TMI Blog2016 (9) TMI 1032X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT (A) has passed a reasonable and judicious order. Therefore, we find no reason to deviate from or interfere with the findings of the learned CIT (A). Accordingly, we uphold his order. These grounds of appeal of the revenue stand rejected. TDS deductable for reimbursement of expenses - Held that:- We have noticed that in the assessment order it has been categorically mentioned that mobilization of expenses of ₹ 43,90,000/- were paid to Canada Inc. for acquiring the aircrafts on lease. Mobilisation expenses pertain to expenses incurred on bringing the aircraft from the Country of Lessor to India and hence they are in the nature of expenditure incurred for acquiring the aircrafts as they are covered in the specific lease agreements with the Lessors. We have also perused the orders of CIT(A) where in para number 3.1 of the CIT(A). There is reference of order for previous year wherein it has been categorically mentioned that the TDS was not deductable for reimbursement of expenses by the assessee accompanied for transporting/mobilizing the helicopters in India and in the absence of any embedded income in the reimbursement of these expenses, the question of deducting TDS d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reimbursement and no TDS ought to have been made. The appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal . The appellant prays that the order of CIT(A) on the above ground be set aside and that of the assessing officer be restored. 2. This appeal was fixed for hearing today and was called for several times but, nobody appeared on behalf of the assessee and even; no application for adjournment of the case was filed. As per the records it is revealed that none appeared on behalf of the assessee on the previous date of hearing also though notice was already issued by RPAD. Therefore, it seems that the assessee is not interested to contest the present appeal. The learned DR representing the Revenue is present before the Bench and submitted that he wish to contest the same. Therefore, we proceed to dispose of the appeal after hearing the learned DR and perusal of the materials available on record. 3. The brief facts of the case are that the assessee firm engaged in the business of providing helicopter services. The helicopters were acquired by the assessee o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deducted at source on these payments. Apart from the bonafide belief we further noted that as per para 4(b) of Article 12 of Indo-US DTAA fees for included services means if such services made available technical knowledge, experience, skill, know-how, or processes, or consists of the development and transfer of a technical plan or technical design. The training in the case in hand was given to the pilots and other staff as per the requirement of the DGCA Rules therefore; it was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term service make available . The decisions relied upon by the Ld. DR are on the taxability of the income and in the hand of the non resident in view of the retrospective amendment therefore the said principle cannot be applied while deciding the issue of disallowance u/ s.40(a)(i). In view of the above discussion and the facts and circumstances of the case we are of the considered opinion that the disallowance of u/ s. 40(a)(i) is not justified and accordingly the same is deleted. Following the above decision, the addition made by A.D. is deleted. This grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year involved is 2004-05 relevant to previous year 2003-04 and it is impossible for the assessee to deduct tax in the financial year 1- 4-2003 to 31-3-2004, when the obligation to deduct TDS was not on the assessee during that period. The provision of section 9 provides for situations where income is deemed to accrue or arise in India to a non-resident. We find that the Legislature vide Finance Act, 1976, a source rule was provided in section 9 through insertion of clauses (vl. [vi) and (vii) in sub-section (1) for income by way of interest, royalty or fees for technical services respectively and the intention of introducing the source rule was to bring to tax interest, royalty and fees for technical services, by creating a legal fiction in section 9, even in cases where services are provided outside India as long as they are utilized in India but the Hon 'ble Supreme Court in the case of Ishikawajma-Harima Heavy Industries Ltd. (supra) held that despite the deeming fiction in section 9, for any such income to be taxable in India, there must be sufficient territorial nexus between such income and the territory of India. It further held that for establishing such territor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iod. With the insertion of the explanation retrospectively by the Finance Act, 2007 with retrospective effect from 1-6-1976 to section 9(2) of the Act, whereas the assessment year involved is 2004-05 relevant to previous year 2003 -04, it is impossible for the assessee to deduct tax in the financial year 1-4-2003 to 3 1-3-2004, when the obligation to deduct TDS was not on the assessee during that period. The argument canvassed by the Ld. counsel on the basis of a legal Maxim lex non cogit ad impossibilia meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform. This Maxim is accepted by different courts of this country, including the Hon 'ble Supreme Court in the case of Krishnaswamy S. Pd. v. Union of India [2006J 281 ITR 305 made the following observations in relation to the provisions of chapter XX-C of the Act. The maximum of equity, namely, actus curiae neminem gravabit - an act of court shall prejudice no man, is founded upon justice and good sense which serves a safe and certain guide for the administration of law. The other relevant maxim is, lex non cogit ad Impossibitie - the law does not compel a man to do wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as current income . 