The fact involved in the present case is that the assessee is a branch of Samsung Electronics Co Company Limited, Korea, engaged in the development, manufacture and export of software for use by its parent company, i.e., Samsung Electronics Co., Ltd., Korea. The assessee develops various kinds of software for telecommunication system for office appliances, for computer systems and for mobile devices etc.,. The software developed by the assessee is for in-house use by the parent company.
This article summarizes a recent ruling of the Karnataka High Court (HC) [ITA No. 2808 of 2005] in the case of Samsung Electronics and others (Taxpayers). The HC held that any payment resulting in any income in the hands of a non-resident would be subject to withholding tax under the Indian Tax Law (ITL). Unless an order is obtained from the Tax Authority for withholding tax at a lower rate or for not withholding tax, a taxpayer would need to withhold tax on the income at the applicable withholding tax rates, even if the income may not be taxable in the hands of the non-resident.
The main issue involved in these appeals is whether the loss shown by the assessee is assessable under the head income from business as claimed by the assessee company or under the head income from other sources as held by the authorities below.
We are of the considered opinion that the activity relating to one of the categories could not be subjected to service tax under other category. In other words, the activities relating to Freight forwarding cannot be thought under CHA. The appellants had clearly explained the nature of the charges collected such as Charge Collect fees, Break bulk fees, Profit share from margin Unallocated income, Currency adjustment factor, Air/sea Freight rebate, Commission/ Brokerage, Air freight incentive, Expenses reimbursement billing, etc.
The expenditure incurred by the assessee by way of payments to the retiring partners is only an application of its income, which is on capital account and not allowable as a deduction.
In all the appeals before us, the specific case of the assesses is that the BSE card acquired by them on or after 1/4/1998 is an intangible asset covered under the expression ‘licences’ or alternatively covered under the expression ‘any other business or commercial rights of similar nature’ enumerated in section 32(1)(ii) of the Act and therefore, depreciation is allowable on the BSE card acquired by them.
It is difficult to conceive that items like carpet etc., would fall in the category of items which are considered in the case of Madras Auto Service (supra). In particular, the assessee has not placed any material, either before the tax authorities or before us to show that the lump-sum payment in the form of renovation expenses has benefited the assessee in the form of reduction in the revenue expenditure over a period of years by virtue of low rentals or otherwise.
The assessee co-operative society did not conform to the stipulation and limitation of the types of activities in which a banking company is allowed to engage as per the Banking’ Regulation Act, 1949.
In our-view, the receipts do satisfy the conditions mentioned in section 80R that the services are rendered in his capacity as a teacher or research worker in such Institution, Association of Body. The amounts are not his professional receipts as he has no permission to practise in a foreign country.
The claim of exemption u/s 11 cannot be denied merely based on the flimsy grounds that the assessee serves alcohol to the members and their friends in the club. Serving alcohol is part and parcel of the activities of any club and it is an integral part of the activities of the club.
