Tax Tribunal allows credit for tax accrued but not yet paid in Brazil under Article 23 of India - Brazil DTAA

18 February 2015
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Even though DTAA refers to the tax paid in other State, it did not define the word 'tax paid'. Therefore, reliance is to be taken from the Indian Income Tax Act. Since the term 'paid' includes incurred according to the method of accounting, and since assessee had offered income on the basis of accrual, even though not fully received, word 'incurred' includes the amount 'liability to pay' and there was no dispute that this amount was subsequently discharged.

As per Article 11 of the DTAA, the tax so charged shall not exceed 15% of the gross amount of the interest and accordingly, assessee provided for the tax at 15%. Since the facts are not in dispute and as the assessee has ultimately paid the entire amount of tax on the income so offered, the Assessing Officer was directed to allow the amount as claimed.