Law:

Section:

[2010] 189 Taxman 232 (Delhi)/[2010] 323 ITR 130 (Delhi)/[2010] 230 CTR 365 (Delhi) [2010] 189 TAXMAN 232 (DELHI) HIGH COURT OF DELHI Van Oord ACZ India (P.) Ltd. v. Commissioner of Income-tax A.K. SIKRI AND SIDDHARTH MRIDUL, JJ. IT APPEAL NO. 439 OF 2008 MARCH 15, 2010 Section 195 of the Income-tax Act, 1961 - Deduction of tax at source - Payment to non-resident - Assessment year 2003-04 - Whether obligation to deduct tax at source arises only when payment is chargeable under provisions of Act; if parties feel that either deduction of tax at source by payer is required to be at a rate lower than prescribed rate or no deduction is required to be made, they are required to file an application before Assessing Officer for obtaining such certificate and in case no such application is filed before Assessing Officer or if such application is rejected by Assessing Officer, payer is duty-bound to deduct tax as per prescribed rates in force at relevant time or as directed by Assessing Officer, otherwise it may be treated as in default and would suffer consequences provided under Act - Held, yes - Whether, however, if in assessment proceedings relating to recipient it is ultimately held that sum received by recipient is not chargeable to tax, effect of that would be that there would be no obligation on assessee to deduct tax at source on sum paid to said non-resident and in that eventuality, assessee would not be treated as in default and would be absolved of any consequences for non-deduction of tax at source - Held, yes FACTS The assessee-company was a wholly owned subsidiary of a non-resident company 'VOAMC'. It was engaged in the business of dredging, contract- ing, reclamation and marine activities. During the relevant previous year, it executed a dredging contract and in terms of the completed contract method, it debited to its profit and loss account mobilization and demobilization cost reimbursed to VOAMC. According to the assessee, the said cost related essentially to transportation of dredger, survey equipment and other plant and machinery from countries outside India to the site in India and re-transportation of the same on completion of the contract,…

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