Case Law Details
Section 195 of the Act clearly states that any person responsible for paying to a non resident any interest or any other sum chargeable under the provisions of this Act shall at the time of credit of such income will income tax thereon at the rate inforce at the time of payment or credit. Therefore, the first test to be applied for deduction of TDS is to see whether income in the hands of payee is taxable in India or not.
In the present case, the payments were reimbursement of expenses and was in no way income chargeable to tax in India in the hands of the payee and hence did not require any tax deduction at source and therefore addition made u/s 40a(ia) of the Act was not warranted. The facts of the case in Transmission Corporation of AP Ltd. v. CIT 239 ITR 587 (SC) do not match with the facts of present case because in the case of Transmission Corporation (supra), the assessee had made certain payments to non resident against the work executed by non resident in India and therefore in that case income had arisen to non resident in India whereas in the present case no such income has arisen to non resident in India.
INCOME TAX APPELLATE TRIBUNAL, DELHI
I.T.A. No.522/Del/2011
Assessment year: 2007-08
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