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2008 (6) TMI 378 - AT - Income TaxTDS on Payment of transponder charges/rent paid to M/s. Shim Satellite Public Co. Ltd. - royalty or fee for technical services - Disallowance of transponder fee u/s 40(a) - Non Resident - Income - Deemed to accrue or arise in India - Section 9(1) - DTAA between Government of India and Government of the kingdom of Thailand - HELD THAT:- The facts in the present case are similar to the facts in the case of Satellite Television Asia Region Ltd. v. Dy. CIT. [2006 (1) TMI 172 - ITAT BOMBAY-G]. As discussed the assessee paid the service fee to the non-resident for use of transponder and uplinking facility in the satellite and the said sum was paid without deducting tax. Since the amount paid is considered as royalty covered by the provisions of section 9(1)(vi) the assessee should have deducted withholding tax as per the provisions and failure to do so result in being denied with a deduction under the section 40(a)(i ) of the Act. Further the Hon’ble Supreme Court in the case of Transmission Corpn. of A.P. Ltd. v. CIT [1999 (8) TMI 2 - SUPREME COURT] held that if the assessee has made no application u/s 195(2) tax must be deducted u/s 195(1) and further held that provisions of section 195 are wide enough to consider any sum payable under the Act. In view of this the amount paid by the assessee-company to the foreign company for hiring the transponder are indeed chargeable under the Act and as no tax is deducted the AO is correct in invoking the provisions of section 40(a)(i) and the CIT(A) is not correct in deleting the same. Support can also be drawn from the decision of the Hon’ble Gujarat High Court in the case of CIT v. Vijay Ship Breaking Corpn.[2003 (3) TMI 91 - GUJARAT HIGH COURT] for the proposition that having not made any tax deduction at source disallowance of amount u/s 40(a)( i) was justified. In the above referred case the issue was payment of interest by a resident to a non-resident and the Hon’ble High Court of Gujarat considered the provisions of section 9(1)(v)(b) r/w section 5(2) and section 40(a)( i) and held that the payment of accrued interest to foreign concerns is an amount taxable and assessee was responsible for paying the amount and there is a liability to deduct tax on the part of the assessee and having failed to make the deduction of tax from the interest, disallowance of interest under section 40(a)(i) was justified on the facts of the case. In this case as well, the assessee is responsible for paying transponder charges to the foreign company and there is liability to deduct tax on the above sum as it is covered by the definition of ‘royalty’ as well as provisions of section 195.Therefore, we are not in agreement with the order of the CIT(A) and so the same was set aside. Grounds of the Revenue are upheld. In the result, appeal allowed.
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