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TMI Blog2022 (6) TMI 143X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of computing the net profit ratio of total income of the assessee in India which is used as the basis for arriving at the net income of Ghana should include other income . We have also held that the effective Indian rate of tax should include surcharge and education cess i.e. 20.01%. The calculation of deduction u/s.91 as done in the above table is in accordance with our views expressed in the foregoing paragraphs and is a reasonable basis of arriving at the effective rate of tax for Ghana. Hence we are of the considered view that it is reasonable to allow the deduction u/s.91 to the assessee. AO is therefore directed to re-compute the income of the assessee. Appeal of the assessee is partially allowed. - ITA No.986/Bang/2019 - - - Dated:- 27-4-2022 - SHRI N V VASUDEVAN, VICE PRESIDENT AND MS. PADMAVATHY S, ACCOUNTANT MEMBER Assessee by : Smt. Tanmayee Rajkumar Advocate Revenue by : Shri Priyadarshi Mishra Addl. CIT ORDER Per Padmavathy S, Accountant Member This is an appeal against the order of the Commissioner of Income Tax (Appeals) - 3 Bengaluru passed u/s. 250 of the Income Tax Act (the Act) dated 12/03/2019 for the assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s section,- (i) the expression Indian income-tax means income-tax charged in accordance with the provisions of this Act; (ii) the expression Indian rate of tax means the rate determined by dividing the amount of Indian income-tax after deduction of any relief due under the provisions of this Act but before deduction of any relief due under this Chapter, by the total income; (iii) the expression rate of tax of the said country means incometax and super-tax actually paid in the said country in accordance with the corresponding laws in force in the said country after deduction of all relief due, but before deduction of any relief due in the said country in respect of double taxation, divided by the whole amount of the income as assessed in the said country; (iv) the expression income-tax in relation to any country includes any excess profits tax or business profits tax charged on the profits by the Government of any part of that country or a local authority in that country. 4. Section 91 makes provision for grant of unilateral relief by the Government of India in respect of incomes which had suffered taxes both in India and in the country with whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief of Rs.1,05,36,759. 3.2. On verification it is found that while calculating tax rate in Ghana the assessee company had calculated the same on Gross receipts while tax paid in India was on income not receipts. Hence after reducing other income (Rs.44,17,852 ) from its profits in P L account the effective profit rate works out to 30.58% i.e. [(Rs.7,04,63,271- Rs.44,17,852) / Rs.21,95,91,404]. Hence in respect of foreign receipts on which taxes are withheld of Rs.12,95,91,404, the profit works out to Rs.3,96,24,766 i.e. (Rs.12,95,91,404 * 30.58%). And the effective rate of tax works out to 26.59% i.e. (Rs.1,05,36,759 / Rs.3,96,24,766). Hence the assessee company will be eligible for deduction at 18.5% of Rs. 3,96,24,766 which works out to Rs.73,30,582 and the balance of Rs.32,06,177 is disallowed and brought to tax . * (this has to be read as Rs.15,99,37,226 admitted by the AO) 7. The AO modified the disallowance to Rs.14,89,609 based on the revised Ghana receipts submitted by the assessee at Rs.15,99,37,226. The manner in which the AO has computed the allowable deduction u/s.91 is given in a tabular form below for ease of understanding Parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he net profit ratio other income needs to be excluded. In effect the CIT(A) confirmed the manner in which the assessing officer computer the relief u/s.91 and directed the AO to recomputed the relief based on the revised sales figures submitted by the assessee. 9. Aggrieved by the order of the CIT(A) the assessee is an appeal before The Tribunal. Section 91 r.w.r 128 allows the assessee, to claim a deduction from the Indian income-tax payable in respect of incomes which had suffered taxes both in India and in the country with which there is no agreement for double taxation relief for avoidance of double taxation. The deductions is calculate by applying the lower of effective Indian rate of tax or effective rate of tax of other country (Ghana) on such doubly taxed income . The issues raised by the assessee before us through various grounds are as under (i) Effective Indian rate of tax The AO / CIT(A) has excluded surcharge and education cess which is contended as not correct in the light of decision of the Supreme Court in CIT vs K Srinivasan 1972 AIR 491 (ii) Effective rate of tax in Ghana The AO/CIT(A) has excluded Other Income while arriving at the net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. We heard the rival submissions and perused the materials on record. The expression such doubly taxed income has reference to the foreign income which is again being subjected to tax by its inclusion in computation of income under the Indian law. In other words, the expression such doubly taxed income has reference to the tax which the foreign income bears once again the burden of the Indian Income-tax Act by its being included in the total income chargeable u/s.4 of the Act. Hence the assessee s claim that the relief to be allowed for the entire tax paid in Ghana on the basis that gross is receipt is doubly taxed cannot be accepted without going into the details of how much of such income is doubly taxed. 13. In this case the gross receipts from Ghana is Rs.15,99,37,226 and the doubly taxed income out of this would be net of expenses. The Ld. AR during course of hearing submitted that the assessee had produced the details of expenses pertaining to Ghana (page 172 of Paper Book) before the CIT(A). We, however notice that the correctness of these expenses in order to consider it for arriving at the net Ghana income was not examined by the lower authorities. The Ld AR as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this Act but before deduction of any relied due under this Chapter by the total income. Indian Income Tax has been defined to mean income-tax charged in accordance with the provisions of this Act. In this case the Indian rate of tax has been arrived at by the assessee at Rs.20.01% i.e. 1,36,56,893/6,82,58,012. However the AO has arrived at the Indian rate of tax at 18.50%. This is because the AO adopted the rate of tax u/s.115JB of the Act on book profits because tax was paid for the relevant assessment year not under normal provisions of the Act but u/s.115JB of the Act on book profits (pages 233 to 235 of paper book) However the AO had considered the tax before surcharge (Rs.6,31,387) and Education cess (Rs.3,97,774) and arrived at a rate of 18.50% i.e.1,26,27,732 / 7,01,90,873. The issue of surcharge and cess being part of income tax is settled by the Supreme Court in the case of CIT vs K Srinivasan (supra) where the Honb ble Supreme Court has clearly laid down that the words income tax would include surcharge and additional surcharge. Hence for the purpose of arriving at effective Indian rate of tax, surcharge and educational cess should be considered i.e. @ 20.01% 16. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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