The Ahmedabad Bench of the Income-tax Tribunal (the Tribunal) in the case of Elitecore Technologies Private Limited, held that the Foreign Tax Credit (FTC) is eligible on ‘income’ and not on ‘gross receipts’. However, based on unusual facts of the instant case, the Tribunal allowed the FTC to the taxpayer on the basis of ‘gross receipts’.
On 27 June 2016, the Central Board of Direct Taxes with the Notification No. 54/2016, introduced FTC rules which will come into effect from 1 April 2017. The rules provide clarity on various aspects of claiming FTC. However, the issue with respect to computation of FTC whether on the basis of ‘gross receipts’ or ‘income’ has not been dealt by such rules.