1989 (5) TMI 89 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to credit for the entire amount of tax deducted at source by the Nigerian company.
2. Interpretation of "doubly taxed income" under Section 91 of the IT Act, 1961.
3. Applicability of deductions under Section 80RRA in conjunction with Section 91 for double taxation relief.

Detailed Analysis:

1. Entitlement to Credit for the Entire Amount of Tax Deducted at Source by the Nigerian Company:
The Revenue argued that the CIT(A) erred in allowing the assessee credit for the entire amount of tax deducted at source by the Nigerian company. The Revenue's contention was that since only 50% of the foreign income was subjected to Indian income tax after granting relief under Section 80RRA, the assessee should only be entitled to credit for 50% of the tax paid abroad. The CIT(A) held that the entire foreign salary income was included under the head "income from salary" and formed part of the total income, thus, the entire amount of tax deducted at source should be allowed as a deduction from the tax payable under the IT Act, 1961.

2. Interpretation of "Doubly Taxed Income" under Section 91 of the IT Act, 1961:
The Revenue's argument was that Section 91 grants relief from double taxation only in respect of "doubly taxed income." Since 50% of the foreign salary income was allowed as a deduction under Section 80RRA, only the remaining 50% could be considered doubly taxed. The CIT(A) observed that Section 91 was prevalent before the introduction of Section 80RRA and that the relief under Section 80RRA is in addition to the relief under Section 91. The CIT(A) concluded that the entire foreign salary income should be considered doubly taxed.

3. Applicability of Deductions under Section 80RRA in Conjunction with Section 91 for Double Taxation Relief:
The learned Senior Departmental Representative cited judgments from the Andhra Pradesh High Court and Rajasthan High Court, which supported the view that only the portion of income actually subjected to double taxation should be eligible for relief. The assessee's representative acknowledged these judgments but argued that the Supreme Court's judgment in K.V.A.L.M. Ramanathan Chettiar vs. CIT supported their stance. The Tribunal noted that the entire foreign salary income was included in the total income, but the question was whether the deductions under Section 80RRA could be considered as doubly taxed income for the purposes of Section 91.

Tribunal's Conclusion:
The Tribunal carefully considered the rival submissions and the relevant provisions of Section 91. It noted that Section 91 provides unilateral relief for incomes taxed both in India and abroad. The Tribunal referred to various judgments, including those of the Andhra Pradesh High Court and Rajasthan High Court, which supported the Revenue's contention that only the portion of income actually subjected to double taxation should be eligible for relief. The Tribunal concluded that the CIT(A) erred in allowing credit for the entire amount of tax deducted at source and that only 50% of such tax should be allowed as a deduction.

Final Judgment:
The appeal filed by the Revenue was allowed, and the order of the CIT(A) was set aside. The Tribunal held that the assessee was entitled to credit for only 50% of the tax deducted at source by the Nigerian company, in line with the judgments of the Andhra Pradesh High Court and Rajasthan High Court.