The Income Tax Appellate Tribunal (ITAT), Delhi, has ruled that for the payment for the procurement of raw material from an individual of a foreign country, the Indian assessee is not required to deduct a TDS (Tax Deducted at Source). The decision of the bench of ITAT has come as a relief for the Honda Cars India.
The Transfer Pricing Officer of Kanpur has previously issued an order stating that the assessee is required to deduct a TDS for the procurement of raw material, spare parts, capital goods and others from an individual of a foreign country.
But, the tribunal issued this ruling and provided the relief of TDS, for the procurement of raw material from Honda Asia Thailand, after relying on the fact as presented by the assessee that he has not no PE has been held by DRP in the case of the procurement deal from the NRI. The tribunal ruled that no disallowance can be charged under section 40(a)(i) of the Act without the deduction of TDS for payment 
Relying on the above order, the Tribunal held that “in view of what has been discussed above and following the order passed by the coordinate Bench of the Tribunal in assessee’s own case (supra), we are of the considered view that addition made/sustained by the AO/CIT(A) of Rs.13,09,82,982/- u/s 40(a)(i) of the Act for not deducting the tax at source of payments made for the purchase of raw material, components, etc. from non-resident Indian is not sustainable in the eyes of law, hence ordered to be deleted.”
