ACIT, CIRCLE-61(1), DELHI, DELHI vs. SHARDUL AMARCHAND MANGALDAS & CO, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘C’: NEW DELHI BEFORE SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER ITA No.2327/DEL/2026 (Assessment Year: 2017-18) ITA No.2328/DEL/2026 (Assessment Year: 2018-19) ITA No.2329/DEL/2026 (Assessment Year: 2018-19) ITA No.2330/DEL/2026 (Assessment Year: 2020-21) ITA No.2331/DEL/2026 (Assessment Year: 2021-22) ITA No.2332/DEL/2026 (Assessment Year: 2022-23) ACIT, Circle 61 (1), vs. Shardul Amarchand Mangaldas & Co., Delhi. 216, Amarchand Towers, Okhla Industrial Estate Phase III, New Delhi – 110 020. (PAN : ACTFS7010H) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Pradeep Dinodia, CA Ms. Pallavi Dinodia, CA Shri R.K. Kapoor, CA Ms. Deepti Gupta, CA REVENUE BY : Shri Tarun Sharda, Sr. DR Date of Hearing : 24.06.2026 Date of Pronouncement : 31.07.2026

2 ITA Nos.2327 to 2332/Del/2026 O R D E R PER S.RIFAUR RAHMAN,AM:

3 ITA Nos.2327 to 2332/Del/2026 services across various practice areas comprising of mergers and acquisitions, taxation, dispute resolution, competition law, regulatory litigation, capital markets and private equity. Such professional and consultancy services are claimed to have been rendered by the assessee to both its Indian clients as well as international clients in the ordinary course of its business. Since the assessee firm is following the cash system of accounting and in accordance with such system, the income as well as expenditure are offered to tax on receipt basis. It is noted that the assessee firm has offered the income earned by it against such services rendered from the overseas clients. Such overseas clients have deducted taxes in accordance with the relevant Double Taxation Avoidance Agreement applicable to the each jurisdiction from which such income has been earned by the assessee. The assessee while offering the gross income from such receipts as taxable in India has claimed the Foreign Tax Credit (FTC) in accordance with section 90/90A of the Income Tax Act, 1961 (for short ‘the Act’) read with Rule 128 of the Income Tax Rules, 1962 (for short ‘the Rules’). While claiming such FTC, the assessee had filed Form No. 67 in respect of each of the years along with the TDS certificates as had been issued to the assessee by its foreign clients in accordance with the requirements for claiming the benefit of FTC in accordance with law. The assessee had treated the rendering of all such consultancy services as “Fee for Technical Services” (FTS) under the relevant articles of the Double

4 ITA Nos.2327 to 2332/Del/2026 Taxation Avoidance Agreement applicable to each of such country from where the assessee had received such professional revenue. However, the Assessing Officer was of the view that such receipts by the assessee is not FTS but fees received by the assessee as independent professional services which are covered under a different article of the respective Double Taxation Avoidance Agreement. For example in respect of receipts from Japan, the assessee claimed that article 12(4) read with article 23 of the Double Taxation Avoidance Agreement with Japan would cover the receipts, however Assessing Officer was of the view that the relevant article under which such receipts fall is article 14 and not article 12(4) of the Double Taxation Avoidance Agreement with Japan. Similarly with regard to the receipts from other countries i.e. China, Uganda, Malaysia, Sri Lanka, Poland and Oman the Assessing Officer referred to the relevant article of independent professional services rather than the articles which according to the assessee covered the receipts as FTS. It is observed that the major receipts by the assessee are from Japan and receipts from other countries constitute only about 2% of the total receipts. The Assessing Officer in accordance with his understanding denied the claim of FTC by making following observations as are noted by him in the Assessment Order for Assessment Year 2018-19:- 1. The nature of services provided by the assessee is clearly of legal nature covered under Article 14 of the DTAA. This nature is also accepted by the assessee firm as

