Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2018 (9) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (9) TMI 81 - HC - Income TaxPrinciple of grossing up u/s 195A - TDS u/s 195 - tax deduction on the amount payable to University of Warwick, UK - Whether the grossing up has to be done to arrive at the tax to be deducted at source? - interest under Section 201(1A) levied - Held that:- Section 195A provision provides for the manner of grossing up of income for computing the tax deductible at source in a case, where the tax is to be borne by the payer. This Section provides for grossing up of the tax only if it forms part of the income. As pointed out in Tata Ceramics [2011 (7) TMI 644 - KERALA HIGH COURT]if the tax is exempted under Section 10(6A), it will not form part of the total income and there would be no grossing up of such tax for the purpose of tax deduction at source. Section 2(24) of the Act, defines income and it is an inclusive definition and includes such net of tax payments also [Section 2(24)(iva)]. Thus, in the absence of the definition of income and definition of gross amount under the treaty, the assessee has to necessarily compute the income in terms of Section 195A of the Act. Admittedly, in the instant case, there is no exemption granted under Section 10(6A) of the Act for the assessee to contend that the said payment does not form part of total income. In the light of the above legal and factual position, for the purpose of deduction of tax at source on the payment made by the assessee to the University of Warwick, the income should be computed in terms of the provisions of the Act and in so doing, it shall be increased by taking into consideration the amount of tax liability undertaken to be borne by the assessee. In other words, the obligation to pay the tax is on the University of Warwick and since the assessee in terms of the agreement agreed to pay the taxes, the same has to be necessarily added to the income of the University of Warwick and therefore, the principle of grossing up has to be applied. No hesitation to hold that the Assessing Officer, the CIT(A), and the Tribunal rightly held that the principles of grossing up would apply to the assessee's case. - Decided against the assessee
|