1989 (5) TMI 88 - AT - Income Tax

Issues Involved:
1. Entitlement to full credit for tax deducted at source by the Nigerian company.
2. Interpretation of Section 91 of the Income-tax Act, 1961.
3. Applicability of deductions under Section 80RRA and their impact on double taxation relief.

Issue-wise Detailed Analysis:

1. Entitlement to Full Credit for Tax Deducted at Source by the Nigerian Company:
The primary issue was whether the assessee was entitled to get credit for the entire amount of tax deducted at source by the Nigerian company from the foreign income, even though only 50% of the said foreign income was subjected to Indian income-tax after granting relief under Section 80RRA of the Income-tax Act, 1961. The Income Tax Officer (I.T.O.) allowed credit for only 50% of the tax deducted by the Nigerian company, arguing that since only 50% of the foreign salary income was brought to tax in India, credit for only 50% of the tax paid abroad could be allowed as per Section 91 of the Income-tax Act, 1961.

2. Interpretation of Section 91 of the Income-tax Act, 1961:
Section 91 provides for relief from double taxation for residents in India who have paid tax on income accrued outside India in a country with which there is no agreement under Section 90. The CIT (Appeals) held that the entire amount of foreign salary income was included under the head "Income from salary" and formed part of the total income, and that the deduction under Chapter VI-A (Section 80RRA) did not alter the fact that the entire foreign salary income was "doubly taxed income." The CIT (Appeals) opined that Section 91 relief should be in addition to the relief under Section 80RRA.

3. Applicability of Deductions Under Section 80RRA and Their Impact on Double Taxation Relief:
The CIT (Appeals) observed that Section 91 existed before the introduction of Section 80RRA, and the latter was intended to provide additional relief. The CIT (Appeals) concluded that the entire amount of tax deducted at source from the foreign salary income should be allowed as a deduction from the tax payable in India, in line with the spirit and intentions of Sections 91 and 80RRA. However, the Revenue argued that only the portion of income subjected to double taxation (i.e., 50% of the foreign salary income) should be eligible for relief under Section 91.

Analysis of Judgments:
The Revenue cited judgments from the Andhra Pradesh High Court (CIT v. C. S. Murthy) and Rajasthan High Court (CIT v. Dr. R. N. Jhangi), which supported the view that relief under Section 91 should be restricted to the portion of foreign income actually subjected to double taxation. The assessee's representative argued that these judgments did not correctly interpret Section 91 and relied on the Supreme Court judgment in K. V. Al. M. Ramanathan Chettiar v. CIT, which dealt with a similar provision under the Indian Income-tax Act, 1922.

The Tribunal noted that the entire foreign salary income was included in the total income as per the provisions of the Income-tax Act, 1961, and subjected to tax under the head "Income from salaries." The Tribunal also considered the purpose and nature of deductions under Chapter VI-A, which are meant for national objectives and do not alter the true nature of income liable to tax.

Conclusion:
The Tribunal ultimately decided in favor of the Revenue, citing the judgments of the Andhra Pradesh High Court and Rajasthan High Court. It held that the CIT (Appeals) should have allowed credit only for the tax on 50% of the foreign salary income, as only that portion was subjected to double taxation. The Tribunal emphasized that it must respect the law laid down by any High Court unless there is a contrary decision by another High Court.

Final Order:
The appeal filed by the department was allowed, and the order passed by the CIT (Appeals) was set aside.

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