TaxTMI 
TaxTMI 
2011 (11) TMI 503
X X X X Extracts X X X X
X X X X Extracts X X X X
....Himachal Pradesh. The assessee had obtained a loan of Rs. 87,00,00,000/- equivalent to US$2 crore from Standard Chartered Bank, India. For obtaining the said loan, the assessee company paid an upfront fee of US$2 lakh to Standard Chartered Bank, Thailand. The said upfront fee of Rs. 2 lakh was net of taxes payable to Standard Chartered Bank, Thailand under the agreement dated 3rd May, 2004. The upfront fee was paid to the aforesaid bank to coordinate all relevant documentation for specific committed loan facility from Standard Chartered Bank, India required for the purpose of purchasing equipments for the Koldam Project. As per the terms of the agreement dated 3rd May, 2004, the tax on the said upfront fee or commission was to be borne by the assessee. 4. In order to determine the applicable withholding tax at the time of making payment to Standard Chartered Bank, Thailand, the assessee has approached the Income-tax Department by filing an application under sec. 195(1) of the Act, in respect of which, the DCIT has held that upfront fee payable by the assessee to Standard Chartered Bank, Thailand was in the nature of fee for technical services liable to be taxed in India and thus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s been made for the preservation and protection of the assessee's business from any process or proceedings which might have resulted in the reduction of its income and profits. In any event, this liability was not incurred by the assessee in the conduct of its business. In view of the aforesaid, I am of the considered view that the Assessing Officer was justified in disallowing the claim of deduction of Rs. 24,16,362/- on account of tax deducted at source on upfront fees and bank charges paid to Standard Chartered Bank, Thailand. As a result, ground No. 2 is dismissed." 6. Being aggrieved, the assessee is in appeal before us. 7. The learned counsel for the assessee has submitted that the upfront fee was paid to Standard Chartered Bank, Thailand for coordinating all relevant documentation for specific committed loan facility obtained from Standard Chartered Bank, India under the agreement dated 3rd May, 2004. The assessee was required to pay upfront fee of US$2,00,000 towards commission, net of taxes. He further submitted that in the light of the order passed under sec. 195(1) of the Act, the assessee was required to deduct tax at source from the payment of upfront fees paid t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....below. 9. We have heard both the parties and have carefully perused the material on record. It is not in dispute that the assessee had obtained loan from Standard Chartered Bank, India to facilitate equipments purchased for Koldam Project. It is also not in dispute that Standard Chartered Bank, Bangkok agreed to complete all relevant documentation for specific committed loan facility obtained for the purpose of purchasing equipment for Koldam Project and for the services rendered by Standard Chartered Bank, Bangkok, the assessee had to pay net upfront fees of US$2,00,000 to the Standard Chartered Bank. In order to remit the upfront fees of US$ 2 lakh to Standard Chartered Bank, Bangkok, the assessee filed an application under sec. 195(1) of the Act in pursuance to which, the department directed the assessee to deduct tax @ 20% plus surcharge and cess inasmuch as the payment of upfront fees was in the nature of fees for technical services taxable @ 20% under sec. 9(1)(vii) of the Act read with sec. 115A of the Act. The assessee therefore, made the payment of Rs. 23,96,362/- as income-tax for and on behalf of the Standard Chartered Bank, Bangkok. It is not in dispute that the net ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the payments to ESW. As a result the assessee paid certain amounts by way of income-tax on the remittances and also paid some further amounts by way of "research and development cess" before making the remittances. The assessee filed appeals under section 248 of the Act against the orders passed by the Assessing Officer under section 195(2) of the Act. In the appeals the assessee asserted that no income-tax was payable on the remittances to ESW because of the provisions of the Act read with the international agreement for avoidance of double taxation. The appeals of the assessee were allowed by the Commissioner of Income-tax (Appeals) upholding the aforesaid contention of the assessee and holding that no income-tax was payable on the remittances. However, the Income-tax Department went in appeal before the Income-tax Appellate Tribunal against he orders of the Commissioner of Income-tax (appeals). Because those appeals filed by the Department were pending before the Income-tax Appellate Tribunal, therefore, the Assessing Officer refunded the income-tax deposited by the assessee along with the interest accrued on the said tax in terms of section 244A, after obtaining indem....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the "consideration" for acquisition of the know-how. We hold accordingly and answer the first question as above. A reference in this connection may be made to the decision of the Supreme Court in the case of McDowell and Co. Ltd. v. CTO reported in [1985] 154 ITR 148 (SC) wherein it was held that excise duty was part of the "consideration". Another direct decision covering the question is by the Madras High Court in the case of Standard Polygraph Machines P. Ltd. [2000] 243 ITR 788 (Mad.)." 10. In the above referred case, in the case of Tata Yodogawa Ltd. (supra), the Hon'ble Jharkhand High Court has relied upon the decision of Hon'ble Madras High Court in the case of Standard Polygraph Machines (P.) Ltd. (supra), where the Hon'ble High Court has taken a view that the Tribunal was right in its view that the amount paid as tax by the assessee was only in discharge of a liability, which it had undertaken in terms of the agreement entered into between the assessee and the collaborator and it, therefore, forms part of the consideration for the agreement relating to know-how. In other words, in that case before the Hon'ble High Court, the payment of tax by the assessee for and on....