Asstt. Director of IT v. Reliance Industries Ltd.

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The Tax Publishers2012 TaxPub(DT) 1058 (Mum-Trib) : (2012) 049 SOT 0181 INCOME TAX ACT, 1961 --Tax deduction at source--Under section 195Availability of exemption under section 10(15)--Assessee had raised foreign currency loan for the purpose of post financing of import of capital goods and services. It had obtained approval from Government of India for taking ECB loans. On non-performance of conditions, government of India had withdrawn the tax exemption granted to assessee under section 10(15)(iv)(f) in respect of ECB's. Revenue directed assessee to remit interest only after deducting withholding tax at the rate of 20 per cent under section 195(2). Assessee claimed that interest payment was exempt from tax in India as per section 10(15)(iv)(f). Revenue contended that after withdrawal of the approval by the Government of India, assessee was not entitled to claim that the interest was not liable to tax in India. Assessee contended that exemption had been granted to the non-resident investors and not to the borrowers. Therefore, for the default committed by the borrowers in India, non-resident/lenders cannot be punished. Held: Exemption withdrawn by the Central Government holding the interest as not exempted under section 10(15)(iv)(f) was to be ignored and the interest payment by assessee to the non-resident lenders as per ECB loan approved by the Central Government would continue to be exempted. Therefore, assessee was not liable to deduct tax at the rate of 20 per cent in respect of interest payment. Income Tax Act, 1961 Section 10(15)(iv)(f) Income Tax Act, 1961 Section 195(2) IN THE ITAT MUMBAI 'L' BENCH D.K. AGARWAL, J.M. & R.K. PANDA, A.M. Asstt. DIT v. Reliance Industries Ltd. IT Appeal Nos. 2046, 2057 to 2059 (Mum) of 2008, 5167, 5168, 5174, 5193, 5195 & 5196 (Mum) of 2010 A.Ys. 2002-03 & 2004-05 23 September, 2011 Appellantby : Malathi Sridharan and Jitendra Yadav, Respondentby : Arvind Sonde, SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 1058 (Mum-Trib) : (2012) 049 SOT 0181

INCOME TAX ACT, 1961

--Tax deduction at source--Under section 195Availability of exemption under section 10(15)--Assessee had raised foreign currency loan for the purpose of post financing of import of capital goods and services. It had obtained approval from Government of India for taking ECB loans. On non-performance of conditions, government of India had withdrawn the tax exemption granted to assessee under section 10(15)(iv)(f) in respect of ECB's. Revenue directed assessee to remit interest only after deducting withholding tax at the rate of 20 per cent under section 195(2). Assessee claimed that interest payment was exempt from tax in India as per section 10(15)(iv)(f). Revenue contended that after withdrawal of the approval by the Government of India, assessee was not entitled to claim that the interest was not liable to tax in India. Assessee contended that exemption had been granted to the non-resident investors and not to the borrowers. Therefore, for the default committed by the borrowers in India, non-resident/lenders cannot be punished. Held: Exemption withdrawn by the Central Government holding the interest as not exempted under section 10(15)(iv)(f) was to be ignored and the interest payment by assessee to the non-resident lenders as per ECB loan approved by the Central Government would continue to be exempted. Therefore, assessee was not liable to deduct tax at the rate of 20 per cent in respect of interest payment.

Income Tax Act, 1961 Section 10(15)(iv)(f)

Income Tax Act, 1961 Section 195(2)

IN THE ITAT MUMBAI 'L' BENCH

D.K. AGARWAL, J.M. & R.K. PANDA, A.M.

Asstt. DIT v. Reliance Industries Ltd.

IT Appeal Nos. 2046, 2057 to 2059 (Mum) of 2008, 5167, 5168, 5174, 5193, 5195 & 5196 (Mum) of 2010

A.Ys. 2002-03 & 2004-05

23 September, 2011

Appellantby : Malathi Sridharan and Jitendra Yadav,

Respondentby : Arvind Sonde,