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2022 (3) TMI 1022 - AT - Income TaxDisallowance of Professional fees paid to non-residents - Non deduction of TDS u/s 195 - Amendment with retrospective effect - whether the payment made to the non-residents was a professional fee or a commission? - HELD THAT:- We find that an identical issue has been considered by the Tribunal in the case of M/s. TVS Electronics Ltd. [2021 (10) TMI 210 - ITAT CHENNAI]for wherein, on identical circumstances held that liability towards TDS cannot be fastened on the assessee on the basis of subsequent amendment to law with retrospective effect, because which was impossible on the part of the assessee to do the impossible things and deduct TDS on payment made to non-residents, because, the assessee cannot foresee the amendment and deduct TDS on said payment and consequently, payment made to non-residents, cannot be disallowed u/s. 40(a)(i) of the Act, for failure to deduct TDS u/s. 195. Thus the assessee cannot be expected to deduct TDS on payment made to non-residents on the basis of subsequent amendment to the law with retrospective effect from earlier date, because the assessee cannot foresee the amendment and deduct TDS and hence, we are of the considered view that the AO was erred in disallowing the payment made to non-residents u/s. 40(a)(i) of the Act, for failure to deduct TDS u/s. 195 of the Act. The Ld. CIT(A) without considering the relevant facts, simply sustained the additions made by the AO. Hence, we are reversed the findings of the Ld. CIT(A) and direct the AO to delete the additions made towards disallowance of payment made to non-residents u/s. 40(a)(i). Disallowance of compensation paid to employees' under 'Welfare Oriented VRS Scheme' - HELD THAT:- In this case, the assessee has made payment directly to employees under 'Welfare Oriented VRS Scheme', but not to a Trust or Fund and thus, we are of the considered view that payment made by the assessee cannot be disallowed u/s. 40A(9) - VRS Scheme provided by the assessee to five employees is on welfare oriented basis by considering their health, which is not covered under Rule 2BA and thus, employee's cannot claim exemption u/s. 10(10C) - Once payment made to employees, is not exempted u/s. 10(10C) of the Act, then it partakes the nature of expenses incurred for the purpose of business and thus, assessee can claim deduction u/s. 37(1) of the Act. However, the facts with regard to the claim of deduction u/s. 10(10C) of the Act by the employees of the assessee, were not forthcoming from the records. Therefore, for the limited purpose to ascertain the facts with regard to claim of benefit u/s. 10(10C) by the employees to allow the deduction claimed by the assessee needs to be re-examined by the AO in light of claim of the assessee that employees did not avail the benefit of exemption u/s. 10(10C) of the Act. Disallowance of expenditure relatable to exempt income u/s. 14A - HELD THAT:- We find that the assessee has not disputed the applicability of Rule 8D of Income Tax Rules, 1962, for computing disallowance of expenses u/s. 14A of the Act. We find that the AO has determined the disallowance u/s. 14A r.w.r. 8D of Income Tax Rules, 1962 @ 0.5% on average value of investments. In our considered view, disallowance determined by the AO is in accordance with law and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the assessee.
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