TMI Blog2018 (6) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... ional as these recipients were foreign residents having no PE in India and the services were also rendered by them outside India. Set aside the order of CIT(A) by holding that no tax at source is required to be deducted at source. The AO is directed accordingly. Disallowance u/s.14A - Held that:- We direct the AO to delete the addition as the case of assessee is squarely covered by the case of Godrej & Boyce Manufacturing Co. Ltd., vs. Dy. Commissioner of Income Tax [2010 (8) TMI 77 - BOMBAY HIGH COURT] in which it has been held that recording of satisfaction is mandatory requirement without which the provision Section 14A r.w.Rule 8D cannot be applied. We set aside the order of CIT(A) and we direct the AO to delete the disallowance. - Decided in favour of assessee - ITA No. 1651/Mum/2016 - - - Dated:- 29-5-2018 - Shri C.N. Prasad, Judicial Member And Shri Rajesh Kumar, Accountant Member For The Appellant : Shri Sunil A Desai, A.R. For The Respondent : Shri M.C. Omi Ningshen, D.R. ORDER Per Rajesh Kumar, Accountant Member The aforesaid appeal has been filed by the assessee against the impugned order dated 19/01/2016, passed by the CIT(A)- I2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. However, the contention of assessee did not find favour with the AO and the AO observed that technical services in UK Branch were utilised in the business of the assessee. He further submitted that assessee is an Indian company having its registered office in India to handle its export business. All their manufacturing activities were carried out in India as the production unit, ware house and godowns are located in India and as such the exclusion provided u/s. 9(1)(vii)(b) is not applicable. The AO further observed that in view of the retrospective amendment w.e.f. 01/06/1976, in Section 9 brought out by the Finance Act 2010, it is no longer necessary that in order to attract taxability in India, the services must be rendered in India. According to AO, utilisation of services in India is enough to attract its taxability in India. Finally, the AO added the said amount to the income of the assessee u/s.40(a)(i) of the Act. In the appellate proceedings, CIT(A) dismissed the appeal of the assessee by holding and observing as under:- I have considered the submission made by the appellant and the reasons recorded by the assessing officer for disallowance in the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (1) only on that proportion of the sum which is so chargeable. 47(***) In the case here, the appellant has made payment to the non resident. The section applies to any sum chargeable under the provision of this Act to the non resident. From the plain reading of the said section it can be clearly seen that if the payment is made to a non resident, whether it is in India or outside India or in any manner, the person making payment is liable for deducting tax at source. If the person has any doubt for deduction of tax, then he should approach the Assessing Officer as provided in section 195(2). Further, the Hon'ble Supreme Court in the case of Transmission Corp. Of A.P. Ltd.( 239 ITR 587) has held that if the assessee has made no application under section 195 (2), then tax must be deducted under section 195(1). In view of the above the appellant is liable to deduct tax at source as provided in section 195 of the Act and therefore as the same is not deducted all provisions of section 40(a)(i)(A) is attracted. Under the above mentioned facts and circumstances, it is found that the AO has correctly made the disallowance and accordingly Grounds of Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he paper book. Finally, learned AR submitted that since the payments were made by the UK Branch in respect of services which are availed in UK and therefore, no TDS is liable to be deducted under the said payments and consequently the disallowance as made by the AO on account of these two heads needs to be deleted. 8. Learned DR on the other hand relied on the orders of the authorities below and submitted that the assessee has been carrying on business in India and therefore the TDS was required to be deducted in India. In so far as the expenses on advertisement in foreign print houses and magazines are concerned , the ld DR argued that admittedly the production unit was located in India and therefore the TDS has to be deducted. Secondly on the consultancy and technical fee, ld DR submitted that retrospective amendment in section 9 w.e.f. 1st June , 1976, it is not necessary that services are to be rendered in India. 9. We have heard the rival contentions and perused the material on record carefully. In the present case, the assessee has a UK Branch and is doing business abroad under the brand name of Cyber Jimmies in UK. The UK branch during the year incurred and paid ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has suo motto disallowed a sum of ₹ 2,58,373/- u/s.14A of the Act , a balance disallowance of ₹ 5,90,654 was required to be made. The AO calculated the said disallowance by subtracting the ₹ 2,58,373/- from ₹ 8,49,027/- which is calculated by the assessee as per letter dated 06/08/2010 u/s.14A r.w.Rule 8D and added the same to the income of the assessee. The CIT(A) dismissed the appeal of the assessee by holding that the assessee might have incurred expenses in relation to the said exempt income. 13. Learned AR vehemently submitted before us that the AO has simply called for the working of disallowance under Rule 8D r.w.s.14A of the Act which was filed by the assessee vide letter dated 06/08/2010 calculating disallowance of ₹ 8,49,027/- but never agreed to this disallowance of ₹ 8,49,027/-. Learned AR submitted that the assessee has suomoto disallowed ₹ 2,58,373/- u/s.14A. Learned AR contended that AO has not recorded his satisfaction which is mandatory in terms of provision of Section 14A as to the reason for which the disallowance as made by the assessee is not acceptable or incorrect. 14. Learned AR submitted that since rec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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