Case Law Details
DCIT Vs Coffeeday Enterprises Ltd (ITAT Bangalore)
In terms of section 195, the liability to withhold taxes arrears at the time of payment/credit of any interest (or any other sum) which is chargeable under the provisions of the Act. The payment/credit was not made till 31.03.2010 and also in terms of the Agreement, interest was due on 30.04.2011, i.e., in F.Y 2011-12 relevant to A.Y.2012-13. No such interest expenditure was claimed by the assessee. After perusal of the financials of the assessee company for F.Y. 2010-11, we find that the total finance charges claimed were to the tune of Rs.16,05,86,054/- which comprise of interest and finance charges on term loans(Rs.15,99,576,468/-) and other bank charges (Rs.6,28,586/-). Thus, the assessee had not claimed interest expenditure pertaining to the transaction with M/s. Arduino Holdings Limited. Further, in view of the waiver of the interest and the benefit having accrued to the assessee company, the assessee voluntarily agreed to offer the benefit accrued (i.e. 7% of the amount of investment) which implied that the amount was not treated as chargeable to tax in the hands of the non-resident entity.
9.1 Section 195 specifies that taxes will have to be deducted either at the time of credit of such income in the account of the payee or at the time of payment thereof in cash or any other mode. In the case of the assessee there is no interest credited to the payee’s account and there was no payment made as per books of account. No expenditure was claimed towards interest payable. In the light of these facts, we find that the provisions of section 195 of the Act is not applicable. As per the terms of agreement, the interest for the F.Y. 2010-11 was required to be credited on 30.04.2011 and during this period, there was no interest required to be credited also. There was no expenditure accrued during the previous year and also claimed and hence, the provisions of section 195 of the Act has no application. The interest payable was eventually waived, therefore, the assessee had not paid any interest. Since no interest was paid or claimed as expenditure, the provisions of section 195 of the Act cannot be applied.
FULL TEXT OF THE ITAT JUDGEMENT
The appeal filed by the Revenue is directed against the order of the CIT(A) dated 12/04/2018. The assessee has filed Cross Objection in C.O. No.42/Bang/2019. The relevant assessment year is 2011-12.
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