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2016 (4) TMI 566 - ITAT MUMBAI

2016 (4) TMI 566 - ITAT MUMBAI - TMI - TDS u/s 195 - Addition made by the AO u/s 40(a)(i) - non deduction of tds - neither the assessee obtained TDS certificate from the department u/s 195(2) nor the TDS was deducted - Held that:- We find that the assessee has paid commission to a person who is non-resident. As per the CBDT Circular 786 dated 7.2.2000, if a person pays commission to the non-resident no tax be deduced from the payment - Decided in favour of assessee. - I.T.A. No.3973/Mum/2014 - D .....

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ome of ₹ 24,12,74,491/- on 30.9.2009. The assessee is engaged in the business of export of garments manufactured by it. On perusal of accounts it was observed by the assessing officer that the assessee has paid a sum of ₹ 6,79,40,492/- and no TDS was deducted. Therefore, the AO called the assessee to explain as to why this amount should not be added to the total income of assessee on the ground that neither the assessee obtained TDS certificate from the department u/s 195(2) nor the .....

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d.AR submitted that the assessee is in export business and he paid some commissions to non-residents agents for services render outside India and according to CBDT Circular 786 dated 7.2.2000, tax is not deductible at source when the payments made to non-resident agents for survives provided by them. Therefore, the provisions of section 195 are not attracted. The ld. AR submitted that all the agents to whom commission were paid were non-residents of India and no permanent establishment was in In .....

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ave been followed and allowed the claim of the assessee, he also relied on the decision of Delhi Bench of the Tribunal on the similar issue in the case of Welspring Universal V/s JCIT reported in (2015) 56 taxman.com 175 (Delhi.Trib). 5. We have heard the parties at length and perused the record. We find that the assessee has paid commission to a person who is non-resident. As per the CBDT Circular supra, if a person pays commission to the non-resident no tax be deduced from the payment. We find .....

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her, was rendered in India; the payee also having no place of business or establishment in India. There was thus, as per the assessee, no question of any part of the impugned sum being chargeable to tax in India; further relying on the decision in the case of GE India Technology Centre (P.) Ltd. (supra). The facts being not in dispute, the issue arising is primarily legal, i.e., whether the provision of s. 40(a)(i) is attracted in the facts of the case. Section 40(a)(i), overriding sections 30 t .....

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n computing the business income. The first thing, therefore, that we would need to see is whether the provisions of Chapter XVII-B are attracted to the impugned payment. The payments to a non-resident being covered under section 195, we begin by reproducing the same in its relevant part, the interpretation of which is in issue: 'Other sums. 195. (1) Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest referred to .....

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ector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode; Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O. (2) Where the person responsible for paying any such sum chargeable under this Act (other than salary) to a non-resident cons .....

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logy Centre (P.) Ltd. (supra), rendered after considering the decision in the case of Transmission Corpn. of A.P. Ltd. (supra), covers the assessee's case, so that no tax was deductible u/s. 195, what we are required to, in order to decide the Revenue's appeal there-against, do is to examine the validity of the said finding, and toward the same, the said decision. As explained by the apex court therein, if the interpretation being accorded by the Revenue to section 195, i.e., that the mo .....

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to every word in the section. The interpretation by the Revenue was, in its view, guided more by administrative convenience, and which would though imply deduction of tax even on payments qua which there was no territorial nexus with India or otherwise were not chargeable to tax in India. Administrative considerations could not be the basis of the interpretation of the statutory provisions, even as the law contemplates adequate safeguards in the form of section 40(a)(i) and section 195(6); the .....

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considers that the same is not deductible on the gross amount on the footing that only a part thereof represented income chargeable to tax in India, it was necessary for him to approach the A.O. u/s.195(2) and obtain permission for deduction at source of tax at a lesser amount. Section 195(2), thus, gets attracted only in case of composite payments, a part of which have an element of income chargeable to tax in India. The observations by it in Transmission Corpn. of A.P. Ltd. (supra) that if no .....

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225/178 Taxman 505 (SC); Vijay Ship Breaking Corpn. v. CIT[2009] 314 ITR 309/[2008] 175 Taxman 77 (SC) and, rather Transmission Corpn. of A.P. Ltd. (supra) as well, squarely covers the facts of the instant case. The Revenue, to enable us to disturb the like finding by the ld. CIT(A), ought to have explained as to how it is infirm or does not amount to a correct reading of the said decision, or is otherwise not applicable in the facts of the case. In fact, the assessee having admittedly neither .....

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not chargeable to tax in India. This in fact is also the requirement and an essential ingredient of s. 40(a)(i), so that the A.O., invoking the same, is in fact obliged in law to render a finding as to the chargeability of the impugned sum to tax under the Act, which is absent in the instant case. We are conscious that Explanation 2 to section 195(1) has since been co-opted on the statute, i.e., by Finance Act, 2012 w.e.f. 01.04.1962, and which reads as under: 'Other sums. " 195. (1)** .....

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