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2003 Supreme(Guj) 143
Gujarat High Court
Judgename :A.L.DAVE, R.K.Abichandani
COMMISIONER OF INCOME TAX - Appellant
Versus
VIJAY SHIP BREAKING CORPORATION - Respondent
TAX APPEAL 273 of 2002
Decided On : 03/20/2003
Headnote:
Income Tax Appeal – Appellate Tribunal was right in law and on facts in deleting disallowance under section 40 of Act for failure on part of to deduct tax at source interest paid to a non-resident under section 195 – Appellate Tribunal was right in law and on facts in holding that interest partakes character of purchase price and therefore not liable to deduction at source 195 Act – Appellate Tribunal was right in law and on facts in allowing deduction and holding that ship breaking activity gives rise to manufacture and production of altogether a new article or Tax Appeal interest paid by apart from purchase price of ship would fall within scope of definition of term Income Tax Act Appellate Tribunal was right in law and on facts in deleting disallowance under section 40 Act for failure on part of deduct tax at source from interest paid to a non-resident under section 195of Act Appellate Tribunal was right in law and on facts in holding that interest partakes character of purchase price and not liable to deduction at source Tax Appeal – Held, Formulated in these appeals as interest paid by was not any part of purchase price of ships and was interest within meaning of definition of term under Section 2 Income Tax Act deduct tax at source under section 195 Income Tax Act, 1961 on interest payable outside India and on tax had not been paid are not entitled to deduct amounts of such interest in computing their income chargeable under head "profits and gains of business of profession – Tribunal wrong in deleting disallowance under Section 40 of Act for failure on part to deduct tax at source paid to non-residents under Section 195 Act being responsible for paying to non-residents interest was chargeable under provisions of Income Tax Act, 1961 liable to deduct income tax thereon under section 195 wrong in holding that interest partook character of purchase price and liable to deduction at source under Section 195 Act interest Article concerning taxation of interest in relevant Double Taxation Avoidance Agreements – Application is rejected.
( 1 ) THIS group of 32 matters has been argued together having regard to the nature of controversy and the common questions of law involved, which are as under : I. QUESTIONS OF LAW INVOLVED IN THESE APPEALS: 1. In Tax Appeal No. 273/2002:-[1] Whether the usance interest paid by the assessee apart from the purchase price of the ship would fall within the scope of definition of term `interest u/s. 2[28a] of the Income Tax Act, 1961?[2] Whether the Appellate Tribunal was right in law and on facts in deleting the disallowance under section 40[a][i] of the Act for the failure on the part of the assessee to deduct tax at source from usance interest paid to a non-resident under section 195[1] of the Act?[3] Whether the Appellate Tribunal was right in law and on facts in holding that usance interest partakes the character of purchase price and therefore not liable to deduction at source u/s 195[1] of the Act?[4] Whether the Appellate Tribunal was right in law and on facts in allowing the deduction u/s 80hh and 80i to the assessee holding that ship breaking activity gives rise to manufacture and production of altogether a new article or thing?in Tax Appeal Nos. 285, 286, 299 and 348 of 2002:-[1] Whether the usance interest paid by the assessee apart from the purchase price of the ship would fall within the scope of definition of term `interest u/s 2[28a] of the Income Tax Act, 1961?[2] Whether the Appellate Tribunal was right in law and on the facts in deleting the disallowance under section 40[a][i] of the Act for the failure on the part of the assessee to deduct tax at source from usance interest paid to a non-resident under section 195[1] of the Act?[3] Whether the Appellate Tribunal was right in law and on facts in holding that usance interest partakes the character of purchase price and therefore not liable to deduction at source u/s 195[1] of the Act?in Tax Appeal Nos. 374, 375, 376, 377, 381 and 382 of 2002:-[1] Whether the usance interest paid by the assessee apart from the purchase price of the ship would fall within the scope of definition of term `interest u/s 2[28a] of the Income Tax Act, 1961?[2] Whether the Appellate Tribunal was right in law and on facts in deleting the disallowance under section 40[a][i] of the Act for the failure on the part of the assessee to deduct tax at source from usance interest paid to a non-resident under section 195[1] of the Act?[3] Whether the Appellate Tribunal was right in law and on facts in holding that usance interest partakes the character of purchase price and therefore not liable to deduction at source u/s 195[1] of the Act?[4] Whether the Appellate Tribunal was right in law and on facts in holding that `usance interest is not interest as envisaged in the Double Taxation Avoidance Agreement?in Tax Appeal Nos. 383, 384, 385, 359, 360 and 362 of 2002:[1] Whether the usance interest paid by the assessee apart from the purchase price of the ship would fall within the scope of definition of term `interest u/s 2[28a] of the Income Tax Act, 1961?[2] Whether the Appellate Tribunal was right in law and on facts in deleting the disallowance under section 40[a][i] of the Act for the failure on the part of the assessee to deduct tax at source from usance interest paid to a non-resident under section 195[1] of the Act?[3] Whether the Appellate Tribunal was right in law and on facts in holding that usance interest partakes the character of purchase price and therefore not liable to deduction at source u/s 195[1] of the Act?[4] Whether the Appellate Tribunal was right in law and on facts in holding that `usance interest is not interest as envisaged in the Double Taxation Avoidance Agreement?[5] Whether the Appellate Tribunal was right in law and on facts in allowing the deduction u/s 80hh and 80-I to the assessee, holding that ship breaking activity gives rise to manufacturing and production of altogether a new article or thing?in Tax Appeal Nos. 128, 129, 195, 196, 197, 198,