208. Advance tax shall be payable during a financial year in every;- A case where the amount of such tax payable by the assessee during that year, as computed in accordance with the provisions of this Chapter, is five thousand rupees or more. ' 7. A combined reading of the above provisions makes it clear that the assessee has to pay taxes in advance in respect of the total income of the assessee, which would be chargeable in a particular assessment year. Now before introduction of section 35DDA, the legal dictum was very clear that the assessee could claim expenditure incurred on account of payment made for the VRS by the assessee in view of the binding decisions of the Hon 'ble jurisdictional High Court in the case of CIT v. George Oakes Ltd. [1992] 197 ITR 288 (Mad.) and OT v. Simpson and Co. Ltd. (No.2) [1998]230 ITR 794 (Mad.). In both the decisions, it was clearly laid down by the Hon 'ble jurisdictional High Court that payments to employees under the VRS were in the nature of business expenditure and was deductible un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertinent to note that the assessee by way of abundant caution deposited a sum of ₹ 90,00,000 on August 6, 2001, i.e., much before the due date filing of the return, which also proves the bona fide credentials of the assessee. In these circumstances, we set aside the order of the learned Commissioner of Income-tax (Appeals) and delete the levy of interest under sections 2348 and 234C. 1O. While dealing with the question as to whether an assessee can be faulted for not declaring the amount of capital gain on acquisition of land when the amount of compensation itself is not determined Hon ble Allahabad High Court in the case of CIT vs. Prem Kumar [2008] 169 Taxman 351 held as follows: Lex non cogit ad impossibilie is an age old maxim meaning that the law does not compel a man to do which he cannot possibly perform. Requiring the assessee to file a proper and complete return by including the income under the head 'Capital gain' would be impossible for the assessee, in cases of the nature referred above. In the case of VL.S. Finance Ltd. v ClT [20Q7J 289 ITR 286 Hon 'ble Delhi High Court was concerned with the question as to whether assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n discussed by the Ahmedabad Bench (supra) we agree with the contention of the assessee that the assessee has acted under bonafide belief that no tax was to be deducted at source on these payments. Apart from the bonafide belief we further noted that as per para 4(b) of Article 12 of Indo-US DTAA fees for included services means if such services made available technical knowledge, experience, skill, know-how, or processes, or consists of the development and transfer of a technical plan or technical design. The training in the case in hand was given to the pilots and other staff as per the requirement of the DGCA Rules therefore, it was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term service make available . The decisions relied upon by the Ld. DR are on the taxability of the income in the hand of the non- resident in view of the retrospective amendment therefore the said principle cannot be applied while deciding the issue of disallowance u/s 40(a)(i). In view of the above discussion and the facts and circumstances of the case we are of the considered opinion that the disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bursement of these expenses, the question of deducting TDS does not arise. Accordingly, the Assessing Officer is directed to delete the demand of TDS and interest u/s 201(1A) of the Income-tax Act thereon in the case of the appellant company. Following the above decision, the disallowance of mobilization expenses paid in foreign currency is deleted. This ground of appeal is allowed. 7. We have heard the learned DR and also perused the materials placed on record as well as the orders passed by the Revenue authorities. We have noticed that in the assessment order it has been categorically mentioned that mobilization of expenses of ₹ 43,90,000/- were paid to Canada Inc. for acquiring the aircrafts on lease. Mobilisation expenses pertain to expenses incurred on bringing the aircraft from the Country of Lessor to India and hence they are in the nature of expenditure incurred for acquiring the aircrafts as they are covered in the specific lease agreements with the Lessors. We have also perused the orders of CIT(A) where in para number 3.1 of the CIT(A). There is reference of order for previous year wherein it has been categorically mentioned that the TDS was not deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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