1)(va) of the Act. The Appellant submits that the said amounts have been paid before the due date of filing return of income under Section 139(1) and hence allowable. 19. Learned representatives fairly agree that this issue is covered, against the assessee, by Hon ble Gujarat High Court s judgment in the case of CIT Vs Gujarat State Toad Transport Corporation [(2014) 366 ITR 170 (Guj)]. The conclusions arrived at by the learned CIT(A), which are in harmony with the view so expressed by Hon ble jurisdictional High Court, donot call for any interference from us. We confirm the order of the CIT(A) on this issue. 20. Ground no. 1 is thus dismissed. 21. In ground no. 2, the assessee has raised the following grievance: 2. Ground No. 2 - Disallowance of Marked to Market Loss 2.1 On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned AO by upholding disallowance of marked to market loss of ₹ 71,29,913 arising on account of forwa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is in accordance with AS-11 which is binding on the assessee but declined the deduction for this loss nevertheless, as, according to the CIT(A), the views of the assessee are not acceptable in view of the view expressed by the CBDT vide instruction no. 3 of 2010 dated 23/03/2010 . The assessee is aggrieved and is in further appeal before us. 23. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 24. It is with some amount of anguish that we have taken note of the fact that the CIT(A) was so much overawed with the CBDT instruction no. 3 (supra) on the subject that rather than even dealing with a Supreme Court judgment cited before him, he simply followed the CBDT instructions. It is only elementary that the CBDT instructions do not bind the appellate authorities and the appellate authorities are, therefore, required to take their independent calls in accordance with the law and binding judicial precedents. That has not been done. Be that as it may, in the case of Woodward Governor (supra), the issue regarding deductibility of foreign exchange loss came up for consideration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correctness of the Accounting Standard followed by the assessee(s) in this batch of civil appeals. 17. Having come to the conclusion that valuation is a part of the accounting system and having come to the conclusion that business losses are deductible under s. 37(1) on the basis of ordinary principles of commercial accounting and having come to the conclusion that the Central Government has made Accounting Standard-11 mandatory, we are now required to examine the said Accounting Standard ( AS ). 18. AS-11 deals with giving of accounting treatment for the effects of changes in foreign exchange rates. AS-11 deals with effects of exchange differences. Under para 2, reporting currency is defined to mean the currency used in presenting the financial statements. Similarly, the words monetary items are defined to mean money held and assets and liabilities to be received or paid in fixed amounts, e.g., cash, receivables and payables. The word paid is defined under s. 43(2). This has been discussed earlier. Similarly, it is important to note that foreign currency notes, balance in bank accounts denominated in a foreign currency, and receivables/payables and loans denominat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never the dollar rate stood reduced, the Department had taxed the gains which accrued to the assessee on the basis of accrual and it is only in the year in question when the dollar rate stood increased, resulting in loss that the Department has disallowed the deduction/debit. This fact is important. It indicates the double standards adopted by the Department. 11. The dispute in this batch of civil appeals centers around the year(s) in which deduction would be admissible for the increased liability under s. 37(1). 12. We quote hereinbelow s. 28(i), s. 29, s. 37(1) and s. 145 of the 1961 Act, which read as follows : Sec. 28. Profits and gains of business or profession - The following income shall be chargeable to income-tax under the head Profits and gains of business or profession , - (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year. Sec. 29. Income from profits and gains of business or profession, how computed - The income referred to in s. 28 shall be computed in accordance with the provisions contained in ss. 30 to 43D. Sec. 37. General - (1) Any expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ievably and consequently, the requirement of expenditure is not met. Consequently, the additional liability arising on account of fluctuation in the rate of foreign exchange was merely a contingent/notional liability which does not crystallize till payment. In that case, the Supreme Court was considering the meaning of the expression expenditure incurred while dealing with the question as to whether there was a distinction between the actual liability in praesenti and a liability de futuro. The word expenditure is not defined in the 1961 Act. The word expenditure is, therefore, required to be understood in the context in which it is used. Sec. 37 enjoins that any expenditure not being expenditure of the nature described in ss. 30 to 36 laid out or expended wholly and exclusively for the purposes of the business should be allowed in computing the income chargeable under the head Profits and gains of business . In ss. 30 to 36, the expressions expenses incurred as well as allowances and depreciation has also been used. For example, depreciation and allowances are dealt with in s. 32. Therefore, Parliament has used the expression any expenditure in s. 37 to cover both. