9911796707
TMI Blog2012 (9) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... works in Hydro Electric Power Project in Himachal Pradesh. It obtained a loan of Rs.87 Crores (equivalent to US $ 2 Crore) from Standard Chartered Bank, N.Y. The terms of the agreement stated that "net commission" was payable in US $ 200,000/- to the Standard Chartered Bank, New York. The Assessing Officer was of the opinion that the amount of tax on the upfront fees borne and paid by the assessee had to be disallowed under Section 40 (a) (ii) and, therefore, disallowed the sum of Rs.23,96,362/-. Applying the same logic, he also disallowed the sum of Rs.20,000/- paid as bank charges. 3. The CIT (A) upheld the disallowance and also held that the expenditure was in the course of acquiring a capital asset. The ITAT agreed with the assessee, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 wen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s business. "consideration" in section 35AB is to be understood in the sense in which it has been used in the Indian Contract Act. Therefore the word "consideration" would include the entire obligation of the assessee, without which the assessee would not be able to acquire the know-how. On the facts of this case the obligation of the assessee under the agreement with ESW extended not merely to remitting the amount of two million DM to ESW, but also extended to payment of taxes which would include the income-tax as well as the research and development cess. It seems quite obvious that if the assessee had not paid the tax or the research and development cess, and had merely made payment of the two million DM to ESW, the latter would not be o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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