WIPRO LIMITED vs. ASSISTANT COMMISSIONER OF INCOME TAX

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ITA/84/2023HC KarnatakaKAHC01009680202309 January 2024Bench: P.S.DINESH KUMAR,T.G. SHIVASHANKARE GOWDA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court allowed the appeal. It set aside the order dated 05.10.2020 passed by the ITAT, Bengaluru, and remitted the matter back to the ITAT for reconsideration in accordance with the law. The Court noted the submissions made by both parties, particularly the assessee's reliance on the Bombay High Court's decision in Reliance Infrastructure Ltd. and the fact that the Revenue did not dispute the need for reconsideration. The Court explicitly stated that all contentions of both parties are kept open for the ITAT to decide. No costs were awarded. The operative direction was to set aside the impugned order and remand the matter to the ITAT.

What were the facts?

The assessee, Wipro Limited, is challenging an order dated 05.10.2020 passed by the Income Tax Appellate Tribunal (ITAT), Bengaluru, for Assessment Year 2012-13. The assessee, a resident of India, paid taxes in foreign countries on income earned outside India, which it claimed was not taxable in India. The assessee sought to deduct these foreign taxes paid under Section 37(1) of the Income Tax Act, 1961. The Assessing Officer (AO) and the Dispute Resolution Panel (DRP) rejected this claim. The ITAT had not considered this specific ground, and a subsequent miscellaneous petition filed by the assessee for reconsideration was also rejected. This led to the present appeal before the High Court.

What were the issues?

1. Whether, on the facts and circumstances of the case, taxes paid by the Appellant to foreign Governments, for which credit has not been given under Sections 90 and 91 of the Act read with applicable Double Taxation Avoidance Agreements (DTAAs), should be allowed as a deduction from the business income of the Appellant under Section 37 of the Act, given that the expenditure was incurred wholly and exclusively for the purposes of its business? Assessee's Contention: The assessee argued that the foreign taxes were paid on income taxable in foreign countries, and these taxes were incurred wholly and exclusively for the purposes of its business. The assessee relied on the Bombay High Court's decision in Reliance Infrastructure Ltd. Vs. Commissioner of Income Tax, City-VI, Mumbai, which granted similar relief, and noted that this decision was accepted by the Department and followed by the ITAT in the assessee's own case for subsequent assessment years. Therefore, the assessee sought reconsideration of the matter by the ITAT. Revenue's Contention: The Revenue, through its Standing Counsel, did not dispute the assessee's submission and agreed that the ITAT may be directed to reconsider the matter, with all questions kept open for the Revenue to urge.

Which sections of the Income-tax Act were involved?

Section 37,Section 90,Section 91

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH,

- 1 - NC: 2024:KHC:1244-DB ITA No. 84 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF JANUARY, 2024 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE T.G. SHIVASHANKARE GOWDA INCOME TAX APPEAL NO. 84 OF 2023

BETWEEN:

WIPRO LIMITED 76P AND 80P, DODDAKANNELLI SARJAPUR ROAD BENGALURU-560 035. REPRESENTED HEREIN BY ITS GENERAL MANAGER - FINANCE MR. VENKATRAMAN .E PAN: AAACW0387R …APPELLANT

(BY SHRI. SANDEEP HUILGOL, ADVOCATE)

AND:

1.

ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-7(1)(2), BANGALORE BMTC BUILDING, 2ND FLOOR KORAMANGALA 80 FEET ROAD BENGALURU-560 095. 2. PRINCIPAL COMMISSIONER OF INCOME TAX BANGALORE BMTC BUILDING, 6TH BLOCK KORAMANGALA BENGALURU-560 095. …RESPONDENTS

(BY SHRI. E.I. SANMATHI, STANDING COUNSEL)

Digitally signed by ANUSHA V Location: High Court of Karnataka

- 2 - NC: 2024:KHC:1244-DB ITA No. 84 of 2023

THIS ITA IS FILED UNDER SEC.260-A OF THE INCOME TAX ACT 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE, ALLOW THE APPEAL AND SET ASIDE, TO THE EXTENT QUESTIONED HEREIN, THE IMPUGNED ORDER DATED 05/10/2020 PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, ‘C’ BENCH, BANGALORE, IN IT(TP)A NO. 492/BANG/2017, ASSESSMENT YEAR 2012-2013 VIDE (ANNEXURE-A) AND PASS SUCH OTHER OR FURTHER ORDERS AS THIS HONBLE COURT DEEMS FIT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE INTERESTS OF JUSTICE AND EQUITY.

THIS ITA, COMING ON FOR FINAL HEARING, THIS DAY, P.S.DINESH KUMAR, J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal by the assessee challenging the order dated 05.10.2020 in IT (TP) A No.492/Bang/2017 for the assessment year 2012-13 passed by the ITAT, ‘C’ Bench, Bengaluru, has been admitted to consider the following question of law:

“Whether, on the facts and circumstances of the case and on the grounds raised, the taxes paid by the Appellant to foreign Governments and authorities, in respect of which credit has not been given under Sections 90 and 91 of the Act read with the Applicable DTAAs, should be allowed as a deduction from the business income of the Appellant given that is unquestionable expenditure which has been incurred by the Appellant wholly and exclusively for the purposes of its business and is, therefore, eligible for deduction under Section 37 of the Act?

- 3 - NC: 2024:KHC:1244-DB ITA No. 84 of 2023

2.

Heard Shri Sandeep Huilgol, learned advocate for the appellant and Shri E.I.Sanmathi, learned Standing Counsel for the Revenue.

3.

Undisputed facts of the case are, appellant is a resident of India and liable to pay tax on the global income for the assessment years 2009-10 to 2014-15. The assessee had received certain income outside the country and paid tax on the same as per the extant law in that country. According to the assessee, the same is not taxable in India. Consequently, he has claimed deduction of tax paid in foreign countries under Section 37(1) of the Act1. The A.O.2 and the DRP3 have rejected the same. On appeal, the ITAT has not considered this question. The assessee filed a Misc. Petition for reconsideration of this ground and the same has also been rejected. Hence, this appeal.

1 Income Tax Act, 1961 2 Assessing Officer 3 Dispute Resolution Panel

- 4 - NC: 2024:KHC:1244-DB ITA No. 84 of 2023

4.

Shri Huilgol submitted that the income in the relevant assessment year was taxable in foreign countries and said tax has been paid. The A.O, DRT as also ITAT have not considered this aspect and the Misc. Petition filed before the ITAT has also been dismissed. Shri Huilgol further submitted that the Bombay High Court, in identical circumstances, in Reliance Infrastructure Ltd. Vs. Commissioner of Income Tax, City-VI, Mumbai4, has granted the relief and the said order has been accepted by the Department and followed by the ITAT in assessee’s own case for the assessment years 2015-16 to 2017-18. Therefore, assessee is entitled for reconsideration of the matter in the hands of the ITAT.

5.

Shri Sanmathi, in his usual fairness, does not dispute the said submission and submitted that the ITAT may be directed to reconsider the matter and all questions may be kept open for the revenue to urge.

4 2016 SCC OnLine Bom10018

- 5 - NC: 2024:KHC:1244-DB ITA No. 84 of 2023

6.

In view of the above, the following: ORDER i) Appeal is allowed; ii) Order dated 05.10.2020

in IT(TP)A No.492/Bang/2017 passed by the ITAT, ‘C’ Bench, Bengaluru, is set aside and the matter is remitted to the file of ITAT for reconsideration in accordance with law; and iii) All contentions of both parties are kept open. No costs.

Sd/- JUDGE

Sd/- JUDGE

YN List No.: 1 Sl No.: 43

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