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has succeeded on merits. As for the CBDT instructions, it is only elementary that any instructions issued by the CBDT cannot bind the assessee even though the assessee is entitled to, and can legitimately ask for, any benefits granted to the assessee by such instructions or circulars. Nothing, therefore, turns on the CBDT instruction even if it is actually contrary to the claim of the assessee. 26. Ground no. 2 is thus allowed. 27. In ground no. 3, the assessee has raised the following grievance 3.1 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned AO in not allowing entire foreign tax credit amounting to ₹ 55,61,306. 3.2 On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the learned AO in disregarding the fact that tax credit has been claimed on the income which has been taxed in both the countries, i.e. source country and resident country. 3.3 Alternatively, on the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the action of the AO in not considering actual profitabili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 37(1)- a claim which was negatived, or rather simply brushed aside, by the Assessing Officer without any discussion at all. Aggrieved by learned CIT(A) upholding the eligible tax credit at ₹ 3,10,799, the assessee is in appeal before us. In the meantime, however, the order so followed by the CIT(A) also came up for examination before us. Vide order dated 3rd January 2017 on assessee s appeal for the assessment year 2009-10, the stand of the CIT(A) on quantification of tax credit was reversed, claim of the assessee on quantification, to a very large extent, was upheld, and, in the process, some observations on principles governing the quantification of such tax credit were made. Learned counsel for the assessee suggests that matter deserves to be remitted to the file of the CIT(A) for fresh adjudication, on quantification aspect, in the light of the order so passed by the Tribunal, and learned Departmental Representative does not oppose this prayer. On the quantification aspect, therefore, we remit the matter the file of the CIT(A) for adjudication de novo in accordance with the law, in the light of the observations made by the Tribunal for the assessment year 2009-10 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so made by the assessee. However, there seems to be no logic in allocating a share, in proportion of turnover, of all the costs borne by the assessee to these earnings- as has been done by the Assessing Officer. When the income in respect of such foreign operations is not separately computed, it is to be done on a reasonable basis, and what would constitute reasonable basis will be the basis which is based on sound reasoning. The concept of averaging on the basis of overall revenues and profits of the assessee, or on the basis of some other ratio analysis, can only come into play when the income element cannot be worked out on some other reasonable basis on the facts of a particular case So far as the facts of the present case are concerned, we have also noted that the assessee has, during the course of the assessment proceedings, given the working on the computation of income- a copy of which is placed at page 79 of the paper-book filed before us.. . 9. We see no infirmities in this computation showing the element of income embedded in the receipts which have been taxed abroad as well. These details were duly furnished to the Assessing Officer vide letter dated 20th Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner, spread over the residence and source jurisdiction, but that s not the case here. Right now, we are dealing with a situation in which a major portion of income, by release of retention money as also by addition of an additional user by the customer, is a somewhat passive income, even though in the nature of business receipt, and as such, to that extent, allocation of all the expenses incurred by the assessee, in respect of such earnings, will not be justified. As regards the income from maintenance contracts, the relates costs have already been allocated and the Assessing Officer has not pointed out any infirmity in the same. In this view of the matter, quantification of income for the purpose of computing admissible tax credit, as done by the assessee and as reproduced earlier, is accepted. 10. We have noted that the tax credit for both the jurisdictions is to be computed separately but in a similar manner, as is provided in the respective treaties. So far as the tax credit in respect of Indonesian receipts is concerned, as noted above and in view of article 23(1) of the applicable tax treaty, it cannot exceed the part of the income tax as computed before the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount of income tax paid abroad (i.e. income tax withheld abroad minus the tax credit held admissible in such respect of such income tax paid abroad), the Assessing Officer is in appeal before us. 31. So far as this aspect of the matter is concerned, the stand of the assessee, at the assessment stage, has been that in case any part of the amount of income tax withheld abroad is not allowed as tax credit against the Indian tax liability, a deduction under section 37(1) be allowed in respect of the same. It was pointed that though there is a bar, under section 40(a)(ii), on deduction in respect of tax on the profits and gains of the business, such a bar does not apply on the taxes paid outside India, as, in terms of definition of tax under section 2(43), income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA . Reliance was placed on a coordinate bench decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefit available to the assessee in respect of taxes paid or withheld outside