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2016 (7) TMI 953 - AT - Income TaxTDS u/s 195 - Payment of Euro towards purchase of Basic Engineering Design Package - withholding tax as being a payment for technical services - Held that:- The position of law as it stood then, including the taxing of the income under section 9(1)(vii) was that, if the services which are source of income is sought to be taxed, have to be rendered in India as well has to be utilized in India so as to be held to be taxable in India. Both the conditions have to be satisfied simultaneously, that is, the services which are source of income should be utilized in India and services should have been rendered in India. However, if the second limb is not satisfied that is, services have been rendered outside India, then same was held to be outside the purview of taxability in India. The Ld. CIT(A) has also admitted to this position, however, he held that the Explanation to section 9(1)(vii) inserted by the Finance Act, 2010 with retrospective effect from 01.06.1976 was brought specifically to overcome the said decisions of Hon’ble Supreme Court as well as the other Courts. Once this is an admitted position, then it is very difficult to comprehend that, assessee should have deducted TDS on such payment when law of the land did not permit so or envisage any withholding of tax, on the basis of law which was brought from subsequent date albeit with retrospective date stating that, now all such payment for services even rendered outside India is taxable in India. Here, the maxim of “lex non cogit ad impossibilia, is fully applicable that is, the law does not possibly compel a person to do something which is impossible, that is, when there was no provision for taxing an amount in India at the relevant time then how it can be expected that a tax should be deducted on such a payment. Here in this case, the decision of Hon’ble Supreme Court in the case of Ishikawajma Harima Heavy Industries Ltd vs. DIT (2007 (1) TMI 91 - SUPREME COURT ) was rendered on 4th January, 2007; agreement was entered by the assessee with SP Italy on 26th April; 2007; application was made before the AO on 23rd August, 2007 for the payment to be made in September, 2007; therefore, assessee had a valid reason and reasonable ground for not with holding the tax at that time, because as observed above, there was no such provision or any explanation in the statute. Thus, we hold that, assessee was not liable to deduct TDS under section 195, at the time of making the payment. - Decided in favour of assessee
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