The Tax Publishers2020 TaxPub(DT) 1701 (Mum-Trib)

INCOME TAX ACT, 1961

Section 195

Since reimbursement of demurrage expenses made to non-residents including group entities did not have any element of income, it was not liable to tax in India and once, the amount was not liable to tax in India, there was no liability on assessee to withhold tax under section 195.

Tax deduction at source - Under section 195 - Reimbursement of demurrage expenses made to non-residents including group entities -

Assessee claimed deduction of reimbursement or demurrage expenses made to non-residents including group entities of assessee. AO disallowed deduction for want of TDS under section 195. Held: Section 195 imposes a statutory obligation on any person responsible for paying to a non-resident any sum 'chargeable under the provisions of the Act', which expression, do not find place in other sections of Chapter XVII. It is in this sense that IT Act constitutes one single integral inseparable Code. Hence, provisions relating to TDS applies only to those sums which are chargeable to tax under the Act and any person making payment to a non-resident is not necessarily required to withhold tax under section 195. Since reimbursement of demurrage expenses made to non-residents including group entities did not have any element of income, it was not liable to tax in India and once, the amount was not liable to tax in India, there was no liability on assessee to withhold tax under section 195.

Followed:CIT v. Dempo and Co. Pvt. Ltd. (2016) 381 ITR 303 (Bom) : 2016 TaxPub(DT) 1042 (Bom-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

INCOME TAX ACT, 1961

Section 195

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