Whether usance charges paid by the Assessee on import of raw material from foreign countries attracts tax in India u/s 5(2)(b) r.w.s. 9(1)(v)(b)?

Last updated: 21 January 2015

Court :
ITAT Panaji

Brief :
The Assessee is engaged in manufacture of wooden doors, frames, furniture etc. The Assessee has paid usance charges of Rs.18,99,772/- on import purchase. The AO was of the view that the usance charges incurred by the assessee is the income arising to the non-resident reckoning within the meaning of provisions of Sec. 5(2)(b) r.w.s. 9(1)(v)(b) and therefore the Assessee was liable to deduct TDS in accordance with the provisions of Sec. 195. Since the Assessee has not deducted the TDS, therefore, AO disallowed the sum u/s 40(a)(i). The Assessee went in appeal before the CIT(A). CIT(A) deleted the addition relying on the explanation to Sec. 10(15)(iv)(c). The only issue involved in all these appeals filed by the revenue relate to whether the Assessee was bound to deduct TDS u/s 195(1) in respect of usance charges paid by the Assessee on import of raw material from countries outside India like Japan, Belgium, Germany, USA etc. Held that usance charges paid by the Assessee on import of raw material from foreign countries attracts tax in India u/s 5(2)(b) r.w.s. 9(1)(v)(b).

Citation :
Asst. Commissioner of Income Tax – Appellant – Versus - M/s. Indian Furniture Products Limited. – Respondent