2010 (9) TMI 7 - SC - Income Tax

Withholding Tax - TDS u/s 195 - Incidence - Whether merely on account of such remittance to the non-resident abroad by an Indian company per se, could it be said that income chargeable to tax under the Income Tax Act, 1961 arises in India? - Held that: - Section 195(2) is based on the "principle of proportionality". The said sub-Section gets attracted only in cases where the payment made is a composite payment in which a certain proportion of payment has an element of "income" chargeable to tax in India - the observations of this Court in Transmission Corporation case (2008 -TMI - 5757 - SUPREME Court) has been completely, with respect, misunderstood by the Karnataka High Court - This interpretation of the High Court completely loses sight of the plain words of Section 195(1) which in clear terms lays down that tax at source is deductible only from "sums chargeable" under the provisions of the I.T. Act, i.e., chargeable under Sections 4, 5 and 9 of the I.T. Act. - Matter remitted back to HC to decided the nature of payment made to non resident.