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2006 (5) TMI 152 - AT - Income TaxDeduction of Tax At Source - failure to deduct tax at source in the context of payment made under the alleged Agreement for Bare Boat Charter-cum-Demise (BBCD) with Dolphin Maritime Co. Ltd. (DMCL) - HELD THAT:- Under section 195 of the Act any person responsible for paying to a non-resident, including a foreign company, any income by way of interest or any other sum which is chargeable to tax in India, is required to deduct tax at source on such income at the time of payment. As per the mandate of the section tax is to be deducted at source with reference to the income element embedded in the payments. However, a non-resident including a foreign company may obtain from the Assessing Officer a certificate authorizing him to receive payment without deduction of tax at source. The expression 'any other sum' occurring in section 195(1) does not necessarily refer to sums which represent wholly income or profit. The scheme of tax deduction at source applies not only to the amount paid which wholly bears income character, but also to gross sums, the whole of which may not be income or profits of the recipient, such as payments to contractors and sub-contractors under section 194C and payment of insurance commission under section 194D. Section 195 takes within its sweep any sums paid to a non-resident which do not wholly represent income or profits chargeable under the Act but a portion of which only so represents. The Hon'ble Supreme Court took this view in the case of TRANSMISSION CORPORATION OF AP LTD. AND ANOTHER VERSUS COMMISSIONER OF INCOME-TAX [1999 (8) TMI 2 - SUPREME COURT] The Hon'ble Calcutta High Court considered and interpreted a similar provision under section 18(3B) of the Indian Income-tax Act, 1922 in the case of PC. RAY AND CO. (INDIA) PRIVATE LTD. VERSUS AC. MUKHERJEE, INCOME-TAX OFFICER, AND ANOTHER [1958 (5) TMI 43 - CALCUTTA HIGH COURT] and held If 'chargeable under the provisions of this Act' means actually liable to be assessed to tax, in other words, if the sum contemplated is taxable income, a difficulty is undoubtedly created as to complying with the provisions of the section. It is not open for a person making payment to a non-resident to take a unilateral decision that the payments made by him are not sums chargeable to tax. To take that view the concurrence of the Assessing Officer as provided in sub-section (2) of section 195 is sine qua non. Section 195 is for tentative deduction of income-tax subject to regular assessment. By the deduction of tax the rights of parties are not, in any manner, adversely affected. Where there exists a doubt as to the chargeability of income to tax, there also tax is to be deducted at source ex abundanti cautela. In the present case the attendant circumstances suggest that ex facie the amount paid is not for the acquisition of the ship, but for the user of the ship, as such taxable. Therefore the assessee cannot be exonerated from the obligation of deduction of tax at source. The appeals of the assessee stand dismissed.
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