TMI Blog2011 (12) TMI 339X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Rs. 17,35,363/- paid to the Powersolve Corporation USA was for the services rendered abroad to their office in USA, which is a permanent establishment in DTAA and hence there is no liability to tax in India and even as per the DTAA tax was paid in USA and no amount out of the said payment was chargeable to tax in India and wherefore, the question of applying Explanation relied upon by the learned Counsel appearing for the appellant would not arise - Decided in favor of the assessee - IT APPEAL NO. 589 OF 2006 - - - Dated:- 8-12-2011 - V.G. SABHAHIT AND S.N. SATYANARAYANA, JJ. E.S. Indrakumar and G. Kamalakar for the Appellant. K.P. Kumar for the Respondent. JUDGMENT 1. This appeal is filed by the revenue being ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as found that the deduction under Section 40( a )( i ) of the Act was not permissible and as no deduction has been made under Section 195 of the Act, a show cause notice was issued to the assessee. In pursuance of which the assessee appeared before the first appellate authority and explained that no part of the said payment pertaining to services rendered for permanent establishment at USA was chargeable to tax in India and therefore, there is no obligation to deduct tax under Section 195 of the Act. However, the first appellate authority held that in view of the provisions of Section 195(1) of the Act it is mandatory in respect of every payment made outside India to make deductions at source unless a certificate of exemption has been obtai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. This appeal was admitted and posted along with ITA.No.574/2006, which in turn was admitted for consideration of substantial questions of law raised in ITA.No.3232/2005. Wherefore, after hearing the learned counsel appearing for the parties the following substantial questions of law arise for consideration in this appeal: (1) Whether the finding of the tribunal in excluding the expenditure in foreign currency from export turnover and total turnover when rendering technical services outside India for computing deduction under Section 80HHE of the Act, is justified in the facts and circumstances of the case on hand? (2) Whether the finding of the Tribunal that disallowance made under Section 40( a )( i ) of the Act by the assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of a non-resident shall be deemed to accrue or arise in India under clause ( v ) or clause ( vi ) or clause ( vii ) of sub-section (1) and shall be included in the total income of the non-resident, whether or not- ( i ) the non-resident has a residence or place of business or business connection in India; or ( ii ) the non-resident has rendered services in India." 8. The learned counsel appearing for the respondent submitted that so far as the payment of Rs. 17,35,363/- paid to the Powersolve Corporation USA for the services rendered abroad to their office in USA which is permanent establishment in DTAA no TDS has been made and as the said expenditure has been considered while computing the tax payable to USA Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, the material on record would clearly show that the said payment of Rs. 17,35,363/- paid to the Powersolve Corporation USA was for the services rendered abroad to their office in USA, which is a permanent establishment in DTAA and hence there is no liability to tax in India and even as per the DTAA tax was paid in USA and no amount out of the said payment was chargeable to tax in India and wherefore, the question of applying Explanation relied upon by the learned Counsel appearing for the appellant would not arise. 11. The Hon'ble Supreme Court in GE India Technology Centre ( P .) Ltd. case ( supra ) has observed as follows after analysing the provisions of Section 195 of the Act; "It may also be noted that section 195(1) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to a non-resident." 12. The Hon'ble Supreme Court has further observed that when the payment is not made within India then the question of making deduction under Section 195(1) of the Act do not arise and the reasoning of the revenue that every payment would attract tax as all payments made to non-residents would attract deduction at source under Section 195(1) unless a certificate has been obtained by making an application under Section 195(2) of the Act regarding exemption for payment of tax in India or that no amount out of such payment, made is chargeable to tax in India has been clearly negated by the Hon'ble Supreme Court in GE India Technology Centre ( P. ) Ltd. , referred to supra . Accordingly, we hold that, the finding o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