India, by way of an example, is as follows: Assuming that the assessee earned an income of ₹ 100 from outside India, and the taxes withheld abroad are ₹ 60 and the admissible tax credit available to the assessee under section 90 and/or 91, in respect of these taxes withheld, is ₹ 40 as the effective tax rate in India in respect of the said income is 40%, the benefit available to the assessee should be as follows: Tax credit to be adjusted against tax liability under the Income Tax Act, 1961 ₹ 40 Deduction under section 37(1) in respect of taxes paid or withheld outside India ₹ 20 In effect thus, the assessee gets a tax benefit of ₹ 48 (i.e. ₹ 40 plus 40% of ₹ 20 which is allowed as deduction) as against a related tax liability of ₹ 40 33. The stand of the revenue authorities, on the other hand, is that in the above example, no amount of tax paid or withheld outside India can be allowed as deduction under section 37(1). It is undisputed p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is significant to note that the word tax'; is used in conjunction with the words any rate or tax , The word any goes both with the rate and tax. The expression is further qualified as a rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. If the word tax is to be given the meaning assigned to it by s. 2(43) of the Act, the word any used before it will be otiose and the further qualification as to the nature of levy will also become meaningless. Furthermore, the word tax as defined in s. 2(43) of the Act is subject to unless the context otherwise requires . In view of the discussion above, we hold that the words any tax herein refers to any kind of tax levied or leviable on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains . [Emphasis, by underlining, supplied by us now] 34. The views so expressed by Hon ble Bombay High Court, in Lubrizol s case (supra), were approved by Hon ble Supreme Court in the case of Smithkline French India Ltd Vs CIT [(1996) 219 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in several other decisions of that Court], Karnataka [CIT vs. International Instruments Pvt. Ltd. (1983) 144 ITR 936 (Kar), Madras [Sundaram Industries Ltd. vs. CIT (1986) 159 ITR 646 (Mad), Andhra Pradesh [Vazir Sultan Tobacco Co. Ltd. vs. CIT (1988) 169 ITR 35 (AP)], Rajasthan [Associated Stone Industries Co. Ltd. vs. CIT (1988) 170 ITR 653 (Raj)], Gujarat [S.L.M. Maneklal Industries Ltd. vs. CIT (1988) 172 ITR 176 (Guj) followed in several cases thereafter], Allahabad [Himalayan Drug Co. Pvt. Ltd. vs. CIT (1996) 218 ITR 346 (All)] and Punjab Haryana High Court [Highway Cycle Industries Ltd. vs. CIT (1989) 178 ITR 601 (P H) : TC 17R.807]. 35. A coordinate bench of this Tribunal, while dealing with the same question of deductibility of income tax paid abroad and in the case of DCIT Vs Tata Sons Ltd [(1991) 9 ITR (Trib) 154 (Bom)] and speaking through one of us, elaborately set out the broad principles governing the issue and observed as follows: 7. Let us deal with some fundamentals first. The payment of income-tax in overseas tax jurisdictions, in addition to taxability in the home jurisdiction, is an inevitable corollary of inherent conflict between the source rule a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n system adopt exemption with progression, under which the total tax on all income of a resident is calculated, and then the average rate of tax is applied to the income that does not enjoy the exemption. Exemption systems are also increasingly subject to various conditions to ensure satisfaction of the assumption underlying the system (that the income has been taxed in the source country at its ordinary rates).These conditions can consist of subjectto- tax tests (including the specification of tax rates) or selective application of exemption to foreign countries under domestic law or tax treaties. In particular, the exemption is usually not given where the source tax has been reduced or eliminated by a tax treaty. The result is that there are no countries asserting jurisdiction to tax worldwide income that give an exemption for all kinds of foreign income; where a country is referred to as an exemption country, this generally means that it provides some form of exemption to business income, dividends received from direct investments in foreign companies, and often employment income, with a credit being used in other cases. The third system is the foreign tax credit system un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be necessary. Where deductions allocated to foreign income exceed that income, the loss should not be available for use against domestic income. 8. There are thus four methods in which relief can be granted to a taxpayer in the residence country in respect of income-tax paid abroad. It is also important to bear in mind the fact that these four methods are mutually exclusive methods in the sense that each one of these methods, on standalone basis, is meant to grant requisite relief from double taxation of an income. Application of more than one of these methods, in a particular situation can thus only result in granting relief greater than the double taxation itself. To sum up even at the cost of an element of repetition, these methods are as follows : In the first method, residence country follows pure territorial method of taxation and brings to tax only such incomes as are sourced in the residence jurisdiction itself. There is then no conflict between the source rule and the residence rule in as much as the residence rule is not strictly followed. Globally, however, there are not many takers for this system, and quite reasonably so, because, as Prof. Vann rightly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) income-tax