TMI Blog2014 (3) TMI 1015X X X X Extracts X X X X X X X X Extracts X X X X ..... ng before the hon'ble high court. In our considered opinion, mere pendency of an appeal involving the same issue against the order of the 'tribunal' is no ground to adopt a different approach in the impugned assessment year. Thus, we agree with the findings of the CIT(A) under challenge and reject grounds raised by the Revenue. - Decided in favour of assessee - I.T.A.No.2311/Mds/2013 - - - Dated:- 28-3-2014 - SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER For the Petitioner : Shri S. Dasgupta, JCIT For the Respondent : Shri Philip George, Advocate ORDER PER S.S.GODARA, JUDICIAL MEMBER This appeal filed by the Revenue for assessment year 2010-11, is directed against order of the Commissioner of Income-tax (Appeals)-IV Chennai, dated 30.8.2013, passed in I.T.A.No.444/13-14 in proceedings under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The substantive grounds raised by the Revenue read as follows: 2.1 The learned CIT(A) erred in deleting the disallowance of ₹ 2,71,70,000/- made under sec.40(a)(i) of the I.T.Act, 1961, on account of non-deduction of tax at source on the commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, Section 194C casts an obligation to deduct TAS in respect of any sum paid to any resident . Similarly, Sections 194EE and 194F inter alia provide for deduction of tax in respect of any amount referred to in the specified provisions. In none of the provisions we find the expression sum chargeable under the provisions of the Act , which as stated above, is an expression used only in Section 195(1). Therefore, this Court is required to give meaning and effect to the said expression. It follows, therefore, that the obligation to deduct TAS arises only when there is a sum chargeable under the Act. Section 195(2) is not merely a provision to provide information to the Income-tax Officer(TDS). It is a provision requiring tax to be deducted at source to be paid to the Revenue by the payer who makes payment to a non- resident. Therefore, Section 195 has to be read in conformity with the charging provisions, i.e., Sections 4, 5 and 9. This reasoning flows from the words sum chargeable under the provisions of the Act in Section 195(1). The fact that the Revenue has not obtained any information per se cannot be a ground to construe Section 195 widely so as to require deduction of TAS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in the Income-tax Act by which a payer can obtain refund. Section 237 read with Section 199 implies that only the recipient of the sum, i.e., the payee could seek a refund. It must therefore follow, if the Department is right, that the law requires tax to be deducted on all payments. The payer, therefore, has to deduct and pay tax, even if the socalled deduction comes out of his own pocket and he has no remedy whatsoever, even where the sum paid by him is not a sum chargeable under the Act. The interpretation of the Department, therefore, not only requires the words chargeable under the provisions of the Act to be omitted, it also leads to an absurd consequence. The interpretation placed by the Department would result in a situation where even when the income has no territorial nexus with India or is not chargeable in India, the Government would nonetheless collect tax. In our view, Section 195(2) provides a remedy by which a person may seek a determination of the appropriate proportion of such sum so chargeable where a proportion of the sum so chargeable is liable to tax. The entire basis of the Department's contention is based on administrative convenience in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the definition of royalty or fees for technical service or other sums chargeable under the Income-tax Act then it would be open to the AO to disallow such claim for deduction. Similarly, vide Finance Act, 2008, with effect from April 1,1989 sub- Section (6) has been inserted in Section 195 which requires the payer to furnish information relating to payment of any sum in such form and manner as may be prescribed by the Board. This provision is brought into force only from April 1, 2008. It will not apply for the period with which we are concerned in these cases before us. Therefore, in our view, there are adequate safeguards in the Act which would prevent revenue leakage. Applicability of the judgment in the case of Transmission Corporation (supra) 10. In Transmission Corporation case (supra) a nonresident had entered into a composite contract with the resident party making the payments. The said composite contract not only comprised supply of plant, machinery and equipment in India, but also comprised the installation and commissioning of the same in India. It was admitted that the erection and commissioning of plant and machinery in India gave rise to income taxable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-resident is not at all chargeable to tax in India , then no TAS is required to be deducted from such payment. This interpretation of the High Court completely loses sight of the plain words of Section 195(1) which in clear terms lays down that tax at source is deductible only from sums chargeable under the provisions of the Income-tax Act, i.e., chargeable under Sections 4, 5 and 9 of the Income-tax Act. 7. In the circumstances, respectfully following the Hon'ble ITAT judgment in the assessee s own case, which in turn had relied on the principles laid down by the Hon'ble Supreme Court in the case of GE India Technology Centre(P) Ltd. referred to supra, as it is noticed that the foreign agent to whom the assessee had paid commission does not have any income liable for tax in India and as it is also noticed that the agent is not giving any services to the assessee in India for which the said commission has been paid, the disallowance made of ₹ 2,71,70,000/- u/s 40a(i) being legally untenable, the AO is directed to delete the same. Therefore, the Revenue is in appeal. 5. We have heard both parties and gone through the case file. As already stated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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