2008 (11) TMI 281 - AT - Income Tax

Rectification u/s.154 - credit for TDS on foreign income not given - DTAA with UK as well as USA - Whether the assessee is entitled to the credit for TDS on such foreign income - TDS deducted in UK and USA on the income which was offered by the assessee in her return of income - CIT(A) allowed the credit of TDS - HELD THAT - Pursuant to s. 90 the Government of India entered into DTAA with UK as well as USA. Accordingly the reliance of the AO on the provisions of ss. 4, 190 and 191 is meaningless in as much as the specific provisions have been contained in this regard in both the treaties. The ld CIT(A) has accepted the assessee's contention that the amount of TDS in UK and USA constitutes 17.42 per cent of the gross professional fees received by the assessee and the average rate of tax on her gross total income for the assessment year under consideration comes to 30 per cent under the provisions of the IT Act, 1961. Even if we consider the claim of deduction u/s. 80RR at 15 per cent of the professional income derived by the assessee in exercise of her profession abroad, the proportionate rate of Indian tax on such income remains at a still higher level. No contradiction has been pointed out by the ld DR in this working. When art. 24(2) of DTAA between India and UK and art. 25(2) of DTAA between India and USA are read in conjunction with s. 90, it becomes abundantly clear that the assessee was entitled to the credit for TDS on foreign income, which income was duly offered for taxation in India. We hardly find any debate or dispute on the allowing of such credit which could preclude the assessee from moving application for rectification before the AO u/s.154. We, therefore, uphold the view taken by the ld CIT(A). In the result, the appeal is dismissed.

Summary

Issues:
1. Granting of relief by CIT(A) in proceedings under s. 154 with reference to a debatable issue.
2. Allowing credit of TDS amounting to Rs. 49,19,743 deducted in UK and USA on the income declared by the assessee.

Analysis:

Issue 1: Granting of relief by CIT(A) in proceedings under s. 154 with reference to a debatable issue:
The Revenue raised a grievance regarding the CIT(A) granting relief in proceedings under s. 154 on a debatable issue. The Departmental Representative argued that the issue was beyond the scope of s. 154 as it was debatable. However, it was observed that the AO had not held the issue as debatable in the order. The AO's response to the notice of hearing also did not indicate that the issue was debatable. The Tribunal noted that the Departmental Representative cannot introduce a new case that was not considered by the AO or the CIT(A). The Tribunal concluded that the issue was not debatable and did not find fault in the assessment order. Therefore, the grounds raised by the Revenue were not accepted.

Issue 2: Allowing credit of TDS amounting to Rs. 49,19,743 deducted in UK and USA on the income declared by the assessee:
The Tribunal examined whether the assessee was entitled to credit for TDS on foreign income. It was noted that the income on which tax was deducted in the UK and USA was included in the total income declared by the assessee. The Tribunal referred to the provisions of sec. 5 and sec. 90 of the Income Tax Act, which deal with the taxation of income earned outside India and relief of tax under Double Taxation Avoidance Agreements (DTAA). The Tribunal highlighted that the DTAA with the UK and USA provided for the allowance of tax paid in those countries as a credit against Indian tax. The Tribunal analyzed the relevant articles of the DTAA and sec. 90 to determine the allowability of credit. It was found that the assessee was entitled to the credit for TDS on foreign income as the income was offered for taxation in India. The Tribunal upheld the view taken by the CIT(A) in allowing the credit. Therefore, the appeal by the Revenue was dismissed.

In conclusion, the Tribunal's judgment addressed the issues of granting relief in proceedings under s. 154 and allowing credit of TDS on foreign income. The decision provided a detailed analysis of the relevant legal provisions and Double Taxation Avoidance Agreements to support the conclusion that the assessee was entitled to the credit.