TDS credit should be given in the year it is deducted, regardless of the year the income is assessed: Ahmedabad ITAT
Ahmedabad Tribunal in the case of Suzlon ITA 1517 2019 has held that TDS credit should be given in the year it is deducted, regardless of the year the income is assessed.
This case reinforces the principle that foreign tax credits can be claimed in the year taxes are withheld, promoting fairness in taxation for multinational companies
Suzlon earned substantial royalty income from its subsidiary in China, which was taxed in China at 10% gross rate, under the India-China Double Taxation Avoidance Agreement (DTAA).
The Assessee sought to claim FTC under Section 90 of the Income Tax Act for taxes withheld in China, which was initially denied by the Assessing Officer (AO) because the claim was not made in the original return.
Tribunal Proceedings
Initial Ruling: The Commissioner of Income Tax (Appeals) allowed the FTC claim, stating it was a technical denial and did not address the merits of the claim.
Revenue Appeal: The Revenue appealed against this decision, leading to a remand for further examination.
CIT(A) Decision:
On remand, since the proceedings were for AY 2008-09, the CIT(A) allowed FTC for AY 2008-09 but denied it for the earlier year, arguing that the credit could only be claimed in the year the income was assessed.
Tribunal’s Analysis:
The Tribunal emphasized that the FTC should be allowed based on the analysis of provisions of Section 199, which state that TDS credit should be given in the year it is deducted, regardless of the year the income is assessed.
The Tribunal referenced previous rulings that supported the Assessee’s position, asserting that the FTC should not be restricted to the year of income assessment.
The Tribunal clarified that the provisions of the DTAA and domestic law support the Assessee’s claim for FTC which does not restrict it with the year of taxability of corresponding income.
The copy of the order is as under:
