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TMI Blog2006 (7) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... he sake of convenience. 3. The first issue arises for consideration is whether the provisions of section 195 are attracted in respect of interest paid to non-resident bank. Shri Y. Ratnakar, the learned counsel for the assessee submitted that the Assessing Officer treated the assessee as an assessee in default for non-deduction of tax at source out of interest paid to non-residents and out of service charges paid to its holding company. According to the learned counsel the assessee has paid interest to its bank. The learned counsel further submitted that the assessee opened a Letter of Credit for import of materials. The foreign firm negotiated the Letter of Credit through the foreign bank. Since the assessee could not pay the money within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dhra Bank acted on behalf of the assessee in their capacity as an agent. Moreover, according to the learned representative, the payment of interest was made by crediting the accounts of the supplier in the books of the importer and hence the importer is the actual payer and not the bank which remits the money as per the Letter of Credit and therefore, it cannot be said that the assessee's bank remitted the interest to the non-resident bank. According to the learned representative, the assessee is the payer of interest to the non-resident banker. 5. We have considered the rival submissions and also perused the material on record. The question that arises for consideration is whether the assessee is liable to deduct tax under section 195 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee has to necessarily pay the interest to the foreign bank in terms of the Letter of Credit. After such payment. M/s. Andhra Bank may recover the amount from the assessee. The process of recovery may be either by debiting the same in the account maintained by the assessee or any other methods known to law. In this case M/s. Andhra Bank debited the interest in the account of the assessee, which is maintained with them. The fact remains that the immediate responsibility for paying interest is that of Andhra Bank and not the assessee. The Legislature has used the words "any person responsible for paying". In this case the responsibility is of Andhra Bank and not of the assessee. The payment might have been made on behalf of the assessee but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er pays the money, the payment always is made on behalf of the company and the Manager or the Drawing and Disbursing Officer acts only as an agent. It these circumstances, if the Manager or the Drawing and Disbursing Officer fails to deduct tax at the time of making payment can we say that the Company committed default in deducting tax at the time of making payment? The answer to this question is negative. Though the liability to pay the amount is on the Company, the responsibility of paying the money is entrusted to the Manager or the Drawing and Disbursing Officer. Therefore, the person who is responsible for making the payment, namely, the Manager or the Drawing and Disbursing Officer has to be held responsible for not deducting tax. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... professional services. They are in the manufacturing business. Therefore, it cannot be construed that holding company provided any technical service to the assessee. The learned counsel invited our attention to provisions of section 194J and submitted that any person who is responsible for paying to a resident towards fees for professional services or technical services shall deduct tax equal to 5 per cent of the amount paid. According to the learned counsel, no technical or professional service was rendered by the holding company. Therefore, the assessee is not liable to deduct any tax at all. The learned counsel submitted that the term 'technical service' is defined in section 9(1)(vii) of the Income-tax Act. Fee for technical service me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Therefore, the assessee has no grievance at all. 8. We have carefully considered the rival submissions and perused the record. The question that arises for consideration is whether the holding company, i.e., M/s. SIEL has rendered any technical or professional services to the assessee. The services rendered by the holding company in the areas of accountancy; human resources development and taxation would definitely fall within the field of technical services. If at all it is not technical service, it may be considered to be professional service. Providing services in the field of accountancy, taxation and human resources development would naturally enrich the assessee's knowledge in that field which would amount to technical enrichment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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