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2016 (4) TMI 592 - HC - Income TaxValidity of Sections 44AC and 206C - Held that:- The minor premise of the ratio decidendi was that a distinction had to be made in respect of assessees covered by Section 44AC of the Act between those who would be able to justify the deductions claimed and others who may not stay back for the same or have their books in order for such purpose. It is the same rule that needs to be applied to Section 44D(b) of the Act in similar circumstances as the rule was applied to Section 44BBA thereof in the case of Royal Jordanian Airlines [2015 (11) TMI 1454 - DELHI HIGH COURT ]. Nothing regarding the possible availability of the option to an assessee covered by Section 44D(b) of the Act to claim permissible deductions, will affect the obligation of the resident assessee while making the relevant payment to a foreign company, whether under Section 195 of the Act or otherwise. The resident assessee making a payment in respect of a matter covered by Section 44D(b) of the Act to a foreign company will be obliged to withhold the tax on presumptive basis and deposit the same with the department. However, it will be open to the concerned foreign company to subject itself to assessment by claiming the permissible deductions, notwithstanding Section 44D(b) of the Act, whereupon the burden, as always, will be on the foreign company to establish the permissibility of the deductions that it claims. The option to claim deductions cannot be denied to a foreign company covered by Section 44D(b) of the Act; but as to whether it can establish the deductions that it claims, is an entirely different matter. WP is disposed of by reading down Section 44D(b) of the Act and by holding that notwithstanding the machinery of presumptive tax being provided thereunder, a foreign company would be entitled to claim deductions under the applicable provisions of the Act upon establishing its entitlement in such regard on the basis of the material that it may produce. Usually, such exercise would imply a claim for refund as the tax on presumptive basis would already have been deducted at the time of remittance by the resident assessee and deposited with the department.
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