TDS deduction not applicable on purchase of raw material from non-resident Indian


TDS deduction not applicable on purchase of raw material from non-resident Indian

IN THE INCOME TAX APPELLATE TRIBUNAL

The Relevant Text of the Order as follows :

“14. In the year under consideration, the Ld. CIT(DR)repeated the arguments made before the Tribunal in assessment year 2009-10 and also contested that non-discrimination clause of article 24(3) of the DTAA between India and Japan is not applicable over the assessee and there was no discrimination qua the payer. However, we find that as far as the payment to Honda motor Japan is concerned, the issue in dispute is squarely covered by the decision of the Tribunal in assessment year2009- 10, wherein the Tribunal has followed the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Herbalife (supra).

TDS deduction not applicable on purchase of raw material from non-resident Indian
TDS deduction not applicable on purchase of raw material from non-resident Indian

We note that Hon’ble High Court in the case of Herbalife (supra) has also considered the amendment in provisions of section 40(a)(i) of the Act by way of insertion of sub-clause(ia) w.e.f. 01/04/2005. Accordingly, respectfully following the decision of the Hon’ble Delhi High Court and the order of Tribunal (supra), we delete the disallowance in respect of payment to Honda motor Japan.

15. Regarding payment to Honda Asia Thailand in the year under consideration, the assessee contended that no PE has been held by the DRP in the case of non-resident company in assessment year 2010-11 and this fact was not controverted by the Ld. CIT-(DR), thus, following the decision of the Tribunal in assessment year 2009-10, we hold no disallowance could be made under section 40(a)(i) of the Act for payment made to Honda Asia Thailand without deduction of tax at source.”

Final order:

14. In view of what has been discussed above and following the order passed by the coordinate Bench of the Tribunal in assessee’s own case (supra), we are of the considered view that addition made/sustained by the AO/CIT(A) of Rs.13,09,82,982/- u/s 40(a)(i) of the Act for not deducting the tax at source of payments made for purchase of raw material, components, etc. from non-resident Indian is not sustainable in the eyes of law, hence ordered to be deleted. Consequently, Grounds No.3 & 8 are determined in favour of the assessee.

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Tags:  JudgementAppellant TribunalIncome Tax

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