The Mumbai Income Tax Appellate Tribunal issued its decision on 4 March 2021 in a case concerning whether a refund may be claimed in respect of foreign tax credits in a loss-making year.

The case involved the Bank of India, which in the year concerned paid foreign tax amounting to approximately INR 1.8 billion in foreign taxes on income earned from its foreign branches in several treaty and non-treaty jurisdictions. Further, the Bank suffered a loss for the year exceeding INR 1.9 billion. When the bank sought to claim a credit for the foreign tax paid as a refund, the claim was denied by the assessing officer, who found that since the Bank did not have any Indian tax liability in respect of the profits earned by the Bank abroad, due to the loss, the Bank was not entitled to any credit/refund for the taxes paid abroad. The Bank challenged the assessing officer's position, claiming that taxes paid to overseas tax jurisdictions, where the related profits are earned, should be given due credit in the computation of a refund and, accordingly, the income tax paid by the Bank to foreign tax jurisdictions should be refunded by the Indian tax authorities.

In its decision, the Tribunal found that the assessing officer was correct to deny the Bank's claim for a refund for the foreign tax paid given that the foreign income was not taxable in India, due to the loss. However, the Tribunal also found that where no credit/refund is granted, the foreign tax paid should be allowed as a deduction in the computation of the business income of the Bank.