5 ITA Nos.2327 to 2332/Del/2026 can be seen from the above discussion. In lieu of the nature of services provided in this case, Article 14 is clearly attracted as against Article 12 of the DTAA. 2. Article 12, as observed from the plain reading of the DTAA, is attracted in case of Royalties and Fee for technical services. 3. Article 14, as observed from the plain reading of the DTAA, is attracted in case of Independent personal services which explicitly includes professional services including independent activities of lawyers. 4. The Article 14 is applicable for both of individuals as well as partnership firm. The usage of words like He and His are concern-neutral terms. These terms not only apply to individuals but also to other concerns like company, firms, AOP, BOI etc. If any such distinction of category was applicable under Article 14, the DTAA makers/drafters would have clearly indicated. This argument can be corroborated by citing drafting of the Income Tax Act, 1961 wherein applicability and non applicability of the sections to persons like individual/HUF/Firm/Company etc. are clearly mentioned. The non distinction under Article 14 clearly indicates the wisdom of the India Japan DTAA drafters. 5. Taking the argument further, Article 14 mentions the term independent personal services. Here the term independent has been used in relation to the nature of the services rather than the type of persons providing such services. The term independent implies absence of a fixed base or presence for over 183 days in the contracting state which in this case is Japan. The term independent has no relation to the type of persons providing this service be it individual/HUF/Company/Firm etc. 6. The term personal herein Article 14 can be interpreted in the light of Income Tax Act, 1961. Section 2(31) of the Income Tax Act, 1961 defines the categories of person which includes individual as well as a firm. Taking this definition as the guiding light, it can be clearly seen that article 14 of the DTAA is a concern neutral term and well applicable in case of the assessee firm.

6 ITA Nos.2327 to 2332/Del/2026

7 ITA Nos.2327 to 2332/Del/2026

8 ITA Nos.2327 to 2332/Del/2026 computations, and such application is not demonstrable from the record? 6. Although these grounds are not serially numbered as per the Memorandum of Appeal but for the sake of clarity and ready reference the same have been numbered as Grounds No. 1 to 6 as above. 7. At the time of hearing, ld. Sr. DR has submitted that order passed by the Assessing Officer needs to be upheld as the same has been passed after considering all the relevant provisions of the respective DTAA. He has submitted that the amounts of FTC in respect of each year as also the corresponding income against which such FTC has been claimed is required to be examined by the Assessing Officer. These arguments of ld. DR have been made in view of Ground Nos. 2, 3, 4, 5 & 6 as identified hereinabove. By referring to the various grounds of appeal, he has submitted that the ld. CIT(A) appears to have allowed the credit of FTC without establishing the nexus with the corresponding income offered to tax in India. He has further submitted that the restricting of credit of FTC to the extent of Indian tax attributable of such income also needs verification. He has, therefore, urged upon the Bench to restore back to Assessing Officer for verification of all these facts before the FTC claim is allowed to the assessee. 8. On the other hand, ld. AR of the assessee, has submitted that the assessee firm has been carved out of the erstwhile firm i.e. Amarchand & Mangaldas & Suresh A. Shroff & Co. and this very issue earlier came up

9 ITA Nos.2327 to 2332/Del/2026 in the case of erstwhile firm for Assessment Year 2014-15 wherein the claim of FTC was denied for the identical reasons by the Assessing Officer but, however ITAT has allowed the relief to the assessee by holding and analyzing the DTAA between India and Japan to conclude that it is Article 12(4) read with Article 23 which is applicable to the professional receipts and not Article 14 as had been done by the Assessing Officer in that year. The ld. AR also referred to another judgement of ITAT, Mumbai Bench in the case of DCIT v. Cyril Amarchand Mangaldas for the Assessment Year 2017-18 and Assessment Year 2018-19 which is reported in 154 Taxman.com 99 wherein also a similar controversy was involved which was decided in favour of the said firm to hold that credit FTC is required to be allowed to the firm in respect of taxes deducted on the legal service rendered in Japan. Copies of both the judgements have been placed by the ld. AR on record. 9. As regards the issue of matching the corresponding income against the FTC claim by the assessee, it has been submitted that firstly the Assessing Officer has not raised any doubt on this aspect. In fact, the assessment orders passed by the Assessing Officer for each of these years clearly extract the amount of receipts shown by the assessee in the total income declared by the assessee and the corresponding FTC claimed has also been noted by the Assessing Officer in each of the assessment order. Further, it was submitted that it is factually correct as can be seen from the assessment orders. For

