The assessee-company claimed deduction of state taxes paid overseas of Rs. 13,22,52,218/- in the return of income. The Assessing Officer held that the payments were not liable to be allowed as deduction either u/s 37(1) or section 40(a)(ii) of the Act. The Tribunal held that Assessee was entitled to deduction for foreign taxes paid on income accrued or arisen in India in computing its income, to the extent that such tax was not entitled to the benefit of section 91 of the Act. The Tribunal directed the AO to verify whether the State taxes paid by the assessee overseas are eligible for any relief u/s 90 of the Act and if it is not found to be so, assessee’s claim of deduction should be allowed. However for interest / penalty for delay in payment of federal or state taxes overseas, the Tribunal observed that assessee had not filed the details with supporting documents on the penal interest and hence it was not possible to decipher whether the penal interest was compensatory in nature or not. Hence the Tribunal restored the issue to the AO for deciding it afresh and directed the assessee to file the documents/evidence before the AO .(IT(TP)ANos. 3262 & 3389/MUM/2017; dt.. 11-11-2020) (AY. 07-08)