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TMI Blog2017 (4) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... for in the books of accounts on 22.11.2010, though the payment was made, a bit later, on 12.05.2011. The tax of Rs. 53,03,595 was duly withheld from the payment so made, and it was deposited on 20.06.2011. There is a small variation in the amount credited, amount paid and the amount of tax but that was because of the fact that the amount was payable in Euros and the conversion rates at different points of time varied. Suffice to note that on these facts, a demand for interest under Section 201(1A) was raised on the assessee by treating the due date for depositing tax deductible at source as 07.12.2010, being 7 days from the end of the month in which amount was credited in the books of accounts. This demand was quantified at Rs. 6,90,530 Aggrieved, assessee carried the matter in appeal before the CIT(A). It was contended by the assessee that the taxability on the amount of Rs. 5,02,35,336, which is taxable under article 12(3) of India Italy Double Taxation Avoidance Agreement [(1996) 220 ITR (St) 3] only at the point of time when it is actually paid, did not arise at the point of time when credit was afforded to the recipient in the books of accounts. Learned CIT(A) rejected this pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year of taxability of the same in the case of the payee. The DTAA quoted by the appellant also does not contain any such provision. Therefore, any person responsible for making payment to another person shall have to deduct tax at source at the time of credit thereof to the account payee or payment thereof to the payee whichever is earlier. Taxability of the amount in the hands of the payee shall be determined in accordance with the relevant provisions of the Act. The circumstances under which the tax is deductible at the time of payment, have been provided in the first proviso to subsection (1) quoted above. In case the amount payable is not chargeable in the hands of the payee, subsections (2) and (3) of section 195 provide for procedure to be followed for non-deduction of tax at source. In view of this, the action of the AO in treating due date of payment of tax as 07/12/2010 and charging interest from the date of deduction of tax to the date of payment, in accordance with the provisions of section 201(1A) of the IT Act, is hereby upheld." 3. The assessee is aggrieved and is in appeal before us. 4. We have heard the rival contentions, perused the material on record an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of "any sum paid to any resident". Similarly, Sections 194EE and 194F inter alia provide for deduction of tax in respect of "any amount" referred to in the specified provisions. In none of the provisions we find the expression "sum chargeable under the provisions of the Act", which as stated above, is an expression used only in Section 195(1). Therefore, this Court is required to give meaning and effect to the said expression. It follows, therefore, that the obligation to deduct tax at source arises only when there is a sum chargeable under the Act. 6. The decision to withhold tax from a credit or payment to a non-resident is not taken in vacuum. It is taken in the light of the tax liability of the non-resident in respect of the amount in question, and, if there were any doubts on this proposition, these doubts have now been set at rest by Their Lordships. Essentially, therefore, the provisions of Section 195 are to be read in conjunction with the charging provisions under the statue, as also in conjunction with the relevant double taxation avoidance agreements which override these charging provisions. Of course, this is subject to the rider, as set out in Section 90(2) its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he gross amount of the royalties or fees for technical services. 3. The term "royalties" as used in this Article means payments of any kind received as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematography films or films or tapes used for radio or television broadcasting, any patent, trade mark, design or model, plan, secret formula or process, or for the use of, or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience. 4. The term "fees for technical services" as used in this Article means payments of any amount to any person other than payments to an employee of the person making payments, in consideration for the services of a managerial, technical or consultancy nature, including the provisions of services of technical or other personnel. 5. The provisions of paragraphs 1 and 2 shall not apply if the beneficial owner of the royalties or fees for technical services, being a resident of a Contracting State, carries on business in the other Contracting State in which the royalties or fees for technical services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent takes place, the taxability under article 13 of Indo Italian DTAA does not arise. In other words, the mere fact that an Indian resident credits the amount of royalty payable to an Italian resident does not trigger taxability under article 13 of the Indo Italian DTAA. Such is also the view taken by a series of decisions by the coordinate benches, including the decision in the case National Organic Chemical Industries Ltd [(2005) 96 TTJ 765 (Mum)], with which we are in respectful agreement. When the royalty so credited by the assessee is not taxable at the time of credit of such amount to the account of payee, in the light of law laid down by Hon'ble Supreme Court in the case of GE Information Technology (supra), it does not give rise to any tax withholding obligations under section 195 (1) either. 9. As regards the point of time when the payment is actually made, i.e. the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, the taxability in the hands of the recipient arises by @ 20% in terms of the provisions of article 13(2) above. However, even though the assessee is covered by the Indo Italian DTAA, the provisions of the Income Tax Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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