India: Taxpayer’s refund claim allowed, even though made under statute allowing for foreign tax credits (High Court decision)
Provisions of section 155(14A) of the Income-tax Act, 1961 must be read purposively to prevent double taxation.
The Madras High Court held that a New Zealand company was entitled to a refund (along with applicable interest) for taxes it initially paid in India on its worldwide income under the bona fide belief that its place of effective management (POEM) was in India, even though it claimed the refund under section 155(14A) of the Income-tax Act, 1961, which allows a taxpayer to claim foreign tax credit for foreign taxes initially under dispute but later resolved, and does not specifically provide for a refund.
The court first found that the taxpayer did not meet the prescribed turnover threshold for application of the POEM provisions and thus was entitled to a refund of the taxes paid. The court then rejected the tax authority’s claim that the taxpayer was not entitled to a refund under section 155(14A) based on the strict reading of the section, concluding that the provisions of section 155(14A) must be read purposively to prevent double taxation.
The case is: Kern Enterprise Limited v. DCIT (W.P. No. 19206 of 2023)
Read a July 2026 report prepared by the KPMG member firm in India