Panania Co Ltd is a company incorporated in Mauritius and has, during the income year 2019-2020, extended its business in the India. It has a factory in India, through which business was conducted and income derived. For the income year 2019-2020, Panania Co Ltd derived a total net income from business of Rs2,000,000. India had considered that the factory constituted a Permanent Establishment (PE) and that an amount of Rs300,000 was attributed to the PE. Assume that the tax rate in India is 18%. In addition to the DTA between Mauritius and India, it was also agreed that any amount of income attributed to a PE in India will not affect the total real amount of income derived by a company in Mauritius. Panania Co Ltd holds shares in Motrisik Ltd, a company resident in Mauritius and received Rs50,000 as dividends for income year 2019-2020. Panania Co. Ltd also holds shares in Shark Co. Ltd, a company incorporated in Australia. During income year 2019-2020, Shark Co. Ltd paid Rs50,000 as dividend to Panania Co. Ltd, net of withholding tax. The withholding tax rate applied by Australia was 5%. REQUIRED Calculate the tax liability of Panania Co. Ltd for the income year 2019-2020.

(b) What do you understand by the term tax sparring credit?