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2024 (1) TMI 995 - ITAT DELHITDS u/s 195 - Validity of the orders passed u/s 201(1)/201(1A) - TDS default on the payments made to the parent company and other overseas AEs - PE in India - AO held that the payments made by the assessee towards purchase of raw-materials, finished goods, capital goods to LG Korea and other non-resident associated companies, are taxable in India, as, all those entities have PE in India, Therefore, the assessee was liable to deduct tax at source under section 195 - HELD THAT:- The basis of attribution of profit to the payee, LG Korea is purely notional as it is the specific case of the assessee that it has not paid any salary cost of expatriate employees to LG Korea. It is the case of the assessee that on the salary cost paid to the expatriate employees, the assessee has deducted tax at source under section 192 of the Act. The aforesaid claim of the assessee remains uncontroverted. Thus, when the assessee has not made any direct payment to the LG Korea towards the salary cost of expatriate employees, in our view, there was no liability on the assessee to deduct tax on such notional payment. Moreso, when the assessee has already deducted tax under section 192 of the Act in respect of salary cost of expatriate employees. Thus, when the basis of attribution of profit to the PE is a notional income, that too, based on a methodology adopted by DRP in case of payee, the assessee cannot be expected to perform an impossible act of computing TDS on a notional payment, a part of which, is to be attributed towards profit of PE of LG Korea. As decided in Samsung India Electronics Pvt. Ltd. [2014 (4) TMI 976 - DELHI HIGH COURT] payments made by the petitioner to SEC for the goods are not tax deductible under section 195(2) and hence they were rightly allowed as deduction in the original assessment of the petitioner and (ii) the assessee cannot be treated as one in default under section 201(1) and no interest can be charged under section 201(1A) as no income arose on account of sales in India since the petitioner cannot be held to be its PE in India. Thus we hold that, there being no obligation of the assessee to withhold tax under section 195 of the Act, the assessee cannot be treated as an assessee in default under section 201 of the Act. Therefore, we direct the Assessing Officer to delete the demands raised under section 201(1)/201(1A) of the Act for the impugned assessment years. Decided in favour of assessee.
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