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April 2023

Glimpses of Supreme Court Rulings

By Kishor Karia, Chartered Accountant
Atul Jasani, Advocate
Reading Time 17 mins
1 PCIT vs. Matrix Clothing Pvt Ltd (2022) 448 ITR 732,737 (SC) Export Commission - Business Expenditure – Disallowance under section 40(a)(ia) –The foreign entity receiving the amounts were not Indian residents and subject to tax in India and that the services rendered were rendered outside India – Payments not liable to deduction of tax at source In a Special Leave Petition filed before the Supreme Court, the following questions arose, namely, (i) losses due to foreign exchange fluctuation on export proceeds, (ii) the advance of interest-free loans to the related party, and (iii) non-deduction of tax at source on payment of export commission. According to the Supreme Court, the first issue was covered in favor of the assessee by its decision in CIT vs. Woodward Governor India Pvt Ltd (2209) 312 ITR 254 (SC). The Supreme Court dismissed the second issue, keeping the question of law open, as the amount involved was only Rs. 6,00,000. So far as the third issue in respect to non-deduction of tax at source on payment of export commission was concerned, the Supreme Court noted that there were concurrent findings recorded that the foreign entity receiving the amounts were not Indian residents and subject to tax in India and that the services rendered were rendered outside India. Therefore, according to the Supreme Court, no error was committed by the High Co
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