Foreign Tax Credit Allow Against Minimum Alternative Tax

Ahmedabad Income Tax Appellate Tribunal : Revenue to examine FTC allow ability against MAT, cautions on MAT-credit double benefit – Suzlon Energy Limited v. ACIT.

Ahmedabad ITAT directs Revenue to consider assessee-company’s foreign tax credit (FTC) claim for AYs 2008-09 and 2009-10 on taxes withholding in China despite no such claim made through return of income, but remits matter back to CIT(A) for quantification; Relies on jurisdictional HC rulings in UTI Bank Limited and Mitesh Impex to hold that the powers of the appellate authorities are not fettered by Supreme Court decision in Goetze India, but rules that CIT(A) erred in not examining merits of claim and proceeding on the basis that assessing officer has not doubted correctness of the claim on merits while rejecting it relying of Goetze decision; ITAT rules that the tax credit is relevant only in respect of the assessment years in which related income is included in the taxable income, noting that part of FTC claimed in AY 2008-09 related to income taxable in AY 207-08, observes that "to this extent, learned CIT(A) does appear to be clearly in error, and the relief of Rs 1,05,43,697 granted on account of tax credit is quite questionable". 

Further, ITAT directs Revenue to examine whether FTC can be granted against assessee’s MAT liability while noting that the treaty does not distinguish between a normal tax liability and a MAT liability; However cautions about impact of subsequent MAT credit u/s 115JAA stating that  “In case an amount (FTC) is granted tax credit under the treaty and the corresponding tax payment in India, even though partially, is again granted credit in the subsequent year in the assessment of income, there could indeed be a double credit for the same payment of taxes.”