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August 2016

[2015] 63 taxmann.com 124 (Bangalore) DCIT vs. Subex Technology Ltd A.Y.:2009-10, Date of order: 1 October, 2015

By Geeta Jani, Dhishat B. Mehta; Chartered Accountants
Reading Time 1 mins
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Section 90 of the Act –In absence of any specific provision in the Act denial of grant of foreign tax credit against MAT liability is invalid

Facts
The Taxpayer was an Indian company. During the relevant assessment year, the income of Taxpayer was subject to Minimum Alternate Tax (“MAT ”) under the provisions of section 115JB of the Act. Since, the Taxpayer had paid taxes in foreign countries, it claimed credit in terms of section 90 of the Act for taxes paid abroad against its MAT liability u/s. 115JB.

During assessment proceedings, the AO disallowed the claim of foreign tax credit on the ground that provisions of section 115JB stood on a different footing than the normal provisions of the Act.

Held
The income on which tax was paid abroad was included in ‘book profit’ computed for the purpose of section 115JB. Once taxable income was determined either under the normal provisions or u/s. 115JB, the computation of tax was to be governed by the normal provisions of the Act1 .

As there was no provision in the Act for restricting the grant of foreign tax credit, such credit should be allowed against MAT liability.

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