TMI Blog2012 (7) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... e same is outside the rigors of section 40(a)(i). Since the assessee has a book loss and was not subject to tax u/s. 115JB. Hence, disallowance of interest paid on TDS and service tax are of no relevance with regard to the tax calculated - in favour of assessee. - ITA NO. 1839/Del/2012 - - - Dated:- 29-6-2012 - SHRI U.B.S. BEDI, AND SHRI SHAMIM YAHYA, JJ. Assessee by : Sh. VA Mehta, CA Department by : S h. Vikas Suryavanshi, Sr. D.R. ORDER PER SHAMIM YAHYA: AM This appeal by the Revenue is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XIII, New Delhi dated 03.2.2012 pertaining to assessment year 2008-09. 2. The grounds raised read as under:- i) Whether on the facts and circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udicial pronouncements in support of his contention. The AO considered the submission of the assessee and held that provision of section 195 of the IT Act covers all the payments. AO observed that the opening lines of the words of section 195 are Any person responsible for paying to non-resident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of this Act itself covers any payment made by the resident to the non-resident shall be liable to TDS and the payer shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheques or draft or by any other mode, whichever is earlier, deduct TDS thereon at the rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as got to be of a trading receipt, the whole or part of which is liable to tax in India. The payer is bound to deduct tax only if the tax is assessable in India. If tax is not so assessable, there is no question of tax being deducted. The obligation to deduct tax at source arises only when there is a sum chargeable under the Act. Considering the above Ld. CIT(A) held as under:- The reimbursement of expenses has been made to the overseas companies for the services rendered in overseas jurisdiction. These overseas companies have operated in their own country and no part of the income has arise in India. Hence, money reimbursed to such overseas parties is not liable to tax in India. If contention of the AO is accepted it would meant that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Authority for Advance Ruling (Income Tax) in [2012] 19 Taxman.com 231 (AAR, New Delhi) in the case of XYZ Ltd., In re. 6.2 Ld. Counsel of the assessee on the other hand supported the order of the Ld. CIT(A). He further submitted that the case laws relied by the AO are not applicable on the facts of the present case. He further referred to CBDT Circular No. 23 issued on 23.7.1969 wherein the tax liability of foreign agents of Indian exporters was considered. It had been clarified in that circular that where nonresident agent operated outside India, no part of the income arose in India. Further, since the payment was usually remitted directly abroad it could not be held to have been received by or on behalf of the agent in In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case the amount reimbursed by the assessee company is not a fee for technical services. Further, we find that the submissions of the ld. Counsel of the assessee have considerable cogency. Since no part of the income has accrued or arisen or is deemed to accrue or arise to the overseas company which is chargeable to tax under IT Act, 1961, therefore, the provisions of section 195(1) are not applicable. We agree with the finding of the Ld. CIT(A) in this regard that the provisions of section 195(1) have to be read in conformity with the charging of provision of section 4, 5, 9. We further find that if the AO s view are accepted which would mean that we are obliterating the words chargeable under the provisions of the Act in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections 4, 5, 9 Held, yes Whether section 195(2) is not a mere provision to provide information to ITO(TDS) so that department can keep track of remittances being made to non-residents outside India; rather it gets attracted to cases where payment made is a composite payment in which certain proportion of payment has an element of income chargeable to tax in India and payer seeks a determination of appropriate proportion of sum chargeable Held, yes. 8. We further find that CBDT Circular No. 23 dated 23.7.1969 also supports the case of the assessee. 9. Hence, in the background of the aforesaid discussion and precedents, we do not find any infirmity in the order of the Ld. CIT(A). Hence, we uphold the same on this issue. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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