10 ITA Nos.2327 to 2332/Del/2026 example, the assessment order for Assessment Year 2018-19 records the following facts. The details of such income accrued and tax relief claimed by the assessee is as under: Sr.No. Name of the Income accrue Relief Country or arise (in Rs.) claimed u/s 90 (in Rs.) 1 Japan 13,85,88,711 1,58,48,104 2 Malaysia 29,83,617 2,98,369 3 Uganda 5,78,610 57,861 Total 14,21,50,938 1,62,04,334 During the said assessment year, the assessee had provided professional legal services to the clients based in Japan, Malaysia and Uganda. The total income from outside India from Japan, Malaysia and Uganda aggregated to Rs.14,21,50,938/-. 10. Similarly, it was submitted that in the Assessment Order for Assessment Year 2020-21 in Para 3 recorded the income and relief claimed as under.

The details of such income accrued and tax relief claim by the assessee as under: Sr.No. Name of the Income accrue Relief Country or arise (in Rs.) claimed u/s 90 (in Rs.) 1 Japan 26,13,71,102 2,56,99,418

11 ITA Nos.2327 to 2332/Del/2026 the orders of the authorities below because the learned Assessing Officer has not denied the credit of FTC in any of the assessment orders because the corresponding income on which the assessee claimed FTC has not been offered to tax. It has, therefore, been submitted that no useful purpose would be served by referring the matters back to the Assessing Officer as it would tantamount to multiplication of proceedings especially in view of the fact that all the relevant facts and figures i.e. the income earned from these foreign jurisdiction and corresponding FTC claimed by the assessee are duly noted by the Assessing Officer in the respective assessment orders and not even an iota of doubt has been expressed by the Assessing Officer in respect of these facts and figures. 12. Further, ld. AR submitted that the ld. CIT(A) has made correct interpretation of the provisions of various Articles as contained in the respective DTAA as also the provisions of section 90/90A of the Income Tax Act read with Rule 128 of the Rules. The ld. AR relied upon the judgements of ITAT, Mumbai Bench in the erstwhile firm i.e. Amarchand & Mangaldas & Suresh A. Shroff & Co. as reported in 122 taxmann.com 248 and also on the judgement of ITAT, Mumbai Bench in the case of Cyril Amarchand Mangaldasas reported in 154 taxmann.com 99 to conclude that the issues involved are fully covered in favour of the assessee and has submitted that the order of ld. CIT(A) is required to be upheld.

12 ITA Nos.2327 to 2332/Del/2026 13. Considered the rival submissions and material placed on record. The only issue involved in all these batch of appeals is as to whether when an assessee earns foreign income which is included at gross level into the taxable income, whether the credit of the foreign taxes which are held by the overseas clients is required to be given in India or not and whether it is the relevant article 12(4); for example in case of DTAA with Japan or article 14 which deals with independent personal service would cover the nature of services rendered by the assessee. The ITAT, Mumbai Bench in the case of Amarchand & Mangaldas & Suresh A. Shroff & Co.(Supra) has after analyzing relevant Articles 12(4) and Article 14 with reference to Indo- Japan treaty has finally in Para-8 of the said judgement held as under: 8. In view of these discussions, there is a valid school of thought that in the scheme of the Indo Japanese tax treaty, article 14 for independent personal services holds the field for the individuals only – particularly in the light of the exclusion clause under article 12(4) being restricted to payment of fees for professional services to individuals alone. There is no dispute that the provisions of article 14 and article 12 are overlapping inasmuch as what is termed as professional service could also be covered by the fees for technical service-particularly as the definition of the fees for technical services is on `classical model’ of much wider scope and not on the `make available model’ now in vogue in many tax treaties. The only reason for which exclusion from article 12 was canvased by the Assessing Officer was that rather specific provisions of article 14 have to make way for rather general provisions of article 12, but then when we hold that, in the context of Indo Japan tax treaty, article 14 comes into play only for individuals, this proposition ceases to hold good in the present context. As a corollary to this legal position, and the exclusion clause under article 12(4) not being triggered on the facts of this case as such, it is indeed reasonably possible to hold that the payments in question were rightly subjected to tax withholding in Japan. The judicial precedents cited by the authorities below are in the context of the tax treaties other than Indo Japan tax treaty, and the provisions of the Indo Japan tax treaty are not in parimateria with the provisions of those tax treaties. These judicial precedents deal with the tax treaties that India has entered into with China, U.K. and the USA, but

