28 Apr 2026
Trilegal successfully represented Canon India in a foreign tax credit matter before the ITAT
23 Dec 2025
23 Dec 2025
Matter Overview: Trilegal successfully represented Canon India Private Limited before the Income Tax Appellate Tribunal, Delhi on the contentious issue of whether an Indian entity is entitled to full credit of taxes withheld in a foreign jurisdiction.
ITAT, Delhi examined whether an Indian group entity is entitled to full credit of taxes withheld in a foreign jurisdiction under section 90 of the Income-tax Act, 1961 read with Article 23 of the India–Japan DTAA, even where the Indian entity may not be subject to tax in India on account of deduction available under section 10A of the Act. The assessee placed reliance on the judgment of the Karnataka High Court in Wipro Ltd. v. DCIT, as subsequently approved by the Delhi High Court in HCL Comnet Systems & Services Ltd. The Revenue sought to distinguish the ruling in Wipro by relying on the decision of the ITAT, Mumbai in Bank of India, contending that foreign tax credit must be restricted to the extent of tax paid in India, and that the Indian exchequer cannot be compelled to refund taxes paid to a foreign jurisdiction.
The ITAT rejected the Revenue’s contention, observing that the Mumbai Bench decision in Bank of India was dealing with a different issue, namely the binding nature of a non-jurisdictional High Court judgment. Once the Delhi High Court had expressly approved the Karnataka High Court’s ruling in Wipro, there was no justification to take a contrary view. Accordingly, the ITAT held that the assessee was entitled to full credit of taxes paid in the foreign jurisdiction, and such credit could not be denied or restricted merely because the Indian tax liability was nil due to business losses or deduction under section 10A of the Act.
Matter Significance: The decision is significant as the ITAT, Delhi, while distinguishing the Mumbai Bench ruling in Bank of India and following the judgments of the Karnataka and Delhi High Court, has effectively affirmed the settled treaty principle that entitlement to foreign tax credit hinges on the assessee being “liable to tax” in the relevant jurisdiction, rather than on the assessee being actually “subject to tax” in a particular year. Further, the ITAT has clarified that full foreign tax credit cannot be denied solely because an Indian entity does not have no tax liability on account of losses or statutory deductions. The ruling therefore brings clarity and certainty to the application of treaty provisions aimed at eliminating economic double taxation, even in those cases where an assessee is not subject to any tax.
The Trilegal Tax Team advising on the matter was led by Partner: Himanshu Sinha; and supported by Counsel: Prashant Meharchandani; and Associate: Jainender Singh Kataria.
About Trilegal
Trilegal is a leading full-service law firm in India with over 25 years of experience, trusted for its in-depth expertise and client-centric approach. The firm advises a diverse set of clients, including Fortune 500 companies, global investment funds, major Indian conglomerates, domestic and international banks, technology and media giants, family offices, and high-net-worth individuals. With 150 partners operating under a distinctive lockstep model, Trilegal is the largest equity partnership in the country. The firm retains over 1,200 professionals across Mumbai, Delhi, Bengaluru, and Gurugram offices.
Trilegal has consistently been recognised among India’s top-tier firms in leading legal directories such as Chambers & Partners (Asia Pacific and Global), Legal 500 Asia Pacific, and Benchmark Litigation. It has also earned several prestigious accolades, including being named Best Overall Law Firm by India Business Law Journal (IBLJ) 2025, Innovative Lawyers in Disputes & Crisis Management by the Financial Times (FT) Innovative Lawyers Asia-Pacific Awards in 2025, M&A Firm of the Year by IFLR Asia-Pacific in 2024, Law Firm of the Year by Deal Volume at the VCCircle Awards in 2024.
For more information, please get in touch with Prakruti Jani | Mob: +91-9867868976 | BD@trilegal.com.
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