9911796707
TMI Blog2018 (5) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... by way of expenditure towards business. We do not find that the transaction can be stated to be in speculation as to cover under sub-section (5) of section 43 of the Act. TDS u/s 195 - addition u/s 40(a)(ia) - assessee had not deducted tax at source on foreign commission payments - income accrued in India - whether the non-resident agent of the assessee was operating at his own level and no part of the income arose or accrued in India? - Held that:- As decided in NOVA TECHNOCAST PVT LTD case [2018 (5) TMI 1182 - GUJARAT HIGH COURT] Explanation inserted with retrospective effect provides that obligation to comply with subsection [1] of Section 195 would extend to any person resident or non-resident, whether or not non-resident person has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 195 of the Act? 3. The first issue pertains to the decision of the Tribunal treating the loss suffered by the assessee in connection with the hedging contract as a business loss rejecting the Assessing Officer's contention that the same being speculative in nature was not allowable deduction. 4. From the documents on record we notice that the respondentassessee is engaged in the business of manufacturing and trading of dress and other materials. The assessee sales such goods through export also. On such export sales, there would be possibility of the foreign remittances being delayed for variety of reasons. The assessee would therefore be exposed to foreign exchange fluctuation risks. To protect itself or at least to minimize the risk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer has not considered these facts. Under section 43(5) of the Income-tax Act, speculative transaction has been defined to mean a transaction in which a contract for the purchase or sale of commodity is settled otherwise than by the actual delivery or transfer of such commodity. However, as state above, the assessee was not a dealer in foreign exchange. The assessee was an exporter of cotton. In order to hedge against losses, the assessee had booked foreign exchange in the forward market with the bank. However, the export contracts entered into by the assessee for export of cotton in some caes failed. In the circumstances, the assessee was entitled to claim deduction in respect of ₹ 13.50 lakhs as a business loss. This matter is squa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (5) of section 43 of the Act. 6. The second issue relates to the addition made by the Assessing Officer of a sum of ₹ 5.05 lacs under section 40(a)(ia) of the Income Tax Act, 1961 on the ground that the assessee had not deducted tax at source on foreign commission payments. The Tribunal however, recorded that the non-resident agent of the assessee was operating at his own level and no part of the income arose or accrued in India. 7. In the recent order in Tax Appeal No. 290 of 2018, we had dealt with similar situation making following observations: It can thus be seen that while confirming the order of CIT [A], the Tribunal relied on judgment of the Supreme Court in the case of G.E India Technology Centre P. Limited vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is expression which is added for removal of doubt is clear from the plain language thereof, may have a bearing while ascertaining whether certain payment made to a non-resident was taxable under the Act or not. However, once the conclusion is arrived that such payment did not entail tax liability of the payee under the Act, as held by the Supreme Court in the case of GE India Technology Centre P. Limited [Supra], sub-section [1] of Section 195 of the Act would not apply. The fundamental principle of deducting tax at source in connection with payment only, where the sum is chargeable to tax under the Act, still continues to hold the field. In the present case, the Revenue has not seven seriously contended that the payment to foreign commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
