TMI Blog2016 (11) TMI 113X X X X Extracts X X X X X X X X Extracts X X X X ..... egally unsustainable, we direct the AO to delete the same. It is accordingly ordered. On this short point, we allow the assessee's appeal. - IT APPEAL NO. 4401 (MUM.) OF 2013 - - - Dated:- 17-8-2016 - JASON P. BOAZ AND SAKTIJIT DEY, JJ. For The Appellant : Ronak Doshi For The Respondent : T. Roumauan Paite Ronak Doshi for the Appellant. T. Roumauan Paite for the Respondent. ORDER Jason P. Boaz, Accountant Member - This appeal by the assessee is directed against the order of the CIT (A)-14, Mumbai dated 22.02.2013 for A.Y. 2009-10. 2. The facts of the case, briefly, are as under:- 2.1 The assessee company, engaged in business as management consultants, filed its return of income for A.Y. 2009-10 on 26.09.2009 declaring income of ₹ 19,79,012/-. On 28.03.2011, the assessee filed a revised return declaring income of ₹ 38,40,819/-. The returns were processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act') and the case was subsequently taken up for scrutiny. The assessment was completed under section 143(3) of the Act vide order dated 22.12.2011, wherein the income of the assessee was determined at ₹ 95,26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), contends that the learned CIT (A) erred in upholding the action of the Assessing Officer (AO) on the disallowance of professional fees of ₹ 26,05,239/- under section 40(a)(i) of the Act for alleged non deduction of tax at source under section 195 of the Act on remittance made to Orfis Baker Tilly, a resident of France. It is contended that in doing so, the learned CIT (A) failed to appreciate that the remittance of professional fees paid to Orfis Baker Tilly ('OBT') was not exigible as per the provisions of section 195(1) of the Act and the Indo-France DTAA and therefore the question of disallowance would not arise. In view of the above, it is prayed that the AO be directed to delete the disallowance of professional fees amounting to ₹ 26,05,239/-. 4.2 At the outset the learned A.R of the assessee submitted that since 'OBT' rendered the services outside India, hence the income is not deemed to accrue or arise in India and therefore the remittance is not chargeable to tax under section 9 of the Act. Therefore, there was no requirement for the assessee to withhold tax under section 195 of the Act in respect of the said remittance in the period releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 'OBT', a non resident, was in the nature of fees for technical services, ('FTS'), held that the assessee was under obligation under section 195 of the Act to withhold tax at source from this payment and proceeded to uphold the disallowance made under section 40(a)(i) of the Act. According to the learned A.R of the assessee, even if by any stretch of imagination, the remittance was considered as 'FTS', no TDS was required to be made at the time of remittance as per the law existing at that time (i.e. in the period relevant to Financial year 2008-09) because the said services were not rendered in India. The learned A.R. submitted, by virtue of amendment to Explanation to section 9(2) by Finance Act, 2010 w.e.f. 01.06.1976 even income received from services rendered outside India is to be treated as FTS. However, he submitted, by virtue of such retrospective amendment liability of TDS cannot be fastened upon the assessee under section 195, since as per the existing provision at the relevant period the income was not taxable, hence, assessee was not required to deduct tax at source. The learned D.R., though, supported the order of the CIT (A), however, he ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on remittance to 'OBT' which were rendered outside India and therefore in our view no disallowance under section 40(a)(i) of the Act can be made or was sustainable since the assessee made the remittances to 'OBT' in the period relevant to AY 2009-10 which is before 08.05.2010. 4.3.3 In similar circumstances, on similar facts, Panaji Bench of the ITAT in the case of Ajit Ramakant Phatarpekar (supra) has held as under at para 5 and 6 thereof. '5. We heard the rival submissions and carefully considered the same alongwith the order of the tax authorities below. The issue before us is whether any disallowance can be made u/s. 40(a)(i). The AO during the course of the assessment proceedings noted that the Assessee has made payment amounting 9 ITA NOS. 145 146/PNJ/2014 (A.Y 2010-11) to ₹ 28,87,983/- to Hongkong and Singapore parties, ₹ 17,43,033/- to Zhao Long (Asia) Ltd. for monitoring, supervision of discharged cargo, draft survey, joint sampling of discharged cargo, photographs, sample preparation and sealing of samples, analysis of the grades etc. Copies of the bills were placed at pg. 134-140 of the paper book. From all the bills it is apparent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... residence or place of business or business connection in India or the non-resident has rendered services in India. Under the amended explanation to Sec. 9(1) as it exists today it is specifically stated that the income of non-resident shall be deemed to accrue or arise in India under clause (v) or (vi) or (vii) of Sec. 9(1) and shall be included in the total income whether or not (a) the non-resident has residence or place of business or business connection in India or (b) the non-resident has rendered services in India. Similar view has been taken by the co-ordinate Mumbai bench of this Tribunal in the case of Ashapura Minichem Ltd. v. ADIT, 40 SOT 220 (Mum.) in which it was observed as under : 9. The legal proposition canvassed by the learned counsel, however, does no longer hold good in view of retrospective amendment with effect from 1-6-1976 in section 9brought out by the Finance Act, 2010. Under the amended Explanation to section 9(1), as it exists on the statute now, it is specifically stated that the income of the non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of section 9(1), and shall be included in his total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce rule, to a taxpayer is relieved only through the specified relief mechanism under the treaties and the domestic law. It is thus fallacious to proceed on the basis that territorial nexus to a tax jurisdiction being sine qua non to taxability in that jurisdiction is a normal international practice in all tax systems. This school of thought is now specifically supported by the retrospective amendment to section 9. 6. It is an undisputed fact that the Finance Act, 2010 received the assent of the President on 8.5.2010 and all the payments have been made by the Assessee to the non-resident party prior to receiving of assent of the President making the retrospective amendment by adding explanation to Sec. 9(1). At the time when the Assessee made the payment there was no provision u/s. 9(1) making the technical fees deemed to accrue or arise in India whether or not (a) the non-resident has residence or place of business or business connection in India or (b) the non-resident has rendered services in India. It is not disputed by the ld. DR that the non-resident did not have residence or place of business or business connection in India. The non-resident has also not rendered service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held by Ahmedabad Bench of this Tribunal in the case of Sterling Abrasives Ltd. by its order dated 23.12.2010 cited by the Ld. Counsel for the assessee, the assessee cannot be held to be liable to deduct tax at source relying on the subsequent amendments made in the Act with retrospective 13 ITA NOS. 145 146/PNJ/2014 (A.Y 2010-11) effect. In the said case, Explanation to sec. 9(2) was inserted by the Finance Act, 2007 with retrospective effect from 1.6.1976 and it was held by the Tribunal that it was impossible for the assessee to deduct tax in the financial year 2003-04 when as per the relevant legal position prevalent in the financial year 2003-04, the obligation to deduct tax was not on the assessee. The Tribunal based its decision on a legal Maxim lex non cogit ad impossiblia meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform and relied on the decision of Hon'ble Supreme Court in the case of Krishna Swamy S. PD and Another v. Union of India and others 281 ITR 305 wherein the said legal Maxim was accepted by the Hon'ble apex court. 26. In view of the above discussion, we are of the view that the amount in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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