High Court Of Bombay
CIT vs. K.E.C. International Ltd.
Asst. Year 1984-85
S.H. Kapadia & R.M.S. Khandeparkar, JJ.
IT Appeal No. 289 of 2000
19th June, 2000
R.V. Desai with J.P. Deodhar, for the Appellant : P.J. Pardiwalla i/b Shaunak Satpute & Co., for the Respondent
BY THE COURT :
The scope of s. 40(a)(ii) of the IT Act, 1961, is the point in issue in this appeal.
2. The facts giving rise to this appeal, briefly, are as follows : For the asst. yr. 1984-85, the assessee claimed deduction in respect of business tax which they paid abroad in Thailand. This was allowed by the AO, on the ground that, in Thailand, there were two types of taxes, namely, corporate tax and business tax. As regards the corporate tax, the AO came to the conclusion that it stood covered under s. 40(a)(ii). The payment of corporate tax is not in issue before us. The only point which arises for consideration in the present matter is : whether the tax paid on business by the assessee in Thailand was not entitled to deduction in view of s. 40 (a)(ii) of the IT Act ? The Tribunal has upheld the order of the AO. Hence, this appeal has been filed by the Department.
3. Learned counsel for the Department relied upon s. 40(a)(ii) of the IT Act. He contended that the taxes paid abroad by the assessee cannot be deducted while computing the income of the assessee in India. We do not find any merit in the said contention. The facts of this case indicate that, in Thailand, there are two types of taxes, namely, business tax and corporate tax. In Thailand, corporate tax is the tax on income. Hence, the AO came to the conclusion that s. 40(a)(ii) squarely applied to corporate tax. The assessee has not challenged the finding of the AO to that extent. Hence, we are not required to go into the question of applicability of s. 40(a)(ii) in regard to corporate tax paid by the assessee in Thailand. However, as stated hereina bove, the Department has contended that s. 40(a)(ii) will also apply to business tax paid by the assessee in Thailand. On the facts, the AO has recorded that in Thailand business tax is not on income. It is on turnover. Under the above circumstances, s. 40(a)(ii) has no application to business tax paid by the assessee in Thailand. Under the above circumstances, the AO and the Tribunal were right in coming to the above conclusion. Under the above circumstances, the assessee was entitled to claim deduction in respect of business tax paid by it in Thailand. Accordingly, the appeal is dismissed. No order as to costs.
[Citation : 256 ITR 354]