The assessee is a wholly owned subsidiary of VOAMC , reimbursement of mobilisation and demobilisation costs to a foreign company . The Assessing Officer the disallowed the amount by applying the provision of section 40(a)(i) of the Act on the ground that the asssesee had defaulted in deducting tax at source under section 195 of the Act  while making payment to VOAMC . High Court held that  the assessee was not liable to deduct tax at source in respect of amount reimbursed  , however  , if assessment proceedings in case of foreign were reopened and final view taken was that it was assessable to tax , then the assessee would also be treated as assessee -in default , attracting consequences provided under section 40(a)(i) of the Act. On appeal the Court held that once the assessee was held to be not liable to deduct tax at source , merely because subsequently , foreign company VOAMC  was held liable , the assessee could not be treated as assessee in default . order of the High Court was quashed and set aside . (AY. 2003 -04 )