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Commissioner Of Income Tax, Delhi Versus Maruti Suzuki India Ltd

2017 (12) TMI 474 - DELHI HIGH COURT

TDS u/s 195 - Disallowing the payment under Section 40 (a)(i) for failure to deduct TDS - Held that:- Section 40 (a) (i) could not be invoked to disallow such payment as deduction on the ground that no TDS under Section 195 (1) was deducted from such payment. Further the CBDT Circular No. 23 dated 23rd July 1969 stated that A foreign agent of an Indian exporter operates in his own country and no part of his income arises in India. It acknowledges that such commission is remitted to the agent a .....

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try, no part of his income arises in India. Further it was held that merely because an entry is made in the books of accounts does not mean that the nonresident received any payment in India. Since no part of the income could be deemed to have accrued to the non-resident in India, there was no obligation to deduct TDS from the payment made to such non-resident. Consequently, the question of disallowing the payment under Section 40 (a) (i) of the Act for failure to deduct TDS did not arise. - Dec .....

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is an appeal by the Revenue against the impugned order dated 29th May 2009 passed by the Income Tax Appellate Tribunal ("ITAT") in ITA No.300/Del/2006 for the AY 2001-02. 2. This Court framed the following questions of law by its order dated 26th May 2010: 1. Whether the Tribunal is right in holding that ₹ 24,92,33,446/- on account of duty drawback had not accrued and become payable to the assessee and cannot be included in the Taxable income of the assessee for the Assessment Ye .....

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ed consumption of material and when payment partakes the character of penalty? 5. Whether learned ITAT/CIT(A) was justified in allowing claim of ₹ 36,09,047/- out of ₹ 75,19,975/- on account of depreciation on enhanced liability when the liability arises when assessee agrees to pay the duty? 6. Whether learned ITAT/CIT(A) was justified in allowing disallowance under Section 40 (a) (i) at ₹ 4,19,09,113/- in view of the decision of the case of Chemloor Drug Ltd. v. CIT : 70 TTJ 9 .....

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he Revenue. 6. In view of the decision of this Court today in ITA No.31 of 2005, Question 4 is answered in the affirmative, i.e. in favour of the Assessee and against the Revenue. 7. In view of the decision of this Court today in ITA No.250 of 2005, Question 5 is answered in the affirmative, i.e. favour of the Assessee and against the Revenue. 8. Question 6 concerns payments made by the Assessee to agents based and operating abroad and who earn no assessable income in India. The Assessee contend .....

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that where the non-resident agent operates outside the country, no part of his income arises in India. It is further contended that since the payment is usually remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India. 10. The Revenue, however, contends that no application was made by the assessee under Section 195 (2) of the Act for making deduction of TDS at nil rate or lower rate. Remittance of the amount to the agents abroad without such certifi .....

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ual determination that the non-resident agent who operates outside India has any income which arises in India. Without these foundational facts, the question of applying Section 195 (1) of the Act does not arise. 12. In CIT v. Model Exims Kanpur (supra), it was held that there was no obligation to deduct TDS under Section 195 of the Act from the commission paid to a non-resident recipient who was not liable to tax in India. In CIT v. Gujarat Reclaim & Rubber Products Ltd. (supra), the commis .....

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