TMI Blog1988 (6) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... facts relevant to the question are that the assessee-company, Barium Chemicals Limited, Ramavaram, entered into an agreement with foreign company, viz., Chemical and Technical Service Limited, on July 9, 1967, whereunder, the assessee-company undertook to remit certain amounts to the foreign company from time to time. During the previous year relevant to the assessment year 1968-69, the assessee-company remitted certain amounts to the foreign company. No tax was deducted at source by the assessee-company as required under section 195 of the Income-tax Act. For that reason, the Income-tax Officer added the tax component and worked out the total taxable income at a particular figure. On appeal, the Appellate Assistant Commissioner determined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revocable confirmed letter of credit on Barclays Bank limited (Foreign Exchange Branch), London, for 15,950.00 pounds OD payable as follows With order ... ... pounds 3,000.00 OD. Three monthly payments of 3,000.00 pounds. OD payable four months after signing of the contract without any deductions for taxes or otherwise." A reading of the above clause shows that the assessee undertook to remit to the foreign company certain amounts "without any deductions for -taxes or otherwise". This contract is clearly in the teeth of section 195 of the Income-tax Act, which obligates every person paying any sum, chargeable under the provisions of the Act to a non-resident (foreign company) to deduct the tax on such amount at the prevailing rates. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "D. All payments to be made hereunder shall be made in the City of Tokyo, Japan, in any currency acceptable to the Japanese Government without deductions for taxes or other charges assessed in India, which shall be assumed by REMCO. (REMCO is the Indian company)." The Mysore High Court held that under the aforesaid clause, the assessee has undertaken the liability to pay the tax due on the income earned by the foreign company in India and the tax component should be added and the total income should be arrived at by grossing it up. Recently, a Bench of this court also had to deal with a similar clause in CIT v. Superintending Engineer [1985] 152 ITR 753. There, there was an agreement between the Andhra Pradesh State Electricity Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned by the foreign company to it. more reasonable way of understanding the clause would be to hold that the assessee-company undertook to discharge the tax obligation attaching to the income earned by the foreign company by itself. The mere absence of the words "which shall be assumed by REMCO" occurring in the contract considered in Tokyo Shibaura Electric Co. Ltd. v. CIT [1964] 52 ITR 283 (Mys), or the absence of the words like those occurring in clause 13 of the-contract considered in CIT v. Superintending Engineer [1985] 152 ITR 753 (AP), should not matter. When the assessee agreed to remit particular amount without deducting taxes, it must be understood that it agreed to bear and pay the tax component. In such a case, the proper cours ..... X X X X Extracts X X X X X X X X Extracts X X X X
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