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2013 (11) TMI 966 - AT - Income TaxLeather testing charges paid to non-resident - Tax not deducted at source - Held that:- Following Channel Guide India Ltd. v. ACIT [2012 (9) TMI 95 - ITAT MUMBAI] The law cannot cast the burden of performing the impossible task of performing tax withholding obligations with retrospective effect, and, accordingly, the disallowance under section 40(a)(i) cannot be made in a situation in which taxability is confirmed only as a result of retrospective amendment of law - The amount paid to the foreign enterprise was not taxable in India in the light of the legal position at that point of time - It became taxable in India only as a result of the retrospective amendment in Section 9(1), the said payment cannot be disallowed by invoking section 40(a)(i) - It is only as a result of the amendment in Section 9(1), by the virtue of Finance Act 2010, that amount can be said to be taxable in India - Even though the amendment is said to be merely clarifiactory in nature Following the case of Ishikwajima Harima Heavy Industries Ltd. v. DIT [2007 (1) TMI 91 - SUPREME COURT] and in view of the fact that services were rendered outside India even if utilized in India, the impugned leather testing fees was not taxable in India - The disallowance under Section 40(a)(i) cannot be invoked on the facts of this case Decided in favour of assessee.
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