2020 (6) TMI 471 - AT - Income Tax

Addition u/s 40(a) (ia) - Short deduction of tax at source which was not reported at the time of filing return - HELD THAT - As decided in own case 2019 (12) TMI 1031 - ITAT KOLKATA if there is any short-fall due to any difference of opinion as to the taxability of any item or the nature of payment falling under various TDS provisions, the assessee could be declared to be an assessee in default under section 201, but no disallowance could be made by invoking the provisions of section 40 (a)(ia). Addition u/s 14A r.w.r 8D of the Rules - HELD THAT - As decided in own case 2019 (12) TMI 1031 - ITAT KOLKATA uphold the impugned order of the ld. CIT(Appeals) deleting the disallowance made by the Assessing Officer under section 14A read with Rule 8D. MAT applicability - Book profit adjustment u/s 115JB - HELD THAT - As decided in own case 2019 (12) TMI 1031 - ITAT KOLKATA that provision of section 115JB is not applicable in the case of the assessee being a Banking company for the year under consideration. Therefore, grounds raised by the Revenue are dismissed. Relief u/s 91 in respect of foreign taxes paid by the appellant - rental income earned from House property in Singapore which is not taxable in India as per Article 6 of DTAA applicable between the Government of the Republic of India and the Government of the Republic of Singapore - HELD THAT - During the year the appellant had paid foreign taxes on the profits derived by the Hongkong Branch. Since there was no Double Taxation Avoidance Agreement between India and Hongkong, in terms of section 91, the appellant is entitled to claim credit of foreign taxes paid subject to the limits prescribed therein. The extent of relief u/s.91 is computed as a percentage of such doubly taxed income'. The percentage to be applied is the lower of the Indian rate of tax and the rate of tax of the said country'. When credit for tax payments is to be given there, is no distinction in the tax liability which is credited through normal computation of income or through section 115 JB. Therefore, credit for tax paid in foreign country should be allowed even when the tax liability is raised u/s 115JB. Therefore, the AO is directed to allow this credit u/s 91 - CIT(A) allowed the claim of the assessee correctly. - Decided against revenue

Summary

Issues Involved:
1. Addition under Section 40(a)(ia) of the Income Tax Act, 1961 for short deduction of tax at source.
2. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1962.
3. Applicability of Section 115JB (MAT) to the assessee.
4. Taxability of rental income from house property in Singapore under the DTAA between India and Singapore.

Detailed Analysis:

1. Addition under Section 40(a)(ia) of the Income Tax Act, 1961 for short deduction of tax at source:
The Revenue challenged the deletion of ?56,49,715/- made by the Assessing Officer under Section 40(a)(ia) due to short deduction of tax at source. The Tribunal referenced its earlier decision in the assessee’s case for AY 2010-11, where it was held that short deduction of tax does not attract disallowance under Section 40(a)(ia). This was based on the Calcutta High Court's ruling in DCIT vs. S.K. Tekriwal, which stated that short deduction of tax does not warrant disallowance under Section 40(a)(ia). The Tribunal upheld the CIT(A)’s order, dismissing the Revenue’s appeal on this ground.

2. Disallowance under Section 14A read with Rule 8D of the Income Tax Rules, 1962:
The Revenue contested the deletion of ?31,35,91,170/- disallowed by the Assessing Officer under Section 14A read with Rule 8D. The Tribunal referred to its decision in the assessee’s case for AY 2010-11, where it was determined that the disallowance under Section 14A was not applicable to banking companies as their investments are part of their banking business. The Tribunal cited the Bombay High Court ruling in CIT vs. HDFC Bank Ltd and the Supreme Court's decision in Maxopp Investment Ltd vs. CIT, which supported the view that no disallowance under Section 14A is warranted for banks. The Tribunal upheld the CIT(A)’s order, dismissing the Revenue’s appeal on this ground.

3. Applicability of Section 115JB (MAT) to the assessee:
The Revenue challenged the CIT(A)’s decision that Section 115JB (MAT) was not applicable to the assessee, a banking company. The Tribunal referenced its decision in the assessee’s case for AY 2010-11, where it was held that Section 115JB does not apply to banking companies as they are governed by the Banking Regulation Act, not the Companies Act. The Tribunal also cited the Bombay High Court ruling in CIT vs. Union Bank of India, which held that the MAT provisions do not apply to banking companies. The Tribunal upheld the CIT(A)’s order, dismissing the Revenue’s appeal on this ground.

4. Taxability of rental income from house property in Singapore under the DTAA between India and Singapore:
The Revenue contested the CIT(A)’s decision that rental income from house property in Singapore is not taxable in India under Article 6 of the DTAA between India and Singapore. The Tribunal noted that Article 6 allows income derived from immovable property situated in one contracting state to be taxed in that state. Since the property is in Singapore, the income is taxable there and not in India. The Tribunal upheld the CIT(A)’s order, dismissing the Revenue’s appeal on this ground.

Conclusion:
The Tribunal dismissed the Revenue’s appeal on all grounds, upholding the CIT(A)’s decisions regarding the non-applicability of Section 40(a)(ia) for short deduction of tax, the non-applicability of disallowance under Section 14A for banking companies, the non-applicability of Section 115JB (MAT) to the assessee, and the non-taxability of rental income from house property in Singapore under the DTAA.