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2017 (9) TMI 1405 - AT - Income TaxAddition u/s.40(a)(ii) - AO disallowed the amount of TDS on payment of royalty pursuant to Technical Collaboration Agreement - TDS borne by the resident Indian payer - deemed income of the recipient - Held that:- The provisions of Section 40(a)(ii) would apply only in a situation where the appellant has paid taxes on his own income and not in respect to income of others on which the appellant has paid taxes as per conditions of the agreements. See Karan Johar Vs. DCIT [2011 (3) TMI 202 - ITAT MUMBAI ] and Dashmesh Transport Co. (P) Ltd. vs. CIT (1973 (10) TMI 1 - PUNJAB AND HARYANA High Court ). CIT-A correctly held that TDS borne by the resident Indian payer is to be deemed as the income of the recipient and it is only out of such income of the recipient, the Indian payer is deemed to withhold the TDS at the appropriate rate and pay to the Govt. it was further observed by the Tribunal that what the Indian payer deposits to the Govt. cannot be construed as tax of the non-resident being borne by the Indian resident payer, but the amount paid is only out of the deemed income of the recipient and the same would not fall within the definition of tax on income for disallowance u/s 40(a)(ii) of the Act. - Decided against revenue
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