Karnataka High Court
The Commissioner Of Income Tax vs M/S Mac Charles (India) Ltd on 6 April, 2010
Bench: K.L.Manjunath, B.V.Nagarathna
IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 6"" DAY OF APRIL. 2010
PRESENT .
THE BONBLE MR. JUSTICE I<.L. IvIAN.IUNA'I'II... ~_:'_:'.._
AND _ ' V
THE IIONBLE MRS. JUSTICE B.y.NAGA;Ia;;E1§~NA~:.: 4. _ 1 "
I.'F.A.NO.296O[2O§_§ I. " M u 1' V
BETWEEN: "
.1. THE COMMISSIONER OF INO1ONI_E.."rAx.V" '- '
C.R. BUILDING. QUEENS ROVAIB. "
BANGALORE. V . 5 1.
2. THE DEPUTY-:COMNI1SSIICINER-IOF}
1N'cOM_E.;If .S:F'EC_1AI_;
GB. BIIILOING. Q'iJE;E4N'S_ROAI).
BANGALORE. = ' -
4- - * APPELLANTS
{BY SR1_K.V. AR.Afi/INII E'OI€"M.\r. SESIIAOIIALA. ADVOCATE]
A. .....
' V' BANGALHORE 7552'; =
M /:5. MAC C {INDIA} LTD.
NO.2S._ sANI<:E.v
" " " IBY SR1 S. PARTHASARATH1 AND SR1 MALLAHA RAO.
ADVOCATES]
;E'HIS I.T.A. IS FELED U/S 260~A OF I.'I'.ACT. 1961 ARISING
VT ORDER DA'I'ED 5.4.2005 PASSED IN E.T.A.
RESPONDENT
M0731/BANG/2001 FOR THE ASSESSMENT YEAR 1991432,
PR WING THAT THIS HONBLE COURT MAY BE PLEJASED TO (1)
WRMULATE THE SU.BS'I'ANTiAL QUESTION os LAW STA'i'ED
TE-'ii-iREiN; AND ETC. 7
THIS I.T.A COMING ON FOR i~iEARiNo_;"Tg'iS.'__;:Viiaic
NAGARATHNA J, DELIVEIREID THE FOLLOVVING:
J U D G M E N T
This appeal is filed by the Revenue:-challenging"the__l_oi=:§_er dated 05.04.2005 passed in I..»"'i'.-.4_»'g..l\io.l"/".'3V_1l/Bang;/0.00.01"moi] following substantial questions of i} Whethervthe Appei-}at.e'AL1_thoriti'evsfwere correct in esaiployers contribution to PF & ES] lmade after the year ending was a ' peiiii-2..iissi.ble_ (ietlu.-ction by treating the amendment to introduced by Finance Act of 2003 "effect from 15* April 2004 as retrospective and V ' to the current assessment year?
ii)"-. Whether the Appeilate Authorities were correct in a holding that the provision made by the Assessee V 0" towards foreign exchange fluctuation in respect of technical kriow how fee is a permissible deduction ,.»/"
and the provisions of Section 40(a)(I) of the___Act is not applicable as this amount was trea.ted:"~by'--_the Assessee as a debit?
2. The facts leading to the fiiing the Assessee who is engagetixvivgjimx hotel .for the assessment year 199]«92_.f11ed declaring a loss. The said return «thereafter taken up for scrutiny asvs.fi§s._mer;§tll lidfficer found that the employers PF and E381 had been remitted disallowed under Section of Act. The Assessing Officer also foundgthata 'I_§s';~ll,O9,200/-- had been provided as .zi(:c§ijn: "" of foreign exchange fluctuation in resp_eet f_of_ techn'i\:t_ai'_ know how fee. This amount had been ll'»....vdebited t.hei':'.V.plrofit and loss account even though no _._l.l'.j';p«ay;nent in this regard had been made to the foreign parties. to the Assessing Officer, there could be no 7ldeCl1.1ctlion of tax at source on this amount and therefore the 5%.
fix'.
entire amount was disallowed under Section 40(a)(i) Of.-t_.l'1€ Act by holding that. the disallowanee of Rs.1,09.200/ét'tvaslllvvnot warranted. Against the said order an appeal the Commissioner of Appeals. 'i'he:~s'ai'd« .appeal "--lovv'ed it by an order dated 12.7.2000.
3. Being aggrieved by Revenue carried the matter Tribunal. The Tribunal on both the the Assessee granted the reliel7.., of the Revenue. The said ord_er VVeh,all.erige appeal.
4. We "have heardlithe"learned counsel for the appellant ~ Revenue _ and 'learrzedl counsel for the respondent --~ :'.\ss'esse'e--, 0' ' 'D'uring§j':t.he course of submissions, it is brought to llfourvnotiele..thatvas far as substantial question of law No.1 is «ifcto11eerne"d, the same has to be answered in favour of the and against the Revenue by virtue of the decision of {w 7'. It is to be noted that. the increase or decrease in the actual payment of the technical know--how fee would ultimately depend upon the foreign exchange fluctuation and that when a provision has been made on the .basis__l_ol'_.the exchange rate then existing and TDS has on the said sum, in the event of there l of fee made on account of fluctuation', it necessary to once again deduct on the amount as the same would have to be_"<3one_ wVhen~-..the'~amount is actually paid at a future date. Sm-cef.the_'Jis following the Merttantileéysteni_V0f.l1iPlcc_ounting, 'if is only in respect of the provision made in that the TDS amount would be deducted and would have been passed on to the lt~__is be noted that on account of the foreign exchange if there would be a nwlliieduction technical knowmhow fee, then there is no for'. return of the refund of the TDS which would h'aye.ya1'1*eady been paid by the Assessee on account of the said i flu c:'i;u.ation_ Q ,3"
8. In the circumstances, the 'I'ribu1'1al was justified in not accepting the e01'1te1'1t1'0n of the Revenue and'*..fe.1;_i'-v.the aforesaid reasons and the reasons assigned bythe we find that the substantial questi0.t'1~»of_'l«aW' 'be answered against the Revenue. C0n'seq:t1ent1jf;- th-e_ dismissed.
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