Order under Article 23 of India-Japan Double Taxation Avoidance Agreement

The Income Tax Appellate Tribunal has ruled in favour of Canon India Pvt Ltd, allowing their appeal regarding tax credit for income earned from software sales in Japan. The tribunal found that the Assessing Officer erred in not granting complete credit for taxes paid in Japan under Article 23 of the India-Japan Double Taxation Avoidance Agreement. This decision aims to prevent double taxation and encourage international trade.

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘D’ BENCH,
NEW DELHI [THROUGH VIDEO CONFERENCE]
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND
SHRI AMIT SHUKLA, JUDICIAL MEMBER
ITA No. 468/DEL/2021
[Assessment Year: 2004-05]

Canon India Pvt Ltd

7th Floor, Building No. 5

Tower B, DLF Cyber City

DLF Phase – III, Gurgaon
Haryana

vs

The A.C.I.T

National Faceless Assessment

Centre, New Delhi

Date of Hearing : 11.10.2021
Date of Pronouncement : 20.10.2021

Assessee by : Shri Himanshu Sinha, Adv
Shri Bhuwan Dhoopar, Adv

Revenue by : Shri Gangadhar Panda, CIT-DR
ORDER

That on the facts and circumstances of the case and in law, the Ld. AO has erred in not allowing complete credit of taxes paid by appellant in Japan on income from sale of software amounting to INR 3,96,12,848 under Article 23 of India-Japan Double Taxation Avoidance Agreement.

2. Briefly stated, the facts of the case are that the assessee filed its original return of income dated 30.10.2004 wherein deduction u/s 10A of the Income tax Act, 1961 [hereinafter referred to as 'The Act' for short] was claimed against income earned by STP Unit amounting to Rs. 3,17,99,733/-.

3. "Double Taxation Avoidance Agreements- extending the scope to include agreements for developing mutual trade and investment Under the existing section 90, the Central Government may enter into an agreement with the Government of any country outside India for granting of relief in respect of income on which have been paid both income-tax under the Income-tax Act and income tax in that country, or for the avoidance of double taxation of income under this Act and under the corresponding law in force in that country, etc. In order to encourage international trade and commerce, it is proposed to insert a new clause in sub-section (1) of Section 90 so as to provide that the Central Government may
also enter into an agreement with the Government of any country outside India, for granting relief in respect of income-tax chargeable under this Act or under the corresponding law in that country to promote mutual economic relations, trade and investment."

4. In the result the appeal of the assessee in ITA No. 468/DEL/2021 is allowed.
The order is pronounced in the open court on 20.10.2021.

Please find attached the enclosed file for the full judgement