A quandary of claim of foreign tax credit

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The tax treaties entered between India and other countries aims to avoid double taxation of income in the hands of a person (taxable in multiple countries) by providing him with an option to claim credit of the tax paid in a foreign country (FTC) against his tax liability in India. Rule 128 of the IT Rules provides that FTC to be allowed in India would be equivalent to the lower of the tax payable on a foreign income in India and in that foreign country.Now, taking benefit from the language of the articles pertaining to FTC in some of the tax treaties, taxpayers have contended that the entire tax paid in the foreign country should be allowed as FTC in India without restricting it to income-tax payable in India. This view has been upheld by the Hon'ble Karnataka High Court in the case of Wipro Ltd. Vs DCIT: [2016] 382 ITR 179 (Kar) while interpreting India -USA DTAA. However, many courts have taken a divergent view.

This podcast discusses and understand the dispute on this issue and analyse the divergent views taken by various courts with a hope that a much-needed conclusion is provided by the Hon’ble Supreme Court.
Audio Source: https://www.lakshmisri.com/insights/articles/a-quandary-of-claim-of-foreign-tax-credit/
Authors: Sanjhi Agarwal Snehal Shukla