2000 (4) TMI 29 - HC - Income Tax

TDS on foreign technicians' India travel and local expenses u/s195-no withholding required; appeal dismissed

The dominant issue was whether the payer was obliged under s.195 to deduct TDS on amounts spent in India for foreign technicians' air tickets and local ... Deduction of tax at source on all payments irrespective of the fact whether they are remitted to the foreign company or were spent on the foreign technicians of that company in India - No objection certificate for remitting certain amounts to the foreign company - nature of a constructive receipt - liable to tax under section 9(1)(vii) read with section 115A and section 44D - whether a substantial question of law arises in this case ? - HELD THAT:- A specific application was made by the assessee before the Assessing Officer for determination of the sum chargeable to tax. In this case, we are not concerned with the fees remitted as Mr. Vyas fairly stated that the said amount would be taxable at source. In this matter, we are only concerned with the expenses incurred by the assessee for purchase of tickets from Air India and for local expenses. For all the earlier years, the assessee has succeeded before the Tribunal. Moreover, the said provision under section 195 is only for tentative deduction of income-tax subject to regular assessment and the rights of the parties are not in any manner adversely affected. Even in the earlier years, in the present matter, the Tribunal has clearly stated that its decision under section 195(2) should not be treated as a conclusion in the determination of income in the case of a foreign company. Hence, no substantial question of law arises. Appeal is accordingly dismissed. Issues involved: The judgment deals with the determination of whether a substantial question of law arises in a case where the Assessing Officer directed the assessee to deduct tax on amounts spent towards air-fare for foreign technicians and other local expenses before issuing a no objection certificate for remitting certain amounts to a foreign company.Summary:The Assessing Officer directed the assessee to deduct tax on expenses incurred for foreign technicians, considering them as part of fees payable to the foreign company u/s 9(1)(vii) read with section 115A and section 44D of the Income-tax Act, 1961. The Tribunal, based on earlier decisions, held that the technicians did not derive personal benefit from the expenses incurred by the assessee. The Department appealed under section 260A of the Income-tax Act, contending that tax should be deducted on the gross sum u/s 195, relying on a Supreme Court judgment. However, the High Court found that the Supreme Court judgment was not applicable to the present case as the assessee had filed an application before the Assessing Officer for determination of the sum chargeable to tax. The High Court emphasized that the scheme of tax deduction at source applies to gross sums, and in this case, the expenses incurred were not in the nature of fees remitted. The Tribunal's decision under section 195(2) was clarified not to be a conclusion in determining income for a foreign company. Therefore, the High Court dismissed the appeal, stating that no substantial question of law arises in the matter.