Bombay High Court
Commissioner Of Income-Tax vs K.E.C. International Ltd. on 19 June, 2000
Equivalent citations: [2000]256ITR354(BOM)
Bench: S.H. Kapadia, R.M.S. Khandeparkar
JUDGMENT
1. The scope of Section 40(a)(ii) of the Income-tax Act, 1961, is the point in issue in this appeal.
2. The facts giving rise to this appeal, briefly, are as follows :
For the assessment year 1984-85, the assessee claimed deduction in respect of business tax which they paid abroad in Thailand. This was allowed by the Assessing Officer, on the ground that, in Thailand, there were two types of taxes, namely, corporate tax and business tax. As regards the corporate tax, the Assessing Officer came to the conclusion that it stood covered under Section 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 Section 40(a)(ii) of the Income-tax Act ? The Tribunal has upheld the order of the Assessing Officer. Hence, this appeal has been filed by the Department.
3. Learned counsel for the Department relied upon Section 40(a)(ii) of the Income-tax 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 Assessing Officer came to the conclusion that Section 40(a)(ii) squarely applied to corporate tax. The assessee has not challenged the finding of the Assessing Officer to that extent. Hence, we are not required to go into the question of applicability of Section 40(a)(ii) in regard to corporate tax paid by the assessee in Thailand. However, as stated hereinabove, the Department has contended that Section 40(a)(ii) will also apply to business tax paid by the assessee in Thailand. On the facts, the Assessing Officer has recorded that in Thailand business tax is not on income. It is on turnover. Under the above circumstances, Section 40(a)(ii) has no application to business tax paid by the assessee in Thailand. Under the above circumstances, the Assessing Officer 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.
4. Accordingly, the appeal is dismissed. No order as to costs.