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2015 (11) TMI 1544 - AT - Income TaxTDS u/s 195 - accrual of income in India - non deduction of tds on payment to foreign attorneys - existence of PE in India - effect of amaendment to act - retrospectivity - Held that:- Till amendment in Explanation to sec. 9(2) of the Act, the prevailing legal position was that unless the technical services were rendered in India, the fees for such services could not be brought to tax under Section 9(1)(vii) of the Act. The law amended was undoubtedly retrospective in nature but so far as tax withholding liability is concerned, it depends on the law as it existed at the point of time when payments, from which taxes ought to have been withheld, were made. The tax deductor is not expected to know how the law will change in future. A retrospective amendment in law does change the tax liability in respect of an income, with retrospective effect, but it cannot change the tax withholding liability, with retrospective effect. The tax withholding obligations from payments to non-residents, as set out in Section 195 of the Act, require that the person making the payment "at the time of credit of such income to the account payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rates in force". When these obligations are to be charged at the point of time when payment is made or credited, whichever is earlier, such obligations can only be discharged in the light of the law as it stands that point of time. Section 40(a)(i) of the Act provides that inter alia, notwithstanding anything to the contrary in sections 30 to 38 of the Act, any amount payable outside India, or payable in India to a non-resident, shall not be deducted in computing the income chargeable under the head "profits and gains of business or profession" on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted. Accordingly, the assessee cannot be faulted for not deducting TDS and consequently, the deletion of disallowance by CIT(A) is confirmed - Decided in favour of assessee.
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