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2016 (3) TMI 812 - AT - Income TaxTDS u/s 195 - disallowance under section 40(a)(i) on account of any retrospective amendment - whether the payment was taxable as ‘fees for technical services’ within section 9(1)(vii) and assessee should have deducted TDS? - Held that:- It is an undisputed fact that the assessee has made payment to HGSL which is a nonresident company based at Switzerland. The payment has been made for training conducted by the HGSL to its delegates outside India. It is an admitted fact here that neither the services have been rendered in India nor such services have been utilized in India. Out of the total payment of ₹ 65,49,217/-, the assessee had not deducted TDS on the payment aggregating to ₹ 33,93,493/- ( on the balance amount TDS has been deducted), on the ground that, such payment relate to services rendered outside India. The revenue’s case is that, in view of the Explanation brought in the statute by the Finance Act, 2010 which got the President’s assent in May, 2010 has been brought in the statute with retrospective effect form 1st June, 1976 and such an Explanation is clarificatory in nature which now provides that, the income of a non-resident shall be deemed to accrue in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) of section 9 and shall be included to the total income of the non-resident, whether or not the non-resident has resident or place of business or business connection in India or a non-resident has rendered services in India. Though, such an amendment has been brought in the statute with retrospective effect but at the time of making the payment there was no such provision under the Act and in fact, the law of the land as laid down by the Hon’ble Supreme Court was that, if the services has not been rendered in India and such services are not utilized in India then there is no liability for deducting TDS. It is a trite legal maxim. “lex non cogit ad impossiblia” which means that, the law cannot possibly compel a person to do something which is impossible to perform. Thus, we hold that, at the time of making the payment, assessee could not have visualize to deduct TDS when there was no provision under the Act and in fact, there was a already prevailing law laid down by the in the case of Ishika Wajima-Heavy Industries Ltd vs DIT, reported in [2007 (1) TMI 91 - SUPREME COURT] wherein, it has been held that services rendered outside India will be taxable in India only, if the services has been rendered in India and such services have been utilized in India, no TDS was to be deducted, then obvious conclusion is that on such payment no disallowance under section 40(a)(i) can be made. If the view and contention raised by the revenue is to be accepted that such a law fixing the liability on the assessee is to be reckoned from retrospective date, then it will cause not only great hardship and injustice but also prejudice to the assessee. Accordingly, we hold that, disallowance under section 40(a)(i) on account of any retrospective amendment is wholly vitiated and cannot be sustained. - Decided in favour of assessee
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