01 January 0001

Direct Tax Amicus: November 2017

by Gayatri Sridharan


Section 40(a)(ii) and taxes paid abroad - A discussion

RFinance Act 2006 inserted Explanation 1 to Section 40(a)(ii) of the Income Tax Act clarifying that any sum payable outside India and eligible for relief of tax under Section 90 or deduction from the income tax payable under section 91 is not allowable as a deduction under section 40 of the Income Tax Act. If there is no Treaty between India and the contracting country then the provisions of Section 91 are attracted and benefit is accordingly given. The problem arises when there exists a Treaty between India and the contracting country but the particular tax is not covered. The Ahmedabad Bench of the Income Tax Appellate Tribunal in a recent judgement found an innovative solution to the vexed question of relief in respect of taxes not covered by a Treaty and not eligible for deduction under Section 37 by virtue of the explanation to Section 40(a)(ii) of the Income Tax Act 1961...



CBDT clarifies that provisions on indirect transfer will not apply on redemption of certain shares or interest outside India.


Ratio decidendi

  • Refund ‘due’ under Section 244A includes discretionary waiver of interest – Supreme Court
  • ICDS as notified by the Executive (Central Government) cannot override binding judicial precedents or provisions of the Act – Delhi High Court
  • Compensation received for breach of right of first refusal for starting business is a capital receipt - Bombay High Court
  • Consideration for grant of sub-license without extinguishment of licensor’s right is taxable as business income – ITAT, Bengaluru
  • Transfer of income to a non-resident is an essential condition to invoke Section 93 – ITAT, Mumbai


November, 2017/Issue-39 November, 2017/Issue-39

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