Facts of the case
The assessee is a 100 per cent EOU engaged in the manufacture and export of leather goods. The assessee has made remittances to a Germany based company, in respect of leather testing charges, but did not withhold the applicable taxes from these remittances.
The Assessing Officer was of the view that since the assessee has made the remittances without withholding requisite tax deductions, the payments so made are not allowable as deductions in the hands of the assessee.
Aggrieved, assessee carried the matter in appeal before the learned CIT (A) but without any success.
Issue before the Tribunal
Whether the payment had to be recognised as ‘fees for technical services’ rendered in India u/s 9(1) (vii) and is liable to deduction of tax at source in India?
Held
Tribunal held that, the amount paid to foreign party was not taxable in India in the light of Legal position as it prevailed at that point of time, and it became taxable in India only as result of retrospective amendments in section 9(1), the said payment cannot be disallowed invoking provision of section 40(a) (i).
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