chargeable under this Act and under the corresponding law in force in that country or specified territory, as the case may be, to promote mutual economic relations, trade and investment, or (b) for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country or specified territory, as the case may be, or (c) for exchange of information for the prevention of evasion or avoidance of income-tax chargeable under this Act or under the corresponding law in force in that country or specified territory, as the case may be, or investigation of cases of such evasion or avoidance, or (d) for recovery of income-tax under this Act and under the corresponding law in force in that country or specified territory, as the case may be, and may, by notification in the Official Gazette, make such provisions as may be necessary for implementing the agreement. (2) Where the Central Government has entered into an agreement with the Government of any country outside India or specified territory outside India, as the case may be, under sub-s. (1) for granting relief of tax, or as the case may be, avoidance of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India has entered into an agreement with a specified association of any specified territory outside India under sub-s. (1) and such agreement has been notified under that sub-section, for granting relief of tax, or as the case may be, avoidance of double taxation, then, in relation to the assessee to whom such agreement applies, the provisions of this Act shall apply to the extent they are more beneficial to that assessee. (3) Any term used but not defined in this Act or in the agreement referred to in sub-s. (1) shall, unless the context otherwise requires, and is not inconsistent with the provisions of this Act or the agreement, have the same meaning as assigned to it in the notification issued by the Central Government in the Official Gazette in this behalf. Explanation 1 : For the removal of doubts, it is hereby declared that the charge of tax in respect of a company incorporated in the specified territory outside India at a rate higher than the rate at which a domestic company is chargeable, shall not be regarded as less favourable charge or levy of tax in respect of such company. Explanation 2 : For the purposes of this section, the expressions - (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is assessed on his share in the income of a registered firm assessed as resident in India in any previous year and such share includes any income accruing or arising outside India during that previous year (and which is not deemed to accrue or arise in India) in a country with which there is no agreement under s. 90 for the relief or avoidance of double taxation and he proves that he has paid income-tax by deduction or otherwise under the law in force in that country in respect of the income so included he shall be entitled to a deduction from the Indian income-tax payable by him of a sum calculated on such doubly taxed income so included at the Indian rate of tax or the rate of tax of the said country, whichever is the lower, or at the Indian rate of tax if both the rates are equal. Explanation : In this section, - (i) the expression Indian income-tax means income-tax charged in accordance with the provisions of this Act; (ii) the expression Indian rate of tax means the rate determined by dividing the amount of Indian income-tax after deduction of any relief due under the provisions of this Act but before deduction of any relief due under this chap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry is practically treated as a separate basket of income and the double taxation relief, in respect of taxes paid in that treaty partner country, is restricted to the taxes actually levied in the home country in respect of the said income. It thus follows that the least relief available in respect of income-tax paid abroad is if at all an assessee is also taxed in India in respect of the income-taxed abroad, it is only to the extent the tax rate abroad falls short of Indian tax rate. There is no dispute that the assessee has claimed double taxation relief under the scheme of the Act - as set out in s. 90 and s. 91 of the Act. 11. The assessee, however, was not satisfied with the relief so granted by the AO. He also claimed deduction, in computation of income from profits and gains from business and profession , in respect of taxes paid abroad. It is the case of the assessee that the taxes so paid abroad constituted expenditure laid out or expended wholly and exclusively for the purposes of the business or profession, and, therefore, deductible under s. 37(1) of the Act. It is this deduction which is now subject-matter of core dispute before us. Interestingly, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndian income-tax liability, in respect of other incomes, by being allowed deduction in respect of taxes paid abroad. Such a claim being accepted will lead to quite an incongruous result by any standard. 12. It is in the backdrop of the above claim for deduction that one has to take a look at s. 40(a)(ii) and s. 2(43) which are reproduced below for ready reference : Sec. 40(a)(ii) - Notwithstanding anything to the contrary in ss. 