TMI Blog2020 (9) TMI 404X X X X Extracts X X X X X X X X Extracts X X X X ..... e that benefit of section 91 (1) of the act does not apply to a person who is not ordinarily resident in India. - ITA No. 4728/Del/2015 - - - Dated:- 7-9-2020 - Shri G.S. Pannu, Hon ble Vice President And Shri Sudhanshu Srivastava, Judicial Member For the Assessee : Shri Ved Jain, Sr. Advocate, Shri Sunil Goel, CA For the Department : Shri Satpal Gulati, CIT ORDER PER SUDHANSHU SRIVASTAVA, JM: This appeal has been preferred by the assessee against order dated 15.05.2015 passed by the Ld. Commissioner of Income-tax (Appeals) -43, New Delhi [ CIT(A)] for assessment year 2010-11. 2.0 The brief facts of the case are that the assessee had filed the original return of income declaring total income of ₹ 71,07,337/-. Thereafter a revised return was filed declaring the same income but also claiming a refund of ₹ 4,69,500/-. As per the records, the assessee was employed with M/s. Allen Co., LLC, USA and had declared income under the head salaries on a proportionate basis as under:- Taxable income in India = Total income *230/365 i.e. ₹ 1,12,76,036/-*230/365 = ₹ 71,07,337. 2.1 Accordingly, the total income offered to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ordinarily Resident is not a Resident in India and hence not entitled to the benefit of the ^-Section. 3. The Learned CIT (Appeals) has erred on the facts and in law in denying the Foreign Tax Credit for New York State Taxes (including local taxes) paid of ₹ 4,55,757/- and restricting the same to US Federal Taxes only. 4. The Learned CIT (Appeals) has erred on the facts and in law in interpreting that the provisions of Section 91 of the Act (which do not discriminate between the taxes levied by the Federal Government and the taxes levied by the State Government), do not apply where there is a treaty entered into for Avoidance of Double Taxation in complete disregard to the provisions of Section 90(2) of the Act where the assessee can take benefit of provisions of the Act that are more beneficial to him. 5. The Learned CIT (Appeals) is wrong in upholding that the judgments in DCIT Vs Tata Sons Ltd : (2011) 135 TTJ (Mumbai) 1: (2011) 9 ITR 154 as well as that passed in Tata Sons Ltd vs DCIT in ITA No. 4978/Mum/04 do not apply to the assessee. 6. That without prejudice to Grounds 2, 3, 4 and 5, Learned CIT (Appeals) has erred on the facts and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee who is not a resident but resident and not ordinarily resident can also claim relief/ deduction u/s 91 of the act or not. 11. With respect to the 1st issue that whether the benefit conferred u/s 91 of the income tax act has to be extended to the income tax paid in foreign jurisdictions pertaining to the federal tax and state tax or not, question has been answered by the honourable Karnataka High Court in case of Wipro Ltd vs Deputy Commissioner Of Income Tax [382 ITR 179] wherein it has been held as under:- 66. The said provision provides for deduction of the tax paid in any country from the Indian Income-tax payable by him of a sum calculated on such doubly taxed income even though there is no agreement under section 90 for the relief or avoidance of double taxation. Explanation (iv) defines the expression Income-tax in relation to any country includes any excess profit tax or business profits tax charged on the profits by the Government of any part of that country or a local authority in that country. Therefore the intention of Parliament is very clear. The Income-tax in relation to any country includes Income-tax paid in any part of the country or a local a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 but had claimed deduction in respect of the same under section 37(1). The reason, for not pressing this ground of appeal, was stated to be that the assessee was content with CIT(A) s having granted the deduction in respect of these taxes, as the claim for tax credit was anyway not admissible in terms of the Indo US tax treaty. The Assessing Officer was also in appeal before us in respect of the deduction having been granted by the CIT(A). For the detailed reasons set out in our order dated 24t h November, 2010, we upheld the grievance of the Assessing Officer and held that deductions in respect of any income tax paid abroad, whether state or federal, were not admissible. One of the arguments before us was that at least deduction in respect of US and Canada state income taxes should be allowed, since the US and Canada state income tax payments did not entitle the assessee to any tax credit, and either an income tax payment is to be allowed as deduction or it is to be taken into account for giving tax credit. We were also taken through the provisions of India-USA Agreement for Avoidance of Double Taxation and Prevention of Fiscal Evasion [ 187 ITR (Statute) 102 - hereinafter refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able only in the