2012 (10) TMI 1063 - AT - Income Tax

Double Taxation Relief in respect of the income from Bangkok branch - taxability of income under section 244A - provision of bad and doubtful debts -

Issues Involved:
1. Double Income-tax Relief (DITR) under the DTAA between India and Thailand.
2. Interest under Section 244A of the Income Tax Act.
3. Provision for bad and doubtful debts.
4. Loss on revaluation of assets.

Issue-wise Detailed Analysis:

1. Double Income-tax Relief (DITR) under the DTAA between India and Thailand:
The Revenue challenged the CIT(A)'s direction to allow DITR in full, claiming that under Article 23(3) of the DTAA between India and Thailand, the credit should be limited to the Thai tax payable, which was `1,08,25,780/-. The Assessing Officer (AO) had allowed this amount as DITR relief, but the CIT(A) directed the AO to allow `1,86,74,470/-. The Tribunal noted that the AO had followed the tax credit method correctly as per the DTAA and departmental circular No. 91/2008. The Tribunal found the CIT(A)'s interpretation incorrect, holding that the AO's application of the DTAA provisions was proper. Thus, the Tribunal reversed the CIT(A)'s order and upheld the AO's decision, allowing the Revenue's appeal on this ground.

2. Interest under Section 244A of the Income Tax Act:
The CIT(A) had directed the AO to allow interest on any amount, including interest under Section 244A, following the decision in Sandvik Asia Ltd. The Revenue contested this, arguing that the term "refund" does not include interest on sums payable by the Revenue. The Tribunal found that the relevant material facts were not available to verify the calculations of interest by the AO and the CIT(A). Therefore, the Tribunal remitted the matter back to the AO to examine the entire facts and decide the issue afresh, considering the decisions relied upon by both parties. This issue was directed to be decided in line with ITA No. 213/Mds/2010, and the appeal was allowed for statistical purposes.

3. Provision for bad and doubtful debts:
The AO disallowed the assessee's claim for bad debts written off in excess of the credit balance in the provision for bad and doubtful debts account. The CIT(A) allowed the claim based on the Tribunal's decision in the assessee's own case for the assessment year 2003-04, directing the AO to allow bad debts written off relating to non-rural advances in full and to work out the credit balance for rural advances. The Tribunal upheld the CIT(A)'s order, finding no infirmity in the decision, and dismissed the Revenue's appeal on this ground.

4. Loss on revaluation of assets:
The AO disallowed the loss on revaluation of investments, arguing that the assessee had classified these as "Held to Maturity" and not as stock in trade. The CIT(A) allowed the claim, following judicial precedents, including the Supreme Court's decision in UCO Bank v. CIT. The Tribunal noted that the issue had been consistently decided in favor of the assessee in its own case and other similar cases, allowing the valuation of investments at lower of cost or market price. Thus, the Tribunal dismissed the Revenue's appeal on this ground.

Conclusion:
The Tribunal allowed the Revenue's appeals on the issue of DITR relief and remitted the issue of interest under Section 244A back to the AO for fresh consideration. The appeals concerning the provision for bad and doubtful debts and the loss on revaluation of assets were dismissed, upholding the CIT(A)'s orders. The decisions were pronounced on October 30, 2012.

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