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession , - (ii) any sum paid on account of any rate of tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. **Explanation 1 : For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate of tax levied includes and shall be deemed always to have included any sum eligible for relief of tax under s. 90 or, as the case may be, deduction from the Indian income-tax payable under s. 91. **Explanation 2 : For the removal of doubts, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no finding that local taxes (abroad) were assessed on a proportion of the profits i.e. consultancy fees received . When CIT sought a reference under s. 256(1), for esteemed views of Hon ble Bombay High Court and against this order on the question of deductibility of local taxes paid abroad, the Tribunal declined the reference and, inter alia, observed that the question is one of the facts , that the tax deducted is a local tax and not a tax on profits and that foreign tax is not covered by the provisions of s. 40(a)(ii) . Hon ble High Court also declined CIT s prayer for reference under s. 256(2) and the order of the Tribunal thus received finality. This decision has been consistently followed over the decades. However, in the lead decision cited before us, there is a categorical observation to the effect that the tax deducted is a local tax and not a tax on profits , whereas in the present case it is an undisputed position that the tax levied abroad, being income-tax, is a tax on profits of the assessee - whether on presumptive basis or on the basis of actual profits earned by the assessee. Obviously, therefore, a decision in the context of local tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature had in view in enacting that provision and in the context of the setting in which it occurs and that we cannot ignore the context and the collection of the provisions in which ......, appears, because, as pointed out by Judge Learned Hand in the most felicitous language : interpret . . .the meaning of a sentence may be more than that of the separate words, as a melody is more than the notes, and no degree of particularity can ever obviate recourse to the setting in which all appear, and which all collectively create . .. One of the things which is clearly discernible from the above observations of their Lordships is that while interpreting the statutes, one has to essentially bear in mind the context and underlying scheme of the legislation in which the words are set out. Keeping these discussions in mind, let us see the context in which expression tax is used in s. 40(a)(ii) which provides that any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains cannot be allowed as a deduction in computation of income from b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such profits or gains. If the word tax is to be given the meaning assigned to it by s. 2(43), the word any used before it will be otiose and the further qualification as to the nature of levy will also become meaningless. Furthermore, the word tax as defined in s. 2(43) of the Act is subject to unless the context otherwise requires . In view of the discussion above we hold that the word any tax herein refers to any kind of tax levied or leviable on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. 16. Hon ble Bombay High Court s judgment in Lubrizol India Ltd. (supra) which holds that the meaning of expression tax cannot be restricted to the definition of tax was delivered on 11th July, 1990, and, to that extent, Tribunal s decision dt. 23rd Oct., 1984, in assessee s own case for the asst. yr. 1976-77 and which has been followed in all other assessment years, is no longer good law. None of the subsequent decisions of the Tribunal, which merely followed the said order, had an occasion to deal with the law so la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief only to such amount as may have been paid by the assessee in excess of his income-tax obligations in India. Similarly, in terms of the provisions of tax treaties which are entered into under s. 90, tax credits, in respect of taxes paid abroad, are restricted to assessee s domestic tax liability in respect of the subject income as was held by this Tribunal in the case of Jt. CIT vs. Digital Equipments India Ltd. (2005) 93 TTJ (Mumbai) 478 : (2005) 94 ITD 340 (Mumbai). If we are to hold that the assessee is entitled to deduction of tax paid abroad, in addition to admissibility of tax relief under s. 90 or s. 91, it will result in a situation that on one hand double taxation of an income will be eliminated by ensuring that the assessee s total income-tax liability does not exceed income-tax liability in India or income-tax liability abroad - whichever is greater, and, on the other hand, the assessee s domestic tax liability will also be reduced by tax liability in respect of income decreased due to deduction of taxes. Such a benefit to the assessee is not only contrary to the scheme of the Act and contrary to the fundamental principles of international taxation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction is unambiguous and beyond any controversy, as evident particularly from the last sentence in art. 25(2)(a) which is italicized as above the supply the emphasis on the same. As a matter of fact, we are unable to appreciate any basis whatsoever for the CIT(A) s conclusion that the taxes paid in the US, in the instant case, are to be credited to the assessee s account and are to be refunded to the appellant, in case he has no income-tax liability in respect of that income in India. As for the CIT(A) s observation, referring to payment of income-tax in the United States on an income and returning a loss in respect of that income in India, to the effect that this is an absurd situation and was not visualized by the treaty , it cannot but stem from his inability to take note of the fact that certain incomes (e.g., royalties, fees for technical or included services, interest, dividends etc.), are taxed on gross basis in the source country but are only be taxed on net basis, as is the inherent scheme of income-tax legislation normally, in the country of which the assessee is resident. In such situations, it is quite possible that while an assessee pays tax in the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich affects such an Indian income-tax liability. The FTD in respect of income-tax paid in the US cannot exceed the Indian income-tax liability in respect of the income on which income-tax is paid in US. 19. In view of the aforesaid judicial precedent, and being in considered agreement with the same, we reject this alternate claim of the assessee. 