TMI Blog2011 (9) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... n held to be chargeable to Indian Income-tax Act. - 3061 (MUM.) OF 2009 - - - Dated:- 5-9-2011 - Asha Vijayaraghavan And Pramod Kumar, JJ. ORDER Pramod Kumar, Accountant Member. By way of this appeal, the Assessing Officer has challenged the correctness of CIT(A)'s order dated 18th February, 2009, in the matter of assessment under section 143(3) of the Income-tax Act, 1961, for the assessment year 2005-06. 2. In the first two grounds of appeal, which are interconnected, the Assessing Officer has raised the following grievances: 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in directing the Assessing Officer to delete the disallowance of ₹ 3,04,03,553 made under section 40(a)(i) on account of legal and professional fees, photography charges and bandwidth charges paid to the overseas parties, without deducting tax at source, as required under section 195(1) of the Income-tax Act. 1A. On the facts and in the circumstances of the case and in law, the CIT(A) erred in not appreciating the facts that the assessee's case is covered by the decision of Hon'ble Supreme Court in the case of Transmission Corporati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, where remittances have been (so) made to respective parties, whose income is not chargeable to tax under the Indian Income-tax Act, there will be no liability to make any TDS . The CIT(A) thus apparently proceeded on the basis that as long as a chartered accountant has certified, in terms of the CBDT circular, that no tax is deductible at source from these payments, disallowance under section 40(a)(i) cannot be made for non-deduction at source from such payments. Since the assessee had duly obtained the chartered accountant's certificate in respect of all the remittances, in the absence of which he could not have made the foreign remittances anyway disallowance under section 40(a)(i) was held to be not sustainable in law, and was deleted. The Assessing Officer is aggrieved of the relief so granted by the CIT(A) and is in appeal before us. 4. We have heard the rival contentions, perused the material on record and duly considered factual matrix of the case as also the applicable legal position. 5. We find that, as held by Hon'ble Supreme Court in the case of GE India Technology Centre Pvt Ltd. v. CIT (327 ITR 456), tax deduction at source obligations under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s certificate is not a substitute for such a determination of taxability in the hands of the recipient by the Assessing Officer. 7. It is, in our considered view, essential to understand the nature of a chartered accountant's certificate on the basis of which foreign remittances are made. The certificate in question is issued by a chartered accountant under CBDT Circular No. 759, dated 18th Nov., 1997 [(1997) 143 CTR (St) 290] as modified by CBDT Circular No. 10 of 2002, dated 9th Oct., 2002 [(2002) 177 CTR (St) 41]. In view of the provisions of section 195, it is obligatory for a person making any payments to any non-residents that income-tax thereon in connection with the same is deducted at source. It was with a view to ensure compliance with this requirement that the RBI requirement was to obtain a 'no objection certificate' from the AO for each such remittance, so as to ensure that all remittances were examined by the AO. This procedure resulted in inordinate delays in making the remittances because on many occasions the process of determining tax deductions by the AO took long time. It was in this backdrop and in the light of, to our mind commercial realities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed format, the rate at which tax is to be deducted or that tax is not to be deducted, and make the remittance on the basis of such a certificate. Even this remittance on the basis of the chartered accountant's certificate is at assessee's own risk of consequences which follow the short deduction or non-deduction of tax at source. The assessee has to give an undertaking to that effect. However, as long as assessee's stand is at least supported by a chartered accountant's certificate, the assessee is at least allowed to make the remittance on that basis. Contrast this with the old procedure of prior certification of withholding tax requirement by the AO, in which, the assessee has to first pay the tax and then make the remittance. Under the revised scheme, the assessee can, subject to the support of a chartered accountant's certificate and furnishing of an undertaking extracted earlier in this order, first make the remittance and the finalization of withholding tax liability follows. All it does is that the real time control mechanism to ensure revenue collections from foreign remittance at the point of remittance, which was in the nature of steering control, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant details, enabling determination of such liability, before the revenue authorities. In this view of the matter, the CIT(A) was clearly in error in accepting the chartered accountants' certificates, on the basis of foreign remittances were made, as decisive of the question that the assessee did not indeed have any obligation to deduct taxes at source from these payments. In our considered view, the CIT(A) ought to have directed the assessee to furnish complete details about each of the foreign remittance, and examine these details to determine whether or not tax was indeed deductible under section 195(1) from each of these payments particularly as admittedly assessee did not furnish these details before the Assessing Officer, and the Assessing Officer had no occasion to decide the matter on merits. To that extent, relief granted by the CIT(A) cannot be sustained by us. And Learned counsel for the assessee has now filed some of these details before us, and urged us to adjudicate the issue of taxability of these payments on merits. Some of these details, on sample basis, are as follows: Sl No. Name and address of the non-resident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xes were deducted at source by the assessee, and also observed that apart from the above (reason), the assessee has not been able to give further details of address of the above parties and the proof of services actually rendered by the said parties so as to qualify the expenses wholly and exclusively for the purposes of business . Aggrieved, assessee carried the matter in appeal before the CIT(A) and contended that taxes were duly deducted at source and that the payments were made for editorial charges, photography charges, music streaming charges which was wholly and exclusively for the purposes of business of the assessee. The CIT(A) accepted these contentions and remitted the matter to the file of the AO for verifications about compliance with tax deduction obligations. The Assessing Officer is aggrieved and in appeal before us. 14. Having heard the rival contentions and having perused the material on record, we see no reasons to interfere in the matter. The matter is remitted to the file of the AO for verifications about factual aspects of discharging TDS obligations, and, as regards non-submission of information, it is not even learned Departmental Representative's ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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