A bench headed by Chief Justice SH Kapadia sought reply from Essar on a petition filed by the income tax department contending that income arising in Oman and Qatar is to be included in the total income of Essar, which is a resident in India for the purpose of tax rate, subject to the credit for taxes paid on the income arising in foreign countries.
It said profits from the Oman and Qatar branches have to be included in the total income as the assessee being a resident of India has to be taxed on its entire income in India as per Section 5(1) of the Income Tax Act, 1961.
The profit attributable to a permanent establishment of resident assessee is to be included in the total income since DTAA between India and these nations provide for credit method of elimination of double taxation, the petition stated.
Subsequent to amendment made in Section 90A of the 1961 Act, the CBDT issued notification which clearly states that the income of a resident of India, which may be taxed in the other country, shall be included in the total income chargeable to tax in India. Besides, it is now the accepted position that the provisions of DTAA override the provisions of the Income Tax Act, it added.