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Issues:
Challenge to order for exemption from TDS on interest payment to foreign supplier under section 10(15)(iv)(c) of the Income-tax Act, 1961. Analysis: The petitioner, a public limited company, contested an order dismissing their application for exemption from Tax Deduction at Source (TDS) on interest payable to a foreign supplier of raw material. The petitioner relied on section 10(15)(iv)(c) of the Income-tax Act, 1961, for the exemption. The respondent, however, citing the proviso to sub-section (2) of section 195 of the Act, rejected the application for exemption. The petitioner imported spin finish oil from Japan and was required to pay interest on the value of imports. The interest amount was claimed to be exempt from income tax under the Act. The petitioner applied for exemption using the prescribed Form No. 'B' on February 24, 1989. The respondent's refusal was communicated on March 7, 1989, leading to the present writ petition challenging the order. The court issued an interim order allowing the petitioner to remit the interest amount to the foreign supplier without deducting any tax, subject to further court orders and on depositing a specified amount with the court. The court found no fault in the respondent's decision, citing the relevant provisions of the Act and a previous Division Bench decision. It was established that the interest amount would be deemed to accrue or arise in India, making the proviso to sub-section (2) of section 195 of the Act applicable, thus justifying the respondent's denial of the exemption certificate. The court also noted that the petitioner could potentially be considered an agent in relation to a non-resident under sections 160 and 163 of the Act, allowing for the submission of a return of income as a representative assessee and the possibility of refund of the tax deducted at source. As the writ petition was dismissed, the court directed the amount deposited by the petitioner to be paid to the respondent, clarifying that the petitioner would not face any liability for depositing the amount with the court instead of the Central Government as required by the Act.
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