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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI B. R. BASKARAN & SMT. BEENA PILLAI
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The assessee has filed this appeal challenging the order dated 31-01-2019 passed by Ld CIT(A), Mysuru and it relates to the assessment year 2015-16.
In the original grounds of appeal, the assessee is aggrieved by the decision of Ld CIT(A) in confirming the rejection of Foreign Tax Credit claimed by the assessee u/s 90 of the Income-tax Act,1961 ['the Act' for short].
3. The assessee has also raised following two additional grounds:-
Palaniappan Sockalingam, Chikmagalur
Page 2 of 4 “4. That the learned lower authorities erred in law and on facts in assessing the capital gains of Rs.1,53,46,827/- from sale of agricultural land in Malaysia on protective basis even though the agricultural land does not belong to the appellant.
5. That the learned lower authorities erred in law and on facts in not providing the benefit of set off of brought forward short term capital loss of Rs.44,48,910/- against the long term capital gains declared in the return of income.”
The assessee has filed a petition praying for admission of the above said additional grounds. It is stated that all the facts and materials relating to the above said additional grounds are available on record. Accordingly, by placing reliance on the decision rendered by Hon’ble Supreme Court in the case of CIT vs. National Thermal Power Corporation (229 ITR 383) and Jute Corporation of India Ltd vs. CIT (187 ITR 688), the assessee prays for admission of the above said additional grounds.
We heard Ld D.R and perused the record. We notice that the assessee has raised a legal issue in first additional ground (numbered as ground no.4). In the second additional ground (numbered as ground no.5), the assessee seeks to claim set off of brought forward losses as per the provisions of the Act. Admittedly, the facts relating to both these issues are available on record. Accordingly, we admit both the additional grounds urged by the assessee.
We shall first take up the original grounds of appeal raised by the assessee. The AO noticed that the assessee has claimed Foreign Tax Credit of Rs.24,76,283/- u/s 90 of the Act. The AO noticed that the assessee’s father had sold certain agricultural lands held by him Malaysia and has paid income tax in Malaysia. The assessee, in his return of income, has offered the capital gains arising on sale of agricultural lands and accordingly claimed credit for taxes paid in Palaniappan Sockalingam, Chikmagalur
Page 3 of 4 Malaysia. It was done so on the reasoning that entire sale proceeds were gifted to the assessee by his father. However, since the income tax was paid in Malaysia by father of the assessee and not by the assessee, the AO rejected the claim put forth by the assessee for foreign tax credit. It is also pertinent to note that the AO has assessed the capital gain arising on sale of agricultural lands held by father of the assessee in Malaysia on “protective basis” in the hands of the assessee. The Ld CIT(A) also confirmed the rejection of claim for foreign tax credit.
We heard the parties on this issue and perused the record. We notice that the Ld CIT(A) has rejected the claim for foreign tax credit with the following observations:- 4.2 In respect of Capital Gains on Sale of Agriculture Land in Malasia the appellant has submitted that his father sold an agricultural land owned by him in Malasia after duly remitting the capital gains taxes to Malaysian Government. The post-tax sale proceeds was gifted to the assessee which is exempt under the Act. As the assessee’s father failed to file the return of income for AY 2015-16, the capital gains on sale of the agricultural land in Malaysia is included in Assessee’s return of income on a protective basis. The Assessee has claimed relief u/s 90 against the capital gain tax paid by his father in Malaysia. The officer has demanded Rs.45,76,024/- tax on protective basis along with interest on Long Term Capital Gains as the claim u/s 90 is withheld pending for verification in the hands of Sri Palaniappa Chettiar. During the appellate proceedings the appellant though has brought the proof for filing the returns of income in Malaysia in the hands of the father, the credit for payment of taxes in the hands of father cannot be treated as pertains to the appellant’s and therefore cannot be given credit of the same. Further the appellant himself declared the capital gains and claiming the credit of taxes paid in Malaysia by his father is neither tenable nor acceptable. Therefore, this ground is not allowed.”
We notice that the Ld CIT(A) has given proper reasoning for rejecting the claim of the assessee. Before us, the assessee could not controvert the decision rendered by Ld CIT(A). Accordingly, we are of the view that the Ld CIT(A) was legally justified in rejecting the Palaniappan Sockalingam, Chikmagalur
Page 4 of 4 claim for foreign tax credit put forth by the assessee. Accordingly, we confirm the order passed by Ld CIT(A) on this issue.
We shall now take up the additional grounds urged by the assessee. We have noticed earlier that these grounds are being taken up for the first time before us by the assessee. Accordingly, the bench felt that both these additional grounds require examination at the end of the AO. Both the parties agreed with the said view. Accordingly, we restore both the additional grounds urged by the assessee to the file of AO for examining them in accordance with law.
In the result, the appeal of the assessee is treated as partly allowed for statistical purposes. Order pronounced in the open court on 28th Dec, 2020