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TMI Blog2019 (10) TMI 262X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in holding that the dis-allowance u/s 40(a)(ia) of the I.T. Act, 1961 cannot be made in respect of the payment of professional fees outside India without realizing that the tax was required to be deducted on these payments u/s 195 of the Income Tax Act, 1961? (ii) Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that the requirement of 'rendering of services' in India was done away with by the insertion of an Explanation by the Finance Act, 2010, with retrospective effect without appreciating that the said explanation was merely clarificatory in nature and as such the tax was supposed to be deducted on receipts taxable on India even if the services were rendered outside India? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer disallowed the professional fees of Rs. 7 crores paid under Section 40(a)(i) of the Act, for non deduction of tax at source on payments made to the service providers in his Assessment Order dated 24th December, 2010. 5. Being aggrieved with the Assessment Order dated 24th December, 2010, the respondent filed an appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By order dated 19th December, 2012, the CIT(A) held that the amounts were paid to the service providers in various countries (except China) were governed by the DTAA. Thus, the dis-allowance for not deducting tax was not justified. Thus, the entire amount of Rs. 7 crores which was disallowed was deleted except the payment of Rs. 33.54 lakhs made to KPMG, China. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the matter, the impugned order further holds that at the relevant time there was no obligation to deduct tax at source in respect of fees paid to service providers, on the basis of its deemed income under Section 9(1)(vii) of the Act. It was only by the amendment made by the Finance Act, 2010 with retrospective effect by adding an Explanation to Section 9(1)(vii) of the Act, that the requirement of the service providers providing the same in India was done away with, for its application. Thus, making it deemed income subject to tax in India and require tax deduction at source by the respondent. However, the Tribunal held that yet the obligation to deduct tax cannot be created with the aid of an amendment made with retrospective effect, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the DTAA, the occasion to deduct tax at source would not arise. Therefore, dis-allowance under Section 40(a)(i) of the Act will also not arise. 10. In the above view, the question no.(i) as proposed by the Revenue is academic in these facts as the application of DTAA which results in no income arising for the service providers in India is a concluded issue. Therefore, the occasion to examine Section 195 of the Act in these facts would not arise. 11. So also, question (ii) as proposed is academic as no occasion to deduct tax at source would arise in the absence of any income in the hands of the service providers outside India in view of Section 195 of the Act. Even otherwise a retrospective amendment cannot cast an obligation to deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X
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