TDS u/s 195 not deductible as no income of non-resident is chargeable to tax

PCIT Vs Minda Stoneridge Instruments LTD (Delhi High Court)

Delhi High Court held that since no income chargeable to tax arose in the hands of the non-resident, as per the provisions of the Act, there was no obligation to deduct tax at source under Section 195 of the Act. Accordingly, disallowance u/s 40(a)(i) unjustified.

Facts- The Assessing Officer (AO), via assessment order dated 25.02.2013, has disallowed the claim made by the petitioner under Section 35 of the Income Tax Act, 1961 [Act], as according to him, this was not part of the Return of Income [ROI] filed by the petitioner. The deduction claimed by the petitioner u/s. 35 of the Act, was Rs. 3,46,32,280/-. CIT(A) reversed the view of the AO and allowed the deduction under Section 35 of the Act. The view of CIT(A) was sustained by Tribunal.

Further, revenue has also contested that ITAT erred in law by upholding the deletion of disallowance of ₹1,35,03,868/- under Section 40(a)(i) of the Act by ignoring Explanation 2 to Section 9(1)(vii) read with Explanation to Section 9(2) and Section 5(2) of the Act.

Conclusion- Held that According to the provisions of section 35(l)(iv) the assessee is eligible for deduction of capital expenditure on research and development related to the business, carried on by the assessee if it satisfies the condition laid down in sub-section 2of section 35 of the Act. No argument is raised by revenue that assessee has not fulfilled those conditions. In the result we find no infirmity in the order of, the Id CIT(A) in granting deduction of Rs.34632282/- to the assessee on account of capital expenditure on research and development. In the result ground No. 1of the appeal is dismissed.

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