The Bombay High Court in the case Grasim Industries Ltd. Versus Assistant Commissioner of Income Tax observed and has directed the department to refund the TDS amount which is deposited by the assessee under protest.
The bench comprising of Justice K. R. Shriram and Justice N. K. Gokhale in the case observed that technically, even though the amount which is deposited by the petitioner would be called as tax deductible at source, what the petitioner paid was ‘an ad hoc amount, not technically the TDS amount.’
The court in the case also confirmed that the amount paid to Davy Mckee Corporation, DAVY was not chargeable to tax in India, the departments’ insistence on the assessee paying that amount was not in accordance with the law, and the amount so paid over must be refunded to the assessee.
In the present case, the assessee or petitioner had set up the gas-based sponge iron plant in India, for which it entered into a foreign technical collaboration agreement with Davy Mckee Corporation, DAVY and the another party. Therefore, under the agreement, it has been agreed by DAVY to render to the petitioner outside India certain engineering and other related services in relation to the project. Thus, the petitioner also entered into another agreement (a supervisory agreement) with DAVY to provide certain supervisory services to Petitioner in India.
However, Under the agreement, the DAVY was to deliver to the petitioner the necessary design, drawing, and data with respect to the sponge iron plant outside India. DAVY in the case has also agreed to train a certain number of employees of the petitioner in order to make available to such employee’s technical information, scientific knowledge, expertise, etc. for the commissioning, operation, and maintenance of the plant. The assessee argued before the court that the contract is not taxable in India since no operations related to its execution must take place there, and Davy must not engage in any activity in order to provide the technical services there.
The court while considering the facts and circumstances of the case stated that once the appellant succeeds in the appeal, the revenue authorities must proceed on the basis that the appellant did not have any obligation to make the payment and the amount which is wrongly deducted or paid to the Revenue Authorities where it was not required to be paid would become refundable to the appellant. Thus, the same being subject to the condition that the person receiving the payment has not claimed credit for it or is not claiming credit for it.
The counsel, J. D. Mistri appeared for the Petitioner.
The counsel, Akhileshwar Sharma represented the respondent.
