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TMI Blog2011 (12) TMI 336X X X X Extracts X X X X X X X X Extracts X X X X ..... er assessee was taken into scrutiny by the Assessing Officer. After notices and hearings, the Assessing Officer framed scrutiny assessment under Section 143(3) of the Act on 18.6.2008 and assessed the income of the assessee at Rs.1,08,59,370/-. 5. Against the order of the Assessing Officer to the extent the petitioner was aggrieved, he preferred appeal before the Commissioner (Appeals), who partially allowed the appeal by his order dated 2.3.2010. 6. To the extent the petitioner's appeal was not allowed by the Commissioner (Appeals), the assessee approached the Tribunal. The Tribunal, however, dismissed the assessee's appeal. 7. In the meantime, the Assessing Officer on 30.6.2010 asked for certain clarifications from the petitioner with respect to payment for purchases of raw-materials from a foreign supplier without deducting TDS. In response to such a communication, the petitioner replied under its letter dated 6.7.2010. Particularly, the assessee contended that the provisions of Section 195 of the Act (for deduction of tax at source) are not applicable, when no part of payment made to non-resident is chargeable to tax in India. With respect to the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer sought to reopen the assessment was that in view of the judgment of Karnataka High Court since the assessee was required to deduct TDS on the payment made to the foreign company for purchase of raw-materials, which the petitioner had not done, entire amount was required to be disallowed and added back to the total income. Counsel submitted that on the date when such reasons were recorded and on the basis of which notice was issued, decision of Karnataka High Court in the case of Commissioner of Income-Tax and another vs. Samsung Electronics Co. Ltd. (supra) was already reversed by the Apex Court vide its decision in the case of GE India Technology Centre P.Ltd. vs. Commissioner of Income-Tax and another reported in [2010] 327 ITR 456(SC). Counsel, therefore, submitted that the Assessing Officer had no basis to hold a belief that income chargeable to tax had escaped assessment. 10. Counsel further submitted that the payments to the foreign supplier did not attract any income tax in India on such supplier of raw-materials. In that view of the matter, there was no liability to deduct tax at source on the petitioner. This is precisely what has been held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o ascertain whether from the reasons recorded by the Assessing Officer for reopening the assessments, there is any such belief emerging. 14. We have already noted that the Assessing Officer had recorded that looking to the provisions contained in Section 40a(i) of the Act and the decision of the Karnataka High Court in the case of Commissioner of Income-Tax and another vs. Samsung Electronics Co.Ltd (supra), the assessee was required to deduct tax at source on the payments made by it to the foreign supplier for the purchase of goods. On the very date when the Assessing Officer recorded such reasons, the decision of the Karnataka High Court in the case of Commissioner of Income-Tax and another vs. Samsung Electronics Co.Ltd (supra) stood reversed by the decision of the Apex Court by virtue of its judgment in the case of GE India Technology Centre P.Ltd. vs. Commissioner of Income-Tax and another (supra). 15. In that view of the matter, the Assessing Officer could not have any reason to believe that looking to the decision of the Karnataka High Court in the case of Commissioner of Income-Tax and another vs. Samsung Electronics Co.Ltd (supra), income chargeable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another (supra) held that " A person paying interest or any other sum to a non-resident is not liable to deduct tax if such sum is not chargeable tot ax under the Income-tax Act. For instance, where there is no obligation on the part of the payer and no right to receive the sum by the recipient and the payment does not arise out of any contract or obligation between the payer and the recipient but is made voluntarily, such payments cannot be regarded as income under the Income-tax Act. It may be noted that section 195 contemplates not merely amounts, the whole of which are pure income payments, it also covers composite payments which have an element of income embedded or incorporated in them. Thus, where an amount is payable to a non-resident, the payer is under an obligation to deduct TAS in respect of such composite payments. The obligation to deduct TAS is, however, limited to the appropriate proportion of income chargeable under the Act forming part of the gross sum of money payable to the non-resident. This obligation being limited to the appropriate proportion of income flows from the words used in section 195(1), namely, " chargeable under the provisions of the Act". It is f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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