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2011 (9) TMI 536 - AT - Income TaxWithdrawal of exemption by Central Government - Utilization of ECB - Interest income being exempt in the hands of non-resident investors - Held That:- by imposing a condition by Dy. Director (ECB) during the progress of the scheme was like changing the rules of the game in mid-way and the change of the rule was in respect of a game already played to alter its outcome. A retrospective or ex post facto change in such a manner is an arbitrary approach having no legal sanctity. First of all we want to observe that if the bureaucracy or executive is acting in an unjustifiable manner then the only course left to a citizen is to approach the judiciary for legitimate redressal. This is what exactly had been done in this appeal by the appellant company. It was catastrophic to withdraw the exemption already granted u/s.10(15)(iv)(f). Due to the withdrawal of the exemption the impugned order u/s.195 (2), now under dispute was passed directing to deduct withholding tax @ 20%. To arrive at a logical conclusion first we hold that, considering the totality of the facts, circumstances, conditions of the scheme, evidences of utility of the funds and the legal matrix of the case, the withdrawal of exemption was unwarranted. Consequent there upon we also hold that the appellant company was not liable to deduct withholding tax @ 20% in respect of the interest payment of US $ 1,05,902 to M/s. Deutsche Bank - AG. With the result. - Decided in favor of assessee The Hon'ble Supreme Court in Radhasoami Satsang v. CIT (1991 -TMI - 5353 - SUPREME Court) has held that, "Strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year.
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