2.2 As covered earlier in chapter 7 dealing with the parties to the tax covenant, if the Sellers make payment to someone other than the Buyer, then the payments will be taxed on the recipient, unless that other party is constructively receiving the funds on behalf of the Buyer. In such circumstances, the Sellers should insist on the grossing up clause being disapplied, as is provided for in the drafting above.
2.3 It is arguable that the text in parentheses in the second line of the drafting above is not necessary, as we are of the opinion that amounts would be in the charge to tax before the application of any reliefs. However, this text does put this point beyond any doubt.
3 Buyer has Obligation to Recover in Respect of Deductions
5.4 T he recipient of an amount paid under this clause 5 shall claim from the appropriate Tax Authority any exemption, refund, credit or similar benefit to which it is or maybe entitled in respect of any deduction or withholding in respect of which a payment has been made pursuant to clause 5.1and, for such purposes shall, within any applicable time limits, submit any claims, notices, returns or applications and send a copy thereof to the Payer; 3.1 This is a continuation of the theme in section 1 above. We have difficulty in identifying circumstances in which the Seller would have an obligation to make a withholding in respect of Tax. This clause does serve to apply a salve to bruised sensibilities, in that it requires the Buyer to make recoveries of deductions of withholdings if he is able to do so.
4 Refunds of Withholdings or Deductions
5.5 I f the recipient of an amount paid under this clause 5 receives a credit for or refund of any Taxation payable by it or similar benefit by reason of any deduction or withholding for or on account of Tax then it shall reimburse the other party such part of the additional amounts paid to it as the recipient certifies to the other party will leave it (after such reimbursement) in no better and no worse position than it would have been if the other party had not been required to make such deduction or withholding;
4.1
This continues the theme mentioned in 3 above.
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