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2013 (11) TMI 307 - ITAT CHENNAIDisallowance u/s 40(a)(ia) of the Income Tax Act for want of deduction of tax at source on commission paid to foreign agents – Held that:- Disallowance under Section 40a(i) for a reason that assessee could not take benefit of Circular No.786 dated 7.2.2000. However, the subsequent Circular No.7/2009 dated 22.10.2009, which allegedly withdrew the benefits given to an assessee under Circular No.786 dated 7.2.2000 and Circular No.23 dated 23.7.1969, were not there, when assessee made payments to non-resident agents since the relevant previous year was 2007-08. Once assessee held a bonafide belief that the payments made to non-residents, were not taxable in India, then it could not be fastened with a liability to deduct tax under Section 195 of the Act. In any case, Assessing Officer has not given any finding that the non-residents had rendered any services which were in the nature of technical services. There is nothing on record to show that any technical knowledge was made available to the assessee through the services rendered by the non-residents, which assessee could make use of in future. In any case, sub-clause (b) of clause (vii) of Section 9(1) of the Act clearly mentions that fees paid in respect of services utilized in a business or profession carried on by such person outside India or for the purpose of making or earning income from any source outside India, would not come within the purview of income by way of fees for technical services. Addition of Explanation to sub-section (2) to Section 9 through Finance Act, 2010 with retrospective effect from 1.6.1976 will therefore have no effect on taxability of income earned by non-resident outside India in the course of his business or profession carried out outside India by him – Decided against the Revenue.
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