It was submitted by the assessee that the state taxes paid in USA and Canada do not come within the purview of s. 40(a)(ii) of the Act. According to the assessee, the term ‘tax’ as defined under s. 2(43) of the Act, would mean the tax chargeable under the IT Act, 1961. Further, it was submitted, in respect of state taxes paid, the assessee is not eligible for any relief either under ss. 90 or 91 of the Act read with the applicable Double Taxation Avoidance Agreements (DTAAs). Further, referring to the applicable DTAAs, it was submitted, the State and local taxes levied by local authorities like state, cities or counties are not covered under the tax treaties/conventions with USA and Canada. Thus, it was submitted, the deduction claimed by the assessee is not disallowable under s. 40(a)(ii) of the Act. The AO, however, did not find merit in the submissions of the assessee. He observed, the expression ‘tax’ under s. 40(a)(ii) of the Act would encompass all taxes levied on the profit or gains of the business or profession and is not limited to tax levied on total income computed under the provisions of Indian IT Act.