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2020 (9) TMI 404 - AT - Income TaxDenying the benefit u/s 91 - Tax Credit / Double taxation - Income accrue in India - assessee being Resident but not Ordinarily Resident is not a Resident in India - HELD THAT - As decided in own case 2019 (5) TMI 1160 - ITAT DELHI we hold that assessee is entitled for tax credit of federal as well as state taxes paid by him u/s 91 of the Act. Whether the assessee being resident but not ordinarily resident in India is entitled to tax relief u/s 91 of the income tax act or not? - The provisions of section 6 of the income tax act provides for qualification of the persons who are residents in India. The provisions of section 6 (6) carves out another category of person in Residents , who is said to be not ordinarily resident in India. However such persons are also resident . The category is also called a resident but not ordinarily resident in India. Therefore persons who are resident but not ordinarily resident in India are forming larger group of the persons who are resident in India. In view of this, we reject the contentions of the revenue that benefit of section 91 (1) of the act does not apply to a person who is not ordinarily resident in India.
Issues Involved:
1. Eligibility for tax relief under Section 91 of the Income Tax Act for federal and state taxes paid in the USA. 2. Applicability of Section 91 relief to a "Resident but not Ordinarily Resident" (RNOR) in India. 3. Denial of Foreign Tax Credit for New York State Taxes. 4. Interpretation of Section 91 in the context of treaties and domestic provisions. 5. Applicability of judicial precedents to the case. 6. Alternative plea regarding the exclusion of New York State Taxes from taxable income in India. Detailed Analysis: 1. Eligibility for Tax Relief under Section 91 for Federal and State Taxes: The Tribunal examined whether the assessee could claim tax relief under Section 91 for both federal and state taxes paid in the USA. The Tribunal referred to the Karnataka High Court's decision in Wipro Ltd vs Deputy Commissioner of Income Tax [382 ITR 179], which clarified that Section 91 provides relief for taxes paid in any part of a country, including state taxes. The Tribunal also cited the case of Tata Sons Ltd vs DCIT, which supported the inclusion of state taxes for tax credit purposes. Consequently, the Tribunal held that the assessee is entitled to tax credit for both federal and state taxes paid in the USA under Section 91 of the Act. 2. Applicability of Section 91 Relief to RNOR: The Tribunal addressed whether an RNOR in India could claim relief under Section 91. The provisions of Section 91(1) and (2) refer to a "resident" in India, while Section 91(3) pertains to a "non-resident." The Tribunal noted that Section 6 of the Income Tax Act categorizes individuals as residents, including those who are "not ordinarily resident." Therefore, RNOR individuals are considered residents for the purpose of Section 91. The Tribunal concluded that RNOR individuals are entitled to the benefits of Section 91, rejecting the revenue's contention otherwise. 3. Denial of Foreign Tax Credit for New York State Taxes: The Tribunal found that the CIT(A) had erred in denying the foreign tax credit for New York State Taxes. The Tribunal reiterated that Section 91 does not discriminate between federal and state taxes, and thus, the credit for state taxes should be allowed. This decision aligns with the judicial precedents cited, including the Karnataka High Court's ruling and the Tribunal's own decision in Tata Sons Ltd vs DCIT. 4. Interpretation of Section 91 in the Context of Treaties and Domestic Provisions: The Tribunal emphasized that the provisions of Section 91 are to be treated as general in application and can yield to treaty provisions only to the extent they are beneficial to the assessee. The Tribunal highlighted that the scheme of the Income Tax Act should be considered holistically, and Section 91 should not be interpreted in isolation. The Tribunal concluded that the provisions of Section 91, being more beneficial to the assessee, should apply, allowing for tax credits for both federal and state taxes. 5. Applicability of Judicial Precedents: The Tribunal criticized the CIT(A) for disregarding binding judicial precedents, such as the decisions in Wipro Ltd and Tata Sons Ltd, which supported the assessee's claims. The Tribunal underscored the importance of adhering to judicial precedents unless overturned by a higher authority. 6. Alternative Plea Regarding Exclusion of New York State Taxes: The assessee's alternative plea was that if New York State Taxes were not considered for foreign tax credit, they should not form part of taxable income in India. Since the Tribunal allowed the primary grounds regarding the tax credit for state taxes, the alternative plea became infructuous and was dismissed. Conclusion: The Tribunal allowed the appeal of the assessee, granting relief under Section 91 for both federal and state taxes paid in the USA, and confirmed that RNOR individuals are entitled to such relief. The Tribunal's decision was based on judicial precedents and a holistic interpretation of the Income Tax Act. The appeal was partly allowed, with the alternative plea dismissed as infructuous.
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