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2014 (9) TMI 312 - AT - Income TaxExpenses incurred by HO in Thailand for Indian Project Held that:- AO was of the view that the expenses are initial startup expenses and are in the capital field AO as well as the CIT(A) have not stated that the expenditure claimed have no nexus with the Project in India - As the photocopy of all the vouchers have been furnished before the bench in the form of a paper book, and as it has been brought to our notice the letter addressed by the assessee, wherein the required details were filed with the AO the matter is remitted back to the AO for verification Decided in favour of assessee. Disallowance u/s 40(a)(ia) Non-compliance u/s 195 Held that:- Italian Thai Development Co. Ltd. (ITDL) is a non resident company and that it has provided certain machinery on "hire" to the assessee company on chargeable basis - ILD has charged hire for the machinery provided to the assessee and raised bills on the assessee towards "Hire charges" - A perusal of the Clauses does not in any way support the arguments of the assessee that these payments were not, in substance, rental payments made by the assessee to ITDL - Just because certain obligations, terms & conditions etc. have been agreed to between the parties, it does not lead to a conclusion that there is no hirer and hiree relationship - The fact remains that the assessee bills ITDL for the total contract work done and ITDL also bills the assessee for hire charges payable. Method of settlements of accounts is of no consequence - even a credit entry attracts provisions of Sec.195 when services were not rendered in India, the amount shall not be taxable and consequently S.195 is not attracted and consequently the disallowance made u/s 40(a)(ia) is bad in law - Decided partly in favour of assessee.
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