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2016 (3) TMI 812 - ITAT MUMBAI

2016 (3) TMI 812 - ITAT MUMBAI - TMI - TDS u/s 195 - disallowance under section 40(a)(i) on account of any retrospective amendment - whether the payment was taxable as ‘fees for technical services’ within section 9(1)(vii) and assessee should have deducted TDS? - Held that:- It is an undisputed fact that the assessee has made payment to HGSL which is a nonresident company based at Switzerland. The payment has been made for training conducted by the HGSL to its delegates outside India. It is an a .....

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nt’s assent in May, 2010 has been brought in the statute with retrospective effect form 1st June, 1976 and such an Explanation is clarificatory in nature which now provides that, the income of a non-resident shall be deemed to accrue in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) of section 9 and shall be included to the total income of the non-resident, whether or not the non-resident has resident or place of business or business connection in India or a non-residen .....

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that, the law cannot possibly compel a person to do something which is impossible to perform. Thus, we hold that, at the time of making the payment, assessee could not have visualize to deduct TDS when there was no provision under the Act and in fact, there was a already prevailing law laid down by the in the case of Ishika Wajima-Heavy Industries Ltd vs DIT, reported in [2007 (1) TMI 91 - SUPREME COURT] wherein, it has been held that services rendered outside India will be taxable in India onl .....

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t, disallowance under section 40(a)(i) on account of any retrospective amendment is wholly vitiated and cannot be sustained. - Decided in favour of assessee - ITA No. : 2357/Mum/2014 - Dated:- 2-2-2016 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Appellant : Shri Kirit Kamdar For The Respondent : Shri Sachhidanand Dubey ORDER PER AMIT SHUKLA, J. M.: The aforesaid appeal has been filed by the assessee against impugned order dated 03.02.2014, passed by CIT(A .....

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ndia, on account of failure on the part of the Appellant to withhold tax thereon under section 195 of the Act. 2. On the facts and in the circumstances of the case and in law, the Commissioner of Income-tax (Appeals) erred in not appreciating the fact that retrospective amendment to section 9(1) was inserted by Finance Act 2010 with effect from 1st June 1976 only after end of the financial year and was hit by the doctrine of 'impossibility of performance'. 3. Without prejudice to the abo .....

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account of participation fees payable for HSSA s delegate of assessee-company to various training programmes organized by HGSL during the year. Tax was deducted wherever it was applicable and has been deposited by the assessee. The details of break-up and nature of payment made to Switzerland company as pointed by the AO has been elaborated at Para 5.1. However, he noted that, the assessee has not deducted TDS in respect of following payments which were on account of training conducted by the Sw .....

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se to the show cause notice as to why disallowance under section 40(a)(i) should not be made, to which the assessee submitted that, it was under a bona fide belief that payment made to Switzerland company for survives rendered outside India would not fall within the ambit of section 9(1)(vii). Since, here in this case the payment related to the services rendered by a non-resident company outside India, therefore, no TDS was required to be deducted by assessee. This view and belief was stated to .....

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ad not deducted TDS. Besides this, it was also submitted that, explanation brought by the Finance Act, 2010 with retrospective effect from 1st June, 1976 cannot be held to be applicable at the time of making the payment. However, the Ld. AO rejected the assessee s contention and after detailed discussion held that, the payment was taxable as fees for technical services within section 9(1)(vii) and assessee should have deducted TDS. The decision of Hon ble Supreme Court will not be applicable or .....

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an AIR 1985 (SC) 582 and host of other decisions. After referring to these decisions, he held that explanation is merely an additional support to the dominant provision of the Act. It tries to remove the vaguenesscrept in the main enactment; therefore, the explanation here merely qualifies for provisions of section 9(1)(vii). After detailed discussions, he confirmed the said disallowance. 5. Before us, the Ld. Counsel submitted that, assessee had made the payment mainly in the year 2009. At the .....

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provision would come in the future date. In support of his contention, he strongly relied upon a decision of ITAT Bench in the case of Channel Guide India Ltd. vs ACIT [2013] 49 and has also filed compilation of various other Tribunal decisions, wherein, it has been held that assessee cannot be held to be liable to deduct TDS when the amendment has been brought subsequently with retrospective effect. 4. On the other hand, Ld. DR strongly relied upon the order of the CIT(A) and submitted that th .....

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dia nor such services have been utilized in India. Out of the total payment of ₹ 65,49,217/-, the assessee had not deducted TDS on the payment aggregating to ₹ 33,93,493/- ( on the balance amount TDS has been deducted), on the ground that, such payment relate to services rendered outside India. The revenue s case is that, in view of the Explanation brought in the statute by the Finance Act, 2010 which got the President s assent in May, 2010 has been brought in the statute with retros .....

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brought in the statute with retrospective effect but at the time of making the payment there was no such provision under the Act and in fact, the law of the land as laid down by the Hon ble Supreme Court was that, if the services has not been rendered in India and such services are not utilized in India then there is no liability for deducting TDS. The amendment has been brought specifically to negate the decision of Hon ble Supreme Court. An assessee who has to make the payment cannot visualiz .....

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