FLAKT INDIA LTD Vs. STATE

JUDGEMENT

(1.) 1. In these two applications, M/s. Flakt (India) Limited is the applicant and the Commissioner of Income-tax-I, Chennai, is the jurisdictional Commissioner. The applicant which is a resident company having its registered office in Poonamalee High Road, Village Numbai, Chennai-600 077, is a member of Flakt Woods Group of Companies--a worldwide group of companies--(for short "the Flakt group"). M/s. Flakt Woods AB incorporated in Sweden and a tax resident of Sweden (hereinafter referred to as the "Sweden company") and M/s. Flakt Woods Group AG incorporated in Switzerland and a tax resident of Switzerland (hereinafter referred to as the "Swiss company"), are also members of the Flakt group. The first application relates to the Sweden company and the second application relates to the Swiss company.

(2.) The following are the facts common to these applications. The applicant entered into two separate agreements in respect of IP Licence and Fee Agreement and Trademark Licence and Fee Agreement with the Sweden company for consideration specified therein payable by the applicant to the said company (hereinafter referred to as the "royalties"). The applicant entered into management services agreement with the Swiss company for providing various services to the applicant in consideration of "fees" payable by it to the said company. Those agreements were operative for different periods. In response to the invoices for royalties and fees raised by the said companies, the applicant credited amounts to the account of the aforementioned companies in its own accounts for the period February, 2002, to December, 2002. No amount was, however, paid to the said companies by the applicant till March 31, 2003. On the assumption that no amount was paid to or received by the said companies, the income-tax payable under the Act by those companies was not deducted and made over to the concerned income-tax authorities under Section 195(1) of the Income-tax Act, 1961 (referred to in this ruling as "the Act"), by the applicant. On this factual background, the applicant sought advance ruling of the Authority, in the first mentioned application, on the following questions :

(3.) THE Commissioner of Income-tax-I, Chennai, the jurisdictional Commissioner, does not dispute the facts stated by the applicant. It is, however, submitted that on the "royalties" and the "fee" payable by the applicant income-tax under the Act has to be deducted under Section 195(1) thereof. According to the Commissioner, income-tax is deductible at the time of crediting royalties and fees to the accounts of the said companies in the accounts of the applicant even though the same is neither paid to nor received by those companies.