TMI Blog2015 (6) TMI 981X X X X Extracts X X X X X X X X Extracts X X X X ..... es” given under explanation 2 to Section 9(1)(vii) of the Act. By virtue of such services, the concerned recipients had not made available to the assessee any new technic or skill which assessee could use in its business. The services rendered by the said parties related to clearing, warehousing and freight charges, outside India. The logistics service rendered was essentially warehousing facility. In our opinion, this cannot be equated with managerial, technical or consultancy services. Even if it is considered as technical service, the fee was payable only for services utilized by the assessee in the business or profession carried on by the said nonresidents outside India. Such business or profession of the non-residents, earned them income outside India. Thus, it would fall within the exception given under sub-clause (b) of Section 9(1) of the Act. In any case, under Section 195 of the Act, assessee is liable to deduct tax only where the payment made to non-residents is chargeable to tax under the provisions of the Act. In the circumstances mentioned above, assessee was justified in having a bonafide belief that the payments did not warrant application of Section 195 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible business and hence the activity of wind energy generation through wind mill units was to be treated as one eligible business and brought forward losses are to be adjusted against profits and gains for the purpose of deduction u/s 80IA. 3.2. Further, the Assessing Officer observed that since allowability of deduction u/s 801A(4) is governed by the provisions of Sec 801A(5).The deduction u/s 80IA would be eligible only on such surplus profits after setting off of the brought forward losses and unabsorbed depreciation. The AO has relied on the decision of the Special Bench of ITAT, Ahmedabad in the case of ACIT Vs. Gold Mine and Shares Finance Pvt. Ltd. (2008) 113 ITD 209 as well as the ITAT, Hyderabad in the case of Hyderabad Chemicals Supplies Ltd. Vs. ACIT, Hyderabad in support of her contention and as such the deduction u/s 80IA was recomputed after adjusting the brought forward losses of earlier years and the eligible business profit on which the assessee was entitled to claim deduction has accordingly been restricted from C5,28,75,459/- as returned by the assessee and restricted to C4,63,48,720/-. Aggrieved, the assessee preferred an appeal before the Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable territories and the commission received also were outside the taxable territories and it had no authority to enter into any contract on behalf of the local manufacturers and had no authority to bind the principal by their act without the written confirmation from the principal, and the commission paid to the non-residents has no relevance to the profits earned by the resident but is linked with the receipt of full payment by the customers to the principals. As such the question of non-resident having business connection in India does not arise. 7.1 The Assessing Officer on the other hand, disallowed C7,42,19,641/- u/s.40(a)(i) on foreign commission and warehousing and other charges broadly for the following reasons:- (i) No tax was deducted on the commission paid to the foreign agents as required under section 195 of the Act. (ii) Board s circulars No.23 dated 23.07.1969, Circular No.163 dated 29.05.1975 and circular No.786 dated 07.02.2000 allowing foreign agent commission without deduction of tax under section 195 was withdrawn by Circular No.7 dated 22.10.2009. (iii) The Assessing Officer has relied on the Hon ble Authority for Advance Ruling in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court in the case of GE India Technology Centre P. Ltd. v CIT (2010) 327 ITR 456 wherein it was held that tax deducted at source obligations u/s 195(1) arises only if the payment is chargeable to tax in the hands of the non-resident recipient. Therefore, merely because a person has not deducted tax at source or a remittance abroad it cannot be inferred that the person making the remittance, namely the assessee in the instant case, has committed a default in discharging his tax withholding obligations because such obligations come into existence only when the recipient has a tax liability in India. The underlying principle was that tax withholding liability of the payer was inherently a vicarious liability on behalf of the recipient and therefore when the recipient does not have the primary liability to be taxable in respect of income embedded in the receipt, the vicarious liability of the payer cannot but be ineffectual. This vicarious tax withholding liability cannot be invoked, unless primary tax liability of the recipient is established. 10. Further, the Commissioner of Income Tax (Appeals) observed that just because the payer has not obtained a specific declaration fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to overseas payments made by the assessee on account of commission, warehousing and other charges, has followed order of the 'tribunal'(supra) qua the very issue. On being granted opportunity, the Revenue has failed to prove that these expenses are liable to be taxed in India as income in the hands of concerned payees or any services had been rendered in India. The Revenue submits that the 'tribunal's order has not been become final and its appeal is pending before the hon'ble high court. In our considered opinion, mere pendency of an appeal involving the same issue against the order of the 'tribunal' is no ground to adopt a different approach in the impugned assessment year. Thus, we agree with the findings of the CIT(A) under challenge and reject grounds raised by the Revenue. Similar view was also taken by the Mumbai Bench in the case of Vilas N. Tamhankar in ITA No.4522/Mum/2013 for the assessment year 2009-2010, vide order dated 21.11.2014, and same view was also taken by the jurisdictional High Court in the case of CIT vs. Faizan Shoes Pvt. Ltd, 367 ITR 155 (Mad) and further in the case of Brakes India Ltd. vs. DCIT (LTU) (144 ITD 403) the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
