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2021 (4) TMI 1269 - HC - Income TaxTDS u/s 195 - disallowance made under the provisions of Section 40 a i - payments made by the appellant company to non-residents are in the nature of Royalty without deducting TDS - HELD THAT - issue involved in this appeal has been put to rest in view of the decision rendered in ENGINEERING ANALYSISCENTRE OF EXCELLENCE PRIVATE LIMITED 2021 (3) TMI 138 - SUPREME COURT and the issue involved in this appeal has been answered against the Revenue and in favour of the assessee.
Issues:
Admissibility of appeal based on substantial question of law regarding disallowance under Section 40[a][i] of the Act for Assessment Years 2005-06 & 2006-07. Analysis: The High Court heard arguments on the question of admission and admitted the appeal based on the substantial question of law regarding the disallowance made under Section 40[a][i] of the Act for the mentioned assessment years. The key issue was whether the Tribunal was justified in confirming the disallowance by holding that payments to non-residents were in the nature of Royalty, necessitating TDS deduction under Section 195 of the Act. The appellant contended that a Supreme Court decision in a related case had resolved the issue in favor of the assessee. The learned Counsel for the assessee argued that the Supreme Court's decision in Civil Appeal Nos. 8733-8734/2018 had addressed the same issue and ruled against the Revenue, supporting the assessee's position. Citing this precedent, the High Court found in favor of the assessee, quashing the order passed by the Income Tax Appellate Tribunal on 29.11.2019. Consequently, the appeal was allowed, and the substantial questions of law were resolved in favor of the assessee, overturning the Tribunal's decision. Furthermore, the High Court granted liberty to the assessee to approach the Court again in the future regarding any other questions of law that may arise, providing an opportunity for further legal recourse if needed. The judgment highlighted the importance of legal precedent and the impact of higher court decisions on similar issues, emphasizing the significance of consistent interpretation and application of tax laws in such cases.
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