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TMI Blog2012 (1) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,42,148/-. The return was processed under Section 143(3). The case was selected for scrutiny and notice u/s.143(2) was issued and the assessment was completed under Section 143(3). 3. The assessee concerned debited profit and loss account for the impugned assessment year ₹ 17,73,885/- towards interest on foreign supplier . No tax was deducted on this amount. There was no disallowance on this account in the order of assessment. 4. CIT by his order under Section 263 dated 11.03.2007 held that the assessing officer ought to have disallowed this amount under Section 40(a)(ia) of the Act, since no TDS was deducted and therefore the order of the AO is erroneous and prejudicial to the interest of the revenue. 5. By their letter d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up figures of transaction i.e. cost of goods, interest paid, banking charges, fluctuation in foreign exchange etc., the case was adjourned. On 14.02.2011,the AR attended and filed the documents relating to LOC copy of bank account and explained how the various sums are ascertained and entries passed in the books of account under the above heads mentioned. (iv) The assessee also objected to the proceedings u/s.263 of the IT Act stating that the AO has already considered this issue of interest payment and allowed the same. The AR relied on the judgment of Supreme Court in 327 ITR 456 G.E. Indian Technology Centre Pvt. Ltd Vs. CIT to state that only when there is an income element in the remittance made to foreigner the obligation to do T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is seen that interest is paid to Oriental Bank of Commerce on the letter of credit facility available for limit of ₹ 7.50 crores. The assessee maintains its accounts very scientifically, ascertaining various sums under the heads cost of goods, interest, fluctuation is foreign exchange etc., and debiting the same to the P L. A/c. It is cannot be denied that interest is paid ultimately to the foreign company. It may be that the said payment is routed through the Indian Banker. To the extent assessee pays such interest and the same is ascertain and entered in the books of account, there arises liability to TDS. No doubt decisions of the Hon ble Tribunal which are referred to by the assessee are in favour of it. It is held by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee are not subject to deduction of tax under Section 195 of the Act in the hands of the assessee. Similarly, the Hyderabad bench in the case of NSL Limited Vs DCIT in ITA No 588/Hyd/96 dated has also passed similar decision. 8. Perusing the order of the CIT, we note the reason for his revision u/s 263 is as follows: No doubt decisions of the Hon ble Tribunal which are referred to by the assessee are in favour of it. It is held by the Hon ble ITAT that interest paid to Indian banker on LC facility cannot be subject to TDS. However, it is seen that the department has not accepted both these decisions but preferred an appeal u/s.260A before the Hon ble High Court. The questions of law raised before the Hon ble High Court in both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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