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2017 (10) TMI 419 - AT - Income TaxMaintainability of appeal - TDS u/s 195 - addition u/s 40(a)(i) - revenue neutral exercise - Held that:- What has been accepted by the CBDT, as learned counsel rightly points out, is the principle that when a disallowance results in an enhancement of business profits but such an enhancement is revenue neutral inasmuch as related business profits, in totality, are eligible for deduction under chapter VI, such appeals need not be pursued. The reference to Section 40(a)(ia) is no more than illustrative in nature, and what holds good for disallowance under section 40(a)(ia) applies, in principle, equally to disallowance under section 40(a)(i) as well. In this view of the matter, in terms of the CBDT circular (supra), the appeal filed by the Assessing Officer, on this point, is indeed not maintainable. Non-deduction of tax at source from payments made to the non-residents must be dealt with at a different level, and bearing in mind the need to protect our tax base, we can only point out that lapses with respect to tax withholding obligations from payments made to non-residents is visited with several type of consequences disallowance under section 40(a)(i), recovery under section 201, penalty under section 271C and, in certain situations, even prosecution under section 276B. We, therefore, see no need to even deal with the matter on merits in the context of the present proceedings, even as we take on record learned counsel’s submission that, even on merits, the issue is now covered in favour of the assessee and that the assessee did not have any obligations to deduct tax at source at all. That aspect of the matter is wholly academic. - Appeal dismissed - Decided against the revenue.
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