cases where India has not entered into a double taxation avoidance agreement with respective jurisdiction, but the scheme of the section 91, read alongwith section 90, does not reflect any such limitation, and section 91 is thus required to be treated as general in application. The scheme of the Income-tax Act is to be considered in entirety in a holistic manner, and each of the section cannot be considered on standalone basis. It is important to bear in mind the fact that so far as section 91 is concerned, it does not discriminate between taxes levied by the Federal Governments and taxes levied by the State Government. The Income-tax levied by different States in USA usually ranges from 3 per cent to 11 per cent, and the aggregate Income-tax paid by the assessee in USA will range from 38 per cent to 46 per cent. Therefore, on the facts of the present case and bearing in mind the fact that the Federal Incometax in USA at the relevant point of time was lesser in rate at 35 per cent vis-avis 38.5 per cent Incometax rate applicable in India, the admissible double taxation relief under section 91 will be higher than relief under the tax treaty. It will be so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law in India, and these payments are also not being taken into account for granting credit for taxes paid abroad by the assessee, as only federal income tax is eligible for tax credit in terms of the Indo US and Indo Canada tax treaty. If this approach is adopted, the assessee does not get a deduction for state taxes so paid abroad, nor does he get the tax credit for the same, and if these two propositions are correct, there is clearly an inherent contradiction in these propositions on tax treatment for state income taxes paid abroad. There cannot obviously be a tax payment which is neither treated as admissible expenditure, because it is treated as an income tax, nor is it taken into account for tax credits, because it is not to be treated as income tax. However, as we have observed in our order on the cross appeal, extracts from which are reproduced in the preceding paragraph, it is incorrect to proceed on the assumption that state income tax paid in USA, or for that purpose paid in Canada, cannot be taken into account for the purposes of computing admissible tax credits. It is so for the elementary reason that the provisions of a tax treaty, based on which tax credits are said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agreement would prevail over the provisions of the Act, as is also clear from the provisions of section 90(2) of the Act. Section 90(2) makes it clear that where the Central Government has entered into an agreement with the Government of any country outside India for granting relief of tax, or for avoidance of double taxation, then in relation to the assessee to whom such agreement applies, the provisions of the Act shall apply to the extent they are more beneficial to that assessee meaning thereby that the Act gets modified in regard to the assessee in so far as the agreement is concerned if it falls within the category stated therein. It would thus appear that the treaty override is only restricted to the extent it is beneficial to a taxpayer. In other words, the fact that a taxpayer is entitled to make a particular claim, in accordance with a tax treaty provisions, does not disentitle him to make the claim in accordance with the provisions of the Act. In this view of the matter, and further to the observations made by us in our order on the cross appeal, in our considered view, the provisions of Section 91 are to be treated as general in application and these provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to tax relief u/s 91 of the income tax act or not. Provisions of section 91 (1) provides relief/deduction of taxes paid with respect to a person who is a resident in India. The provisions of section 91 (2) also deals with the person who is a resident in India. The provisions of section 91 (3) deals with the person who is a nonresident . The revenue contends that as the assessee is not a resident therefore he is not entitled to benefit of section 91 of the act. The provisions of section 6 of the income tax act provides for qualification of the persons who are residents in India. The provisions of section 6 (6) carves out another category of person in Residents , who is said to be not ordinarily resident in India. However such persons are also resident . The category is also called a resident but not ordinarily resident in India. Therefore persons who are resident but not ordinarily resident in India are forming larger group of the persons who are resident in India. In view of this, we reject the contentions of the revenue that benefit of section 91 (1) of the act does not apply to a person who is not ordinarily resident in India. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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