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2018 (11) TMI 1109 - ITAT RAJKOTTDS u/s 195 - usance interest on delayed payment to its holding company - whether payment of usance interest is part of purchase cost as per the DTAA between India and Singapore - Held that:- It is undisputed fact that the Hon’ble Gujarat High Court in the case of Vijay Ship Breaking Corporation [2003 (3) TMI 91 - GUJARAT HIGH COURT] has decided the issue against the assessee as held The usance interest paid by the assessees was not any part of the purchase price of the ships and was interest within the meaning of the definition of the term "interest" under section 2(28A) of the Income-tax Act, 1961. The assessees who did not deduct tax at source under section 195(1) of the Income-tax Act, 1961, on the usance interest payable outside India and on which tax had not been paid, are not entitled to deduct the amounts of such usance interest in computing their income chargeable under the head "Profits and gains of business of profession". The Tribunal was, therefore, wrong in deleting the disallowance under section 40(a)(i) of the Act for failure on the part of the assessees to deduct tax at source, from usance interest paid to the non-residents, under section 195(1) of the Act. The assessees being responsible for paying to the non-residents usance interest which was chargeable under the provisions of the Income-tax Act, 1961, were liable to deduct income-tax thereon under section 195(1) thereof. The Tribunal was, therefore, wrong in holding that the usance interest partook of the character of purchase price and therefore, not liable to deduction at source under section 195(1) of the Act. Usance interest is "interest" within the meaning of the article concerning taxation of interest in the relevant Double Taxation Avoidance Agreements. The Tribunal was, therefore, wrong in holding that usance interest was not "interest" as envisaged in the Double Taxation Avoidance Agreements. - Decided in favour of revenue
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