The Madras High Court has directed the department to reconsider the claim of Foreign Tax Credit.
The court on examining the company tax return and the activity statements, appears prima facie that the petitioner has remitted taxes through the Australian branch. It is clear that foreign tax credit in respect thereof was claimed by the petitioner by filing Form 67 with relevant annexures. On examining the intimation under Section 143(1) and the rectification order, the foreign tax credit was computed by the assessing officer, and the computation tallied with the foreign tax credit claim of the assessee. In spite of accepting the computation of the taxpayer, the tax credit relief was denied.
The court set aside the rectification order and the matter was remanded for reconsideration in so far as the Foreign Tax Credit claim is concerned. If there are any dues after taking into consideration foreign tax credit claim and interest liability arising from, the petitioner shall discharge it.
Facts
The petitioner in both the original and revised return of income, the petitioner had claimed the benefit of Foreign Tax Credit under Section 90/90A of the Income Tax Act read with Article 24 of the India-Australia Double Taxation Avoidance Agreement in respect of taxes paid by the Australian branch.
In order to make the Foreign Tax Credit claim, the petitioner had uploaded Form 67, the business activity statements filed with the Australian Tax Office, and the company tax return filed in Australia.
Upon return being processed by the Central Processing Centre, under Section 143(1), a demand of Rs. 1,40,47,430 was made.
Upon examining the intimation, the petitioner noticed that a foreign tax credit was not granted. In those circumstances, a rectification petition dated 09.11.2023 was filed.
Since the rectification petition was rejected by once again denying the foreign tax credit, the writ petition was filed.
The appellant argued that the tax liability was about Australian dollars 231,460. The tax liability was duly discharged as evidenced by the petitioner’s activity statement. The tax credit was claimed to the extent of Rs. 1,14,62,414 in view of the differential tax rates being applicable in India and Australia, respectively.
As per the intimation under Section 143(1), the foreign tax credit was completely denied, although the same intimation computes the foreign tax credit in a sum equal to that claimed by the taxpayer. The rectification order is on the same lines, by which the tax relief is denied, on the one hand, whereas the computation reflects the total value of the foreign tax credit.
Case Name : Thejo Engineering Limited Versus The Deputy Director of Income Tax
Judicial Level & Location : Madras High Court
Case Number : W.P.No.17394 of 2024
Date of Ruling : 16-07-2024
Ruling in favour of: Petitioner
Coram: Justice Senthilkumar Ramamoorthy
Petitioner Advocate: V. Vikram
Respondent Advocate: V. Mahalingam
