January 2023
Business expenditure — Disallowance u/s 40(a) (ia) — Payments liable to deduction of tax at source — Scope of section 40 — Amount paid to non-resident for technical services — Amount not debited to profit and loss account and not claimed as deduction in computing business income — Amount could not be disallowed.
By K. B. Bhujle, Advocate
Reading Time 4 mins
64. Principal CIT vs. Linde India Ltd.
[2022] 448 ITR 682 (Cal.)
A.Y.: 2007-08
Date of order: 5th September, 2022
Section 40(a)(ia) of ITA, 1961
Business expenditure — Disallowance u/s 40(a) (ia) — Payments liable to deduction of tax at source — Scope of section 40 — Amount paid to non-resident for technical services — Amount not debited to profit and loss account and not claimed as deduction in computing business income — Amount could not be disallowed.The assessee-company is engaged in the business of manufacture and sale of various industrial and mechanical gases, cryogenic and non-cryo- genic plants and vessels. A show-cause notice was issued to the assessee alleging that tax was not deducted at source in terms of the provisions of section 40(a)(ia) of the Income-tax Act, 1961 in respect of the advances as on 31st March, 2007 for import of capital goods. In reply to the show-cause notice, the assessee contended that the said advances was made towards import of capital goods on free on board (FOB) basis at foreign sea ports, leading to transfer of title to the goods outside India, and hence there is no income chargeable to tax in India and therefore the provisions of section 195 of the Act are not attracted. It was also contended that such advances to suppliers had also not been charged to the profit and loss account for the relevant assessment year. The AO completed the assessment u/s 143(3) by an order da