13 ITA Nos.2327 to 2332/Del/2026 then all the three treaties are, in the material respects, differently worded vis-à-vis the Indo-Japanese tax treaty that we are presently dealing with. It is, therefore, not even necessary, even if we have our reservations on correctness of these decisions, to refer the matter to the larger bench for reconsideration of the principle laid down therein. Suffice to say, on the facts of this case, the conclusions arrived at by the Japanese tax authorities, directing tax withholdings from the payments made to the assessee by its Japanese clients, cannot be said to unreasonable or incorrect. In the light of these discussions, as also bearing in mind entirety of the case, we hold that the assessee was wrongly declined tax credit of Rs.80,55,856/- on the facts of this case. We, therefore, direct the Assessing Officer to grant the said tax credit to the assessee. As we have upheld the plea of the assessee with respect to the admissibility of the foreign tax credit, we see no need to deal with the alternate plea of the assessee seeking deduction of the taxes so withheld abroad in the computation of its income. 14. Respectfully following the aforesaid judgements as also in other judgement of ITAT, Mumbai Bench in the case of Cyril Amarchand Mangaldas (supra), we hold that the order passed by the ld. CIT(A) holding that the assessee is entitled to claim FTC is in accordance with the provisions of law i.e. section 90/90A read with Rule 128 especially when there is no dispute that the assessee made all the compliance as per other provisions i.e. filing of Form 67, filing of TDS certificates issued by foreign jurisdiction etc. Moreover, the undisputed facts in this case are that (i) assessee has rendered services in overseas jurisdictions, (ii) the foreign payers have withheld taxes in accordance with DTAA provisions for which TDS certificates duly authenticated by their revenue authorities are issued, (iii) assessee as resident in India has declared gross receipts in the taxable income in India and claimed FTC for the taxes withheld overseas by filing Form 67, (iv) Rule 128 of the Rules does not contain any restriction for allowing FTC

14 ITA Nos.2327 to 2332/Del/2026 credit in accordance with section 90/90A of the Act. Upon these undisputed facts there remains no reason or justification in denying the taxes withheld by the overseas clients against the gross income declared in India by the resident assessee. 15. In view of our findings given above, the order passed by the ld. CIT(A) for the Assessment Year 2018-19 in ITA No.2328/Del/2026 filed by the Revenue is upheld and appeal filed by the Revenue is dismissed. 16. As the Grounds of Appeal raised by the Revenue as also the facts and circumstances in each of the other appeals are identical to the facts as also the reasons assigned by the Assessing Officer in denying the benefit of FTC to the assessee are identical, all other appeals i.e. ITA Nos.2327, 2329, 2330, 2331 and 2332/Del/2026 to 2332/Del/2026 for Assessment Years 2017-18, 2018-19, 2020-21, 2021-22 and 2022-23 respectively are also dismissed for the identical reasons. 17. To sum up, all the appeals filed by the Revenue are dismissed. Order pronounced in the open court on this 31ST day of July, 2026.

SD/- SD/- (RAJ KUMAR CHAUHAN) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated: 31.07.2026 TS

15 ITA Nos.2327 to 2332/Del/2026