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2019 (12) TMI 459 - HC - Income TaxAddition u/s 40(a) - payment made to a party residing outside India towards interest etc - HELD THAT:- In the present case, the assessee had the specific exemption from the Ministry of Finance and therefore, was entitled not to deduct any tax at source from the interest payment made by it to M/s. London Forfaiting Asia Ltd., from which assessee took the Foreign Currency Loan in question and therefore, Section 40(a) of the Act could not attract to the present case at all. Even though the foreign currency loan in question was utilised by the assessee to repay the loan of one M/s.Raghava Enterprises P. Limited, which was admittedly taken from M/s. Raghava Enterprises Limited towards its working capital requirement, the purpose of Section 10(15)(f) of the Act, for the industrial development stood satisfied in the present case. The words in the said provision quoted above are not “for industrial development”, but the words “having regard to the need for industrial development in India”, which are wider in nature. These words employed in Section 10(15)(f) are wide enough to cover within its ambit and scope even the indirect utilisation of the funds for industrial development in India. Therefore, even if the loan taken as working capital loan from M/s. Raghava Enterprises Limited earlier and employed by the assessee for such industrial development and the foreign currency loan in question was utilised to repay the loan to M/s. Raghava Enterprises Private Limited, the exemption given by the Ministry of Finance in favour of the Assessee cannot be said to have been lost by such facts. It is not the case of the Revenue before us, that the exemption given to the assessee vide Letter dated 23.09.1997 stood revoked or withdrawn on any such contingency at any point of time. Assessee was entitled to exemption and was under no obligation to deduct any tax at source on such interest payment made on Foreign Currency Loan to M/s. London Forfaiting Asia Ltd., Therefore, the additions with reference to Section 40(a) made in the name of the Assessee, were rightly deleted by the two appellate authorities in the present case.
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