The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has granted relief to Bajaj Auto Ltd by allowing a deduction under Section 40(a) (i) of the Income Tax Act 1961, for expenditures incurred in foreign currency.
The Assessee incurred expenditures in foreign currency amounting to Rs.194.85 lakhs. The tax deducted at source was appropriately applied where applicable, while in certain instances, no tax was deducted. However, the assessing officer raised concerns, disallowing an amount of Rs.26,62,904 under Section 40(a)(i) of the Income Tax Act 1961,in relation to specific expenditures. This development highlighted potential tax compliance issues, and the intricacies surrounding foreign currency transactions came under scrutiny. The situation prompted a closer examination of the tax regulations governing such expenditures and the potential impact on the assessee’s financial standing.
The CIT(A) approved the assertion regarding the mentioned expenses. This approval came after a thorough examination, confirming that payments for the purchases were executed with non-residents lacking any business ties in India. The crucial factor considered was that the nature of these payments did not constitute income arising or accruing in India.
The two member bench of the tribunal comprising Amjith Singh ( Account member ) and Aby T varkey (Judicial member) observed that the assessee, in question, made payments for various expenses to non-residents without any business connections in India.
Consequently, no tax was deducted for these transactions. In the course of the appellate proceedings, the revenue failed to present any substantial evidence contradicting the findings established by the Commissioner of Income Tax ( Appeals ).
As a result, this ground of appeal by the revenue has been dismissed due to a lack of merit.
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