“Section 195(6)”
The decision most relied on for Section 195(6) is CIT v. Lovely Exports (P) Ltd. (216 CTR 195), cited in 854 judgments on BharatTax.
Leading authorities on Section 195(6)
If an assessee company receives share application money from alleged bogus shareholders and provides their details to the Assessing Officer, no addition can be made under Section 68 in the company's hands; the Department must proceed against the shareholders by reopening their individual assessments.
When purchases are found to be entirely bogus and based on fictitious invoices from non-existent or unconfirmed suppliers, the entire amount of such purchases is liable to be added back as unexplained expenditure, not merely a percentage thereof.
When purchases are unverifiable or alleged to be bogus, only the profit element embedded in such transactions is taxable, not the entire purchase amount; the onus lies on the assessee to prove the genuineness of the transactions.
Commission paid to non-resident agents for services rendered outside India is not taxable in India as income not accruing or arising in India and not being fees for technical services. Consequently, no tax deduction at source under Section 195 is required, and non-deduction does not attract disallowance under Section 40(a)(i)/(ia).
An assessee must discharge the primary onus of providing relevant documents to support a claim of expenditure, and reliance on case law is misplaced if this onus is not met.
Part reimbursement of expenses does not constitute income if the services rendered are under the direct control and supervision of the recipient.
Foreign exchange losses on reinstatement of foreign currency loans are allowable as revenue expenditure, provided they are recognised in accordance with applicable accounting standards. Exchange fluctuation losses attributable to depreciable assets acquired in India may also be allowable expenditure.
Payments for sponsorship rights, such as title sponsorship or being an "Official Partner" of an event, are not considered royalty income for the use of trademarks or brand names under Section 9(1)(vi). Consequently, withholding tax obligations under Section 195 may not apply to such payments.
