Case Law Details
Facts:- The taxpayer, an Indian company gets its sale bills discounted from its Singapore associate companies. Singapore companies charge discounting charges for undertaking these transactions.
Issues before Tribunal:- Whether the discounting charges are to be disallowed under section 40(a)(ia) since they are in the nature of „interest? and tax is not withheld by the Indian taxpayer?
Contentions of the revenue:- Discounting charges are covered by the definition of interest under section 2(28A) of the Income Tax Act (ITA). In absence of withholding of tax by the Indian payer, the said payments are not allowable as a deductible expenditure under the ITA.
Contentions of the taxpayer:- Discounting charges are not in the nature of interest under section 2(28A) of ITA or under the India-Singapore tax treaty. Hence, no tax is deductible in India in the absence of Singapore Company?s permanent establishment (PE) in India.
Observations and ruling of the Tribunal
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