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Senior Advisor - Direct & International Tax
In an increasingly globalized world, individuals and businesses engage in cross-border transactions, leading to tax obligations in multiple jurisdictions. India, like many other countries, has provisions to avoid double taxation on income earned abroad. One such provision is the Foreign Tax Credit (FTC) mechanism, which allows taxpayers to offset taxes paid in foreign jurisdictions against their Indian tax liability.
Coming to this month’s, Taxation Times, here’s what we have :
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UJA Tax Team
In an increasingly globalized world, individuals and businesses engage in cross-border transactions, leading to tax obligations in multiple jurisdictions. India, like many other countries, has provisions to avoid double taxation on income earned abroad. One such provision is the Foreign Tax Credit (FTC) mechanism, which allows taxpayers to offset taxes paid in foreign jurisdictions against their Indian tax liability.
The concept of FTC is a significant aspect of international taxation, particularly for individuals and businesses engaged in cross-border transactions. In India, the foreign tax credit mechanism allows taxpayers to claim a credit against their Indian tax liability for the taxes paid in a foreign country on the same income that is also subject to tax in India. The idea behind FTC is to prevent double taxation on the same income, ensuring that taxpayers are not taxed twice on the same earnings, once in the foreign country where the income is earned and again in India.
FTC is a mechanism that prevents double taxation on the same income in both the taxpayer’s home country and the foreign country where the income was earned. In the Indian context, it allows taxpayers to claim a credit for taxes paid abroad against their Indian tax liability.
Suppose Mr. A is an Indian resident but earns interest income in the United States. The source state, i.e., the US, will withhold a percentage of the amount as tax. In addition, Mr. Ramana will also have to pay taxes on his U.S. income in India. This will result in double taxation on the same income. FTC is a facility that helps people like Mr. A avoid paying double tax on the same income.
As per the tax laws of India, sections 90 and 91 of the Income Tax Act, 1961, deal with the concept of FTC. Section 90 discusses claiming of FTC in a case where India has entered into a Double Taxation Avoidance Agreement (DTAA) with another country and such DTAA provides for claiming of such FTC, while Section 91 deals with claiming of FTC in scenarios where India has not entered into a DTAA with the country where the income arises for a taxpayer. Under these sections, if the taxpayer is a resident of India and has paid taxes outside India, he can claim a credit for such foreign taxes paid against his tax payable in India.
Rules for claiming FTC have been notified under Rule 128 w.e.f. 1.4.2017, which have helped clear out ambiguity around claiming of FTC, some of which have been briefly captured here under:
Facts:
The assessee, a tax resident of China, was engaged in the business of the manufacture and supply of composite long rod insulators and other hardware fittings for optical fiber ground wire (OPGW) used in transmission lines.
During the year under consideration, the assessee received a certain amount of consideration on account of offshore supply made to Indian PSU’s, which the assessee had claimed to be not chargeable to tax under Indian Taxation and accordingly, claimed the refund of the corresponding tax credit.
The assessing officer, however, allocated 60 percent of the total receipts towards the supply of equipment and 40 percent towards the fee for technical service (FTS). Further, the calculation on the attribution of profit was done by considering 25 percent of the equipment supply and 100 percent of FTS. Accordingly, he made an addition on account of income chargeable on account of FTS and towards the taxable component of business receipts.
The DRP upheld the addition made by the assessing officer.
The assessee filed an appeal before the ITAT.
Held:
Assessee, a tax resident of China, received certain amount of consideration on account of offshore supply made to Indian PSU’s – Assessing Officer, however, allocated 60 per cent of total receipts towards supply of equipment and 40 per cent towards fee for technical service (FTS) – Accordingly, he made additions to income of assessee – Tribunal in assessee’s own case for earlier assessment years in Jiangdong Fittings Equipments Co. v. ACIT (International Taxation) [2023] 157 taxmann.com 109 (Delhi – Trib.) on similar issue had held that supply of goods and equipments was completed outside India and transfer of title over goods had passed from non-resident assessee to Indian PSU’s outside India in terms with contract, receipts from such supply could not be made taxable in India
In Favour of: The Assessee
Facts:
During the year under consideration, the assessee, a NRI, had shown long term capital gain on sale of immovable property .Out of the capital gain, the assessee had invested part of the sum in the capital gain bond scheme as per section 54EC, offered tax on remaining capital gains and also claimed deduction of stamp duty and registration charges in respect of society transfer fees paid by the assessee out of the aforesaid capital gain amount.
The Assessing Officer had disallowed the claim of expenses on the ground that assessee had not furnished the supporting document regarding the payment of aforesaid expenditure claimed by the assessee.
The assessee filed objection before the DRP. The DRP has dismissed the objection filed by the assessee on the ground that original form no. 35A was not signed by the authorized representative and the fresh form no. 35A filed by the assessee cannot be considered because it was filed beyond time.
On appeal, the assessee contended that assessee had filed form no. 35A within the time through his authorized representative and subsequently, on raising objection by the DRP, the assessee had himself filed the fresh form No. 35A. Therefore, form no. 35A was filed within the time, which was only corrected on raising objection by the DRP
Held :
It is found that assessee has already filed original form 35A within the time limit, however, same was corrected, as pointed out by the DRP, on the ground that authorized representative was not the right person to sign form 35A. After considering the above facts, it is evident that assessee has made correction to the form 35A, which cannot be treated as filed beyond time limit, therefore, there is no justification in the finding of the DRP for treating the form 35A as not filed. Further, on merit, it is found that the Assessing Officer has not considered that assessee has actually incurred the expenses pertaining to stamp duty and registration charges and society transfer charges as per the terms and conditions of the agreement and evidence of payment as reflected in the copy of bank statement. Therefore, the Assessing officer was directed to allow the claim of the assessee after verification of the copy of agreement and copy of bank statement filed by the assessee. Accordingly, the appeal of the assessee is allowed
In Favour of: The Assessee.
CBDT clarifies provisions under Finance Act 2023 relating to donations made by a trust / institution to another trust / institution for purposes of application of income
Due date for deposit of Tax deducted/collected by an office of the government for the month of March, 2024. However, all sum deducted by an office of the government shall be paid to the credit of the Central Government on the same day where tax is paid without production of an Income-tax Challan
due date for issue of TDS Certificate for tax deducted under section 194-IA/194-IB/194M/194S is February, 2024
Due date for furnishing of Form 24G by an office of the Government where TDS/TCS for the month of March, 2024 has been paid without the production of a challan
Due date for furnishing the challan-cum-statement in respect of tax deducted under section 194-IA/194-IB/194M/194S in the month of March, 2024
Due date for deposit of Tax deducted by an assessee other than an office of the Government for the month of March, 2024.
Due date for e-filing of a declaration in Form No. 61 containing particulars of Form No. 60 received during the period October 1, 2023 to March 31, 2024
Due date for uploading declarations received from recipients in Form. 15G/15H during the quarter ending March, 2024
