TaxTMI 
TaxTMI 
2008 (12) TMI 268
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.... that as the loan amount was not utilized for industrial development in India, the interest does not qualify for exemption under s. 10(15)(iv)(f). Hence, the AO concluded that assessee ought to have deducted tax under s. 195 and paid the same to the Government of India account. As the assessee failed to deduct tax on this amount and pay the same to the Government of India account, the amount was required to be disallowed under s. 40(a). 3. The assessee submitted before the AO that as regards foreign currency loan from M/s Doshin Hongkong Ltd., necessary approval was obtained from Government of India, Ministry of Finance (Department of Economic Affairs) as per which interest payment to be made to M/s Doshin Hongkong Ltd. is exempted from withholding tax under s. 10(15)(iv)(f). A copy of the said approval letter was also enclosed. The said approval letter was amended to provide that the purpose of the loan would be for the repayment of existing loans from the financial institutions. In the circumstances, since the assessee was specifically exempted from payment of withholding tax, the question of disallowance of interest amounting to Rs. 1,06,96,080 does not arise. 4. However, ....
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....ion, I find that the payment of interest is covered under s. 10(15)(iv)(f), In view of this finding, the addition made by the learned AO is hereby deleted." Accordingly, learned CIT(A) on merits decided the issue in favour of the assessee. Against this order, Revenue has filed appeals against the CIT(A)'s decision on merits while assessee in the cross-objections is aggrieved about CIT(A)'s order holding the reopening valid. 7. We have heard both the counsel and perused the relevant records. The learned counsel of the assessee submitted that the reopening in this case was done after four years and hence he contended that the proviso to s. 147 will come into playas there was no failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment. The learned counsel of the assessee further placed reliance upon decision of the Hon'ble jurisdictional High Court in the case of Fenner (India) Ltd. vs. Dy. CIT (1999) 155 CTR (Mad) 165 : (2000) 241 ITR 672 (Mad). The learned Departmental Representative, on the other hand placed reliance upon the order of the learned CIT(A). 8. We have carefully considered the issue. As per the admitted facts ....
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....thholding tax. Tax has to be recovered @ 15 per cent as per DTAA between India and Korea, for the accrued interest. The assessee has to obtain permission from RBI/GOI with regard to waiver of loan of the foreign company and also on tax implications on such waiver. In the light of the above, the learned CIT(A) erred in deleting the addition made by the AO, simply on the basis of letter dt. 6th May, 1997 furnished by the assessee for amending the purpose of loan from 'working capital requirements' to 'payment of existing loans from the financial institutions'." 11. The learned counsel of the assessee submitted that the ground being raised by the Revenue is not at all relevant as the matter submitted above pertained to subsequent assessment period. Moreover, these are not the basis for AO's addition. 12. We have carefully considered the issue. We find that AO had made the disallowance on the ground that assessee had not utilized the loan for working capital requirement and hence the exemption under s. 10(15)(iv)(f) will not be applicable. Hence, the assessee ought to have deducted tax under s. 195 and as the assessee failed to do so, the interest claimed was disallowed under ....
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....titutions. It is not disputed that the loan amount was not utilized for repayment of loans to financial institutions. 16. We also agree with the learned counsel of the assessee that the ground raised in the first para of the Revenue's appeals in this regard is not relevant for these impugned assessment years. Under the circumstances, when the language of the Act is clear and unambiguous, there is no need to bring any extraneous extrapolation. Under the circumstances, in our opinion, there is no infirmity in the order of the learned CIT(A) in this regard and hence we uphold the same. 17. In the assessee's cross-objection for asst. yr. 1999-2000, one more issue has been raised. It has been contended that AO be directed to delete the disallowance made in respect of royalty of Rs. 64,396. 18. On this issue, the AO noted that assessee has not deducted 15 per cent on gross amount of royalty and fees for technical services. The assessee had submitted that, as per the DTAA between India and Korea, deduction has to be made only when there is "payment of any kind to any person". Hence, it was contended that since in this case only provision was made, no deduction was required. Howev....