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2012 (9) TMI 285 - AT - Income TaxDisallowance u/s 40(a)(i) - rate of TDS - whether deduction of tax at source @ 11.33% in case of payments made to nine non-residents engaged in rendering services in connection with oil exploration business which are taxable under the Income-tax Act as per the provisions of section 44BB, is sufficient compliance of section 40(a)(i) of the Act or any disallowance out of such payment is warranted u/s 40(a)(i) of the Act. - held that:- following the decision of Apex Court in GE India Technology Centre (P.) Ltd., (2010 (9) TMI 7 - SUPREME COURT OF INDIA) and Frontier Offshore Exploration (India) Ltd vs DCIT, decided in favour of assessee. Disallowance u/s 40(a)(i) - consultancy charges/fees for technical services paid to not residence working in overseas off shore oil and gas exploration projects it Nigeria - Held that:- As the payments made by the assessee to non-resident consultants, were directly related to the Nigerian projects of the assessee, the fees paid to such consultants on its projects abroad has to be considered as fees paid for services utilized in the business of the assessee outside India. Therefore, clearly Section 9(1)(vii)(b) applied and the income earned by such non-residents cannot be deemed to accrue or arising in India. Therefore, assessee had every reason to hold a bonafide belief that no part of the payment had any element of income which was chargeable to tax in India & assessee could not be put in a position where it can be visited with the rigours associated with non-deduction of tax at source. It cannot be fastened with any liability associated with non-deduction of tax at source on such payments - in favour of assessee.
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