Foreign income-tax is deductible u/s 37(1). Bar in s. 40(a)(ii) does not apply to foreign taxes

DCIT vs. Mastek Limited (ITAT Ahmedabad)

The assessee paid Rs.42.57 lakhs in Belgium as income-tax and claimed that as deduction u/s 37(1). The AO rejected the claim by relying on s, 40(a)(ii) which provides that any sum paid on account of tax levied on profits or gains of business shall not be allowable as a deduction, though the CIT (A) allowed the claim on the ground that the bar in s. 40(a)(ii) did not apply to foreign taxes. On appeal by the department, HELD dismissing the appeal: