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2006 (6) TMI 423 - AT - Income TaxDeduction of tax at source - only grievance of the assessee is that the learned Commissioner of Income-tax (Appeals) has erred in holding that tax was required to be deducted at source in respect of payment made to M/s. Chang Leung Hvi and LI CPA Ltd. Hongkong in spite of the fact that such payment is covered under exception clause of 9(1)(vii)( b) - HELD THAT:- Source of income is not a legal concept but it must mean something which a practical man regard as a real source of income. When the customer of company i.e. associate company is located outside India than it cannot be said that source of income is not outside India. It is not the case of the revenue that associate company was importing the goods but is mentioned that assessee-company was making exports. Fees paid for getting the patent registered in Hongkong is for making or earning income from a source outside India. The Legislature has used the word making or earning income. The income of the assessee-company is profit from sale to associate company and such sale is a part of marking of income. Making an assessment has been held to cover the whole period during which assessment is made. Keeping in view the fact that patent was registered outside country for making an income from a source outside the country. The amounts paid are covered in exception provided in section 9(1)(vii)( b). Hence, the assessee was not required to deduct tax at source - Moreover, it is not the case of revenue that professional fees paid to M/s. Chang Leung Hvi and Li C PA Ltd., Hongkong are taxable in India and steps have been taken to tax the same. If the receipts are not taxable in the hands of recipient then payee is not required to deduct tax at source as per provisions of section 195 of the Income-tax Act. The appeal is allowed.
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