2021 (7) TMI 1479 - HC - Income Tax

Assessee wins: Revenue's time-barred appeal dismissed; s.40(a)(i) challenge under s.195 rejected for reimbursement to foreign entity

The HC allowed the taxpayer's appeal, holding that earlier decisions in identical matters favored the assessee and that the revenue's appeal was ... TDS u/s 195 - disallowance made u/s.40(a)(i) for non-deduction of tax on payment made to abbey National Plc., UK. - reimbursement of salary costs and other expenditure HELD THAT:- Substantial questions of law have already been answered in favour of the assessee by judgment passed in ITA Nos.214/2014 [2020 (12) TMI 570 - KARNATAKA HIGH COURT] and 215/2014 [2020 (12) TMI 1418 - KARNATAKA HIGH COURT] - Also the appeal filed by the revenue is barred by limitation and no application for condonation of delay has been filed. Therefore, the appeal itself cannot be entertained. In support of aforesaid submission, reliance has been placed on ODEON [2017 (3) TMI 1266 - DELHI HIGH COURT]. Revenue was unable to point out as to why the judgment [supra] does not apply to the facts of this case. Appeal of assessee allowed. Appeal under Section 260-A of the Income Tax Act, 1961 for Assessment Year 2005-06 challenged the Tribunal's findings on two substantial questions of law framed as follows: 'a) Whether the Tribunal was correct in holding that the disallowance made u/s.40(a)(i) for non-deduction of tax on payment made to Abbey National Plc., UK., in not liable to TDS u/s.195 of the Act and consequently the said payments are not laible for disallowance u/s.40(a)(i) of the Act? b) Whether the Tribunal was correct in allowing relief to the assessee holding that the reimbursement of salary costs and other expenditure was without any profit element and hence cannot be regarded as income chargeable in the hands of Abbey National Plc., UK under Article 13 of the India-UK Treaty, without properly appreciating the nature and content of the transactions with reference to the provisions of section 195 and section 40(a)(i) of the Act?' Reliance was placed on a prior judgment dated 01.12.2020 in ITA Nos.214/2014 & 215/2014. The revenue failed to distinguish that precedent. The Court held the substantial questions of law 'answered against the revenue and in favour of the assessee.' The appeal was dismissed. The issue of limitation was kept open, and parties were granted liberty to agitate it in appropriate proceedings.