20. Learned counsel has also contended that in any event, we must allow deduction in respect of State income-taxes paid in USA and Canada as relief is not admissible in respect of the same in respective tax treaties. We have been taken through India USA tax treaty to point out that tax credits are admissible only in respect of incometax levied by the Federal Government and not by the State Governments. It is contended that since no relief is admissible in respect of State taxes under s. 90 or s. 91, these taxes will continue to be tax deductible, and to that extent, decisions of the Co-ordinate Benches will hold good. We are unable to see legally sustainable merits in this submission either. Apart from the fact that such a claim of deduction is clearly contrary to the law laid down by Hon ble jurisdictional High Court in L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee vis- -vis tax credit under the applicable tax treaty, the provisions of s. 91 will apply to State income-taxes as well. The State income-tax is also, therefore, covered by Expln. 1 to s. 40(a)(ii), and deduction cannot be allowed in respect of the same. Finally, in view of Hon ble Bombay High Court s judgment in Gill s case (supra), income-tax abroad cannot be allowed as a deduction in computation of income and this judgment does not discriminate between Federal and State taxes either. Interestingly, State incometaxes paid in USA, subject to certain limitations, are deductible in computation of income for the purposes of computing Federal tax liability in USA, but that factor cannot influence deductibility of these taxes, particularly in the light of the provisions of Expln. 1 to s. 40(a)(ii) and in the light of Hon ble Bombay High Court s judgment in Gill s case (supra), in computation of business income under Indian IT Act. For all these reasons, we are unable to uphold the plea of the assessee seeking deduction of at least State income-tax paid in USA. 21. In view of the above discussions and for the detailed reasons set out above, we uphold the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c. 37 of the Act and payment of such taxes does not amount to application of income. 40. Let us now have a glimpse at the judicial views on a similar issue. (i) South East Asia Shipping Co. ITA No.123 of 1976 - Mumbai Tribunal: The issue, in brief, was that the tax authorities of the respective country had collected income-tax at source, according to them, a part of such earnings accrued and arose in their countries which were liable to income-tax under its taxing laws. Such foreign tax claimed as a deduction by the assessee was turned down by the AO. This was reversed by the AAC with a reasoning that the 'payment of foreign income-tax formed part of the expenditure like other usual business expenses incurred in the course of business and as such, the assessee was entitled to claim deduction of the same u/s 37 of the Act for being incurred wholly and exclusively for the purpose of business.' On a further appeal, the Tribunal had, after due consideration of the provisions of both the sections - 37 which allows a business expenditure and 40(a)(ii) which contained prohibition -as under: '40(a)(ii) - any sum paid on account of any rate or tax l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto account all these facts and circumstances of the issue and in consonance with the findings of the Hon'ble Benches of Mumbai Tribunal (supra), we are of the firm view that the learned CIT (A) was justified in his stand which requires no interference of this Bench at this juncture. It is ordered accordingly. 37. The views so taken by the coordinate bench, however, are not only diametrically opposed to an earlier decision of another coordinate bench in the case of Tata Sons (supra), as reproduced earlier, and of Hon ble Bombay High Court s decision in the case of Lubrizol India (supra) but also clearly contrary to certain observations a later judgment of Hon ble Bombay High Court in the case of Reliance Infrastructure Ltd vs CIT [TS 676 HC 2016 (BOM)] wherein Their Lordships have, inter alia , observed as follows: We have considered the rival submissions. So far as the question relating to the Tribunal not following its order in the case of the applicant itself for A.Y. 197980, we find that there is a justification for the same. This is so as the decision of this Court in Inder Singh Gill (supra) was noted by the Tribunal on an identical issue while passing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oint out that earlier decision of Hon ble Bombay High Court in Lubrizol s case (supra) and the fact that it stands specifically approved by Hon ble Supreme Court in the case of Smithkline and French India (supra) was not brought to the notice of Hon ble Bombay High Court either. It was in this backdrop that Their Lordships further made the following observations in the case of Reliance Infrastructure (supra): It therefore, follows that the tax which has been paid abroad would not be covered with in the meaning of Section 40(a) (ii) of the Act in view of the definition of the word 'tax' in Section 2(43) of the Act. To be covered by Section 40(a)(ii) of the Act, it has to be payable