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2007 (2) TMI 265 - AT - Income TaxTax deducted u/s 195 - Disallowance u/s 40(a)(i) - Payments made in foreign currency - Non-resident - agreement with ONGC and hardy Exploration and Production (India) Inc. ("HEPII") to drill oil wells in Indian waters off the coast of India - assessee has deducted tax @ 4.2% on the bare boat charges only - HELD THAT:- The purpose of sub-section (1) of section 195 is to see that the sum which is chargeable under section 4 of the Act for levy and collection of income-tax, the payer should deduct income-tax thereon at the rates in force, if the amount is to be paid to a non-resident. The said provision is for tentative deduction of income-tax thereon subject to regular assessment and by the deduction of income-tax, the rights of the parties are not, in any manner, adversely affected. Further, the rights of the payee or recipient are fully safeguarded under sections 195(2), 195(3) and 197. The only thing required to be done by them is to file an application for determination by the Assessing Officer that such sum would not be chargeable to tax in the case of the recipient or for determination of the appropriate proportion of such sum so chargeable or for grant of certificate authorising the recipient to receive the amount without deduction of tax, or deduction of income-tax at any lower rates or no deduction. On such determination, tax at the appropriate rate could be deducted at the source. If no such application is filed, income-tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such “sum” to deduct tax thereon before making payment. He has to discharge the obligation of tax deduction at source. We have already clarified in the initial portion of the order that the provisions regarding computation of income and tax cannot be mixed up and confused with the provisions regarding deduction of tax at source. We rail to understand what prevented the assessee from making an application u/s. 195(2) and claim the so called benefits u/s. 44BB. We are at a loss to understand how the assessee sitting in his own office can take such a decision that whatever payments it was making to the non-residents ultimately would be covered u/s. 44BB, even when such non-resident had never filed any return. We think, by adopting this course of action the assessee tried to decide everything on his own ignoring all statutory provisions. We find that the issue is covered squarely against the assessee by the decision of the Tribunal in the case of HNS India VSAT Inc. v. Dy Director of Income-Tax (International Taxation) [2005 (5) TMI 259 - ITAT DELHI-A] where it was held that when the assessee had not deducted tax from the payment made to non-residents against various jobs relating to installation and no application u/s. 195(2) was made then the assessee was under obligation to deduct tax at source and having failed to make any such deduction the Assessing Officer was fully justified in disallowing payments by invoking the provisions of section 40(a)(i). We think it is immaterial whether some tax has been deducted or not and in any case whatever tax has been deducted by the assessee corresponding credit has already been allowed by the lower authorities. Similar view was taken by the Mumbai Bench of the Tribunal in this case of Satellite Television Asian Region Ltd. v. DCIT [2006 (1) TMI 172 - ITAT BOMBAY-G]. We find no merit in the appeal filed by the assessee. In any case, no harm is going to be caused to the assessee due to this disallowance because proviso to section 40(a)(i) itself makes it clear that whenever the so-called tax is deducted and paid to the Government, the assessee would get the deduction accordingly even in the subsequent year. Thus, we find nothing wrong with the order of the ld. CIT(Appeals) and confirm the same. In the result the appeal is dismissed.
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