2011 (11) TMI 20 - DELHI HIGH COURT

Addition u/s 40(a)(i) - TDS on commission income - business connection - Income of non resident - Income deemed to accrue or arise in India - Circular No.23 dated 23.07.1969 - Revenue contended that the commission income of ₹ 33,36,068/- earned by ETUK had accrued in India or was deemed to accrued in India and, therefore, the respondent assessee was liable to deduct tax at source and as there was failure, the said expenditure should be disallowed under Section 40(a)(ia) of the Act. - Held that:- The scope and ambit of Section 195 of the Act has been explained by the Supreme Court in GE India Techonology Centre (P) Ltd. vs. CIT (2010 -TMI - 77380 - SUPREME COURT OF INDIA). In the said case the expression “any other sum chargeable under the provisions of the Act” in Section 195 of the Act was elucidated and explained. It was held that if payment is made in respect of the amount which is not chargeable to tax under the provisions of Act, tax at source (TDS, for short) is not liable to be deducted. Decision of Supreme Court in Transmission Corporation of Andhra Pradesh vs. CIT, (1999 -TMI - 5757 - SUPREME Court), operates and is applicable when the sum or payment is chargeable to tax under the provisions of the Act. In such cases, TDS has to be deducted on the gross amount of payment made and not merely on the taxable income included in the gross amount. The said decision would not apply in case payment is made but the said sum in entirety is not chargeable or exigible to tax under the provisions of the Act. The said distinction has been rightly understood by the first appellate authority and the ITAT and correctly applied by them. - Decided in favor of assessee.