under the Act. We are conscious of the fact that Section 2 of the Act, while defining the various terms used in the Act, qualifies it by preceding the definition with the word In this Act, unless the context otherwise requires the meaning of the word 'tax' as found in Section 2 (43) of the Act would apply wherever it occurs in the Act. It is not even urged by the Revenue that the context of Section 40(a)(ii) of the Act would require it to mean tax paid anywhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision by the jurisdictional High Court to the contrary of what has been stated by Hon ble Bombay High Court, Reliance Infrastructure (supra) decision is a binding precedent for us and we must follow the same. Any other approach, he very politely tells us, would be violate fundamental principles of judicial discipline and cannot, therefore, meet approval of Hon ble Courts above. He reminds us that the Tribunal decision in the case of Tata Sons (supra) is authored by one of us and suggests, in very decorous manner- which is his hallmark anyway, that we should not become so attached to our labour of love that the cause of justice is sacrificed. We are thus urged to follow the Mastek decision (supra) Reliance Infrastructure decision (supra) in letter and in spirit. Learned counsel has then pointed out that the Explanations to Section 40(a)(ii) refer only such taxes paid outside India in respect of which relief under section 90 and 91 are available, and it cannot be open to extend the scope of what is covered by Explanations to Section 40(a)(ii). 42. Learned counsel s remarks are indeed thought provoking. We have to take a conscious call on the points made by him. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration of the provisions of sec.37 and sec.40(a)(ii) of the Act as well, it emerges that u/s 37, all taxes and rates are allowable irrespective of the place where they are lived i.e., whether on Indian soil or offshore, whereas u/s 40(a)(ii) of the Act, income-tax which is a tax leviable on the profits and gains chargeable under the Act is deductible . On the other hand, all other taxes levied in foreign countries whether on profits or gains or otherwise are deductible under the provisions of sec. 37 of the Act and payment of such taxes does not amount to application of income. 40. Let us now have a glimpse at the judicial views on a similar issue. (i) South East Asia Shipping Co. ITA No.123 of 1976 - Mumbai Tribunal: The issue, in brief, was that the tax authorities of the respective country had collected income-tax at source, according to them, a part of such earnings accrued and arose in their countries which were liable to income-tax under its taxing laws. Such foreign tax claimed as a deduction by the assessee was turned down by the AO. This was reversed by the AAC with a reasoning that the 'payment of foreign income-tax formed part of the expenditure l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that just as Section 40(a)(ii) of the Act does not allow deduction on tax paid on profit and/or gain of business. The Indian Income Tax Act, 1922 Act also contains a similar provision in Section 10(4) thereof. However, the Indian Income Tax Act, 1922 contains no definition of tax as provided in Section 2(43) of the Act . Consequently, the tax paid on income / profits and gains of business / profession anywhere in the world would not be allowed as deduction for determining the profits / gains of the business under Section 10(4) of the Indian Tax Act, 1922. Therefore, on the state of the statutory provisions as found in the Indian Income Tax Act, 1922 the decision of this Court in Inder Singh Gill (supra) would be unexceptionable. However, the ratio of the aforesaid decision in Inder Singh Gill (supra) cannot be applied to the present facts in view of the fact that the Act defines tax as income tax chargeable under the provisions of this Act. Thus, by definition, the tax which is payable under the Act alone on the profits and gains of business are not allowed to be deducted notwithstanding Sections 30 to 38 of the Act. It therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;tax hence foreign tax paid will not be disallowed by virtue of Sec.40 (a)(ii). Reliance is placed on following decided cases where it has been held that taxes paid in foreign country is an allowable expenditure U/s.37(1) CIT vs. Tata Sons Ltd (ITA No. 89 of 1989) - Bombay high court rejected reference in 1993 for this matter hence its approved stand of high court that foreign tax credit is an allowable expenditure. CIT vs. South East Asia Shipping Co (ITA No.123 of 1976) - Bombay high court rejected reference of this matter as well. DCIT Vs. Mastek Limited (Ahmedabad Tribunal) - Jurisdictional tribunal decision delivered on 16m may 2012 which relied on above decision of Bombay High Court. The above contention of ETPL has been accepted by the learned Commissioner of Income-tax (Appeals) in ETPL's case for AY 2009-10. Copy of the said order is attached as Annexure 1A [Emphasis, by underlining, supplied by us now] 43. In the light of the above observations in judicial precedents relied upon by the learned counsel for the assessee, and in the light of extracts from the impugned orders, the core issue, in our considered view, is wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in Smithkline and French s case (supra) specifically approving the Lubrizol judgment .. Firstly, it may be mentioned, s. 10(4) of the 1922 Act or s. 40(a)(ii) of the present Act do not contain any words indicating that the profits and gains spoken of by them should be determined in accordance with the provisions of the IT Act. All they say is that it must be a rate or tax levied on the profits and gains of business or profession. The observations relied upon must be read in the said context and not literally or as the provisions in a statute. But so far as the issue herein is concerned, even this literal reading of the said observations does not help the assessee. As we have pointed out hereinabove the surtax is essentially levied on the business profits of the company computed in accordance with the provisions of the IT Act. Merely because certain further deductions [adjustments] are provided by the Surtax Act from the said profits, it cannot be said that the surtax is not levied upon the profits determined or computed in accordance with the provisions of the IT Act. Sec. 4 of the Surtax Act read with the definition of chargeable profits and the First Schedule make t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the effect that We are conscious of the fact that Section 2 of the Act, while defining the various terms used in the Act, qualifies it by preceding the definition with the word In this Act, unless the context otherwise requires the meaning of the word 'tax' as found in Section 2 (43) of the Act would apply wherever it occurs in the Act. It is not even urged by the Revenue that the context of Section 40(a)(ii) of the Act would require it to mean tax paid anywhere in the world and not only tax payable/ paid under the Act . That was not the situation before us. The very thrust of stand of the revenue was that the connotations of expression tax in section 40(a)(ii) must be taken in its contextual meaning which extends to any tax ascertainable with reference to the profits of the assessee as evident from the wordings of section which refer to any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains , and that its connotations cannot be treated as restricted to tax under the Income Tax Act. This argument, in the context of deduction in respect of tax outside I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons from benches of equal strength, is that the latter was delivered in ignorance of earlier decisions in the cases of Tata Sons (supra) and Lubrizol India (supra). 48. A per incuriam decision, as noted by several binding judicial precedents, including, for example, in the case of CIT Vs B R Constructions [(1979) 222 ITR 202 AP Full Court], ceases to be a binding judicial precedent. As observed by the Full Bench of Hon ble AP High Court in this case, It may be noticed that precedent ceases to be a binding precedent- (i) if it is reversed or overruled by a higher Court, (ii) when it is affirmed or reversed on a different ground, (iii) when it is inconsistent with the earlier decisions of the same rank, (iv) when it is sub silentio, and (v) when it is rendered per incuriam . Nothing, therefore, turns on Mastek decision by the coordinate bench. Learned counsel has then invited our attention to the fact that the said decision in Mastek s case (supra) is now pending for consideration before Hon ble jurisdictional High Court, as Their Lordships have, vide order dated 14th March 2013 in TA No. 826 of 2012, have admitted the appeal, inter alia , on the question whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income tax withheld abroad in respect of which no foreign tax credit is admissible, under section 37(1) of the Act must, therefore, stand vacated. We direct so. We further direct that, as a result of our directions earlier in this order, in the event of assessee being allowed only partial tax credit in respect of taxes withheld abroad, the assessee cannot be allowed any deduction, in respect of the balance of the taxes so withheld abroad, under section 37(1) of the Act. 51. As we conclude our adjudication on this issue, we must say that we are not very happy with the position that we are placed in, which was wholly avoidable only if all the judicial precedents really relevant to the issues were duly mentioned before the respective judicial forums. Nothing prevented the revenue authorities from inviting attention of the coordinate bench to earlier decision by another coordinate bench, on the same issue, in favour of the revenue- particularly when it was in public domain and reported by tax journals and websites. Undoubtedly, it was even then open for the bench to agree with this or disagree with this decision, and there were options available to them in case the coordinate bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lawyers and chartered accountants now adding to the available pool of tax professionals every year, outsourcing, in controlled conditions- to begin with, the representation of cases before the benches of this Tribunal and to consider the modifications in the role of Departmental Representatives to administering and monitoring the representation before the Tribunals rather than invariably arguing the appeals on their own. It is much better to use the present talent pool of younger lawyers and chartered accountants, in a cost effective manner and let the tax administrators be used, apart from other very crucial roles in tax administration, in getting the best out of people assigned to argue the cases before the Tribunal. A cost benefit analysis of various approaches would perhaps be in order. It is also an idea worth exploring that while research and ground work is outsourced to young law and accountancy professionals, final call on the line of argument and actual arguments before the bench, though with or without active assistance of independent professionals retained by the revenue authorities, remains with the Departmental Representatives. Of course, assistance by the independent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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