TMI Blog2021 (3) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... o to section 40(a)(ia) and section 40(a)(i) are evenly worded and Pari materia to each other. Both the provisions were introduced by the legislature in order to remove the anomaly and curative in nature. In the case of section 40(a)(ia) the Hon ble Bombay High Court in the case of Perfect Circle India Pvt. Ltd. [ 2019 (1) TMI 1532 - BOMBAY HIGH COURT ] and in the case of Ansal Land Mark Township (P) Ltd. [ 2015 (9) TMI 79 - DELHI HIGH COURT ] have already held that these provisions are applicable retrospectively with effect from 01.04.2005. Since the amendment was carried out in order to remove the anomalies in the sections similar to section 40(a)(ia) and in our considered view, the amendment in section 40(a)(i) is also made in order to remove the anomaly and it is no doubt curative in nature. Therefore, considering the findings of the Hon ble High Courts, in our view the amendment to the section 40(a)(i) is also applicable retrospectively. Considering our observation in the above paragraphs, in our considered view, the documents submitted before us clearly shows that the income of the payee is not taxable in India and assessee has already filed the relevant information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 to August 2013. For the remaining months assessee has not deducted tax at source which amounts to ₹ 6,98,38,225/ when assessee was asked to show cause why the amount on which tax was not deducted at source should not be disallowed under section 40(a)(i) of the Act. In response, assessee submitted that as per the provisions of section 195 of the Act, assessee is responsible to deduct tax only on those income which is chargeable to tax in India. In the given case, the income of the assessee is not chargeable to tax for the reason that assessee is a tax resident in Israel and is eligible to claim the benefit of Indo Israel treaty and the article 7 of the treaty is applicable to the assessee. The assessing officer rejected the contention of the assessee and invoked the provisions of section 40(a)(i) of the Act and disallowed payment to the extent of ₹ 6,98,38,225/ . 5. Aggrieved with the above order assessee preferred an appeal before Ld. CIT(A) 16, Mumbai. Before Ld CIT(A), assessee made similar submissions as was made before assessing officer and Ld CIT(A) dismissed the appeal by sustaining the additions made by the assessing officer. 6. Aggrieved with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lltick Israel after going through the characterization of the remittances; 5. The learned CIT(A) has erred in holding that the agreement between the Appellant and Celltick Israel for distribution of software solution can be considered as a colourable device as to hide the reality behind the created documents and to evade tax on transfer of the rights to use. Each of the above grounds is independent and without prejudice to one another. The Appellant craves leave to add, to alter, to amend or to delete any or all of the above grounds of appeal, at or prior to hearing of the appeal so as to enable the Hon'ble Income Tax Appellate Tribunal to decide the appeal according to law. The Appellant prays that appropriate relief be granted based on the above grounds of appeal and the facts and circumstances of the case. 7. Before us assessee filed additional grounds of appeal which is reproduced below:- Ld. CIT(A) erred in law and in confirming disallowance of ₹ 6,98,38,225 u/s. 40(a)(i) made by Ld. AO in view of insertion of second proviso to section 40(a)(i) w.e.f 01.04.2020, which was held to be of retrospective effect from 01.04.2005 by various Hon. High c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments (i) Certificate from chartered accountant in form 26A (ii) Return and computation of income of payee filed u/s.139 4. I also invite your honours kind attention to following judicial decisions in which second proviso to section 40(a)(ia) inserted w.e.f 01.04.2013 was held to be of retrospective effect from 01.04.2005. second proviso to section 40(a)(i) inserted w.e.f 01.04.2020 is pari materia with second proviso to section 40(a)(ia), hence the issue is squarely covered, a. PCIT vs. Perfect Circle India Pvt. Ltd, hon. Bombay High Court ITA No. 707 of 2016 dated 07/01/2019 b. CITv. Ansal Land Mark Township (P.) Ltd [2015] 61 taxmann.com 45 HIGH COURT OF DELHI 5. I also invite your honours kind attention to memorandum explaining amendment made to section 40(a)(i) and section 201 of the Act by Finance (No.2) Bill, 2019, which explains that amendment is remove anomaly and curative in nature, hence the same is in retrospective in nature Relaxing the provisions of sections 201 and 40 of the Act in case of payments to non-residents Section 201 of the Act provides that where any person, including the principal officer of a company or an employ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(i) and 201(1) are similar to Section 40(a)(ia) of the Act. Therefore, the amendment are in the nature of removing anomaly. Hence, it is applicable retrospectively. 12. On the other hand, Ld DR submitted that assessee is in the distribution and marketing of the live screen/Flash services. He submitted it is not only distribution of services, the parent company allowed the assessee to use the program exclusively or non-exclusively depending upon requirement of the mobile companies. Therefore, as per the findings of the Ld CIT(A), it is falling under the category of royalty. He brought to our notice page 2 of the AO s letter on additional grounds of appeal. Further he brought to our notice para 6 of the assessment order and submitted that assessee has deducted TDS in the 1st half of the assessment year and not deducted in the 2nd half of the assessment year. With regard to submission on the issue of Celltick Mobile Israel and findings of ITAT, he submitted that the issue is pending before the High Court. Further he brought to our notice para 4 of the order of CIT(A). 13. In the rejoinder, Ld AR brought to our notice page 29 of the paper book, which is findings of the ITAT on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 201(1). It shall be deemed that the assessee has deducted and paid the taxes on such sum on the date of furnishing of return of income by the payee referred to in the said proviso. As per proviso to section 201(1), a payee shall not be deemed to be an assessee in default in respect of such tax if such payee, (a) furnished its return of income under section 139, (b) has taken into account such sum for computing income in such return of income and (c) has paid the tax due on the income declared by him in such return of income and along with such payee furnishes a certificate to this effect from an accountant as per form prescribed for this purpose. 17. In the given case, we notice that the payee has already furnished certificate from a chartered accountant, return of income and computation of income under section 139. Further we also noticed that the income of the payee is not chargeable to tax in India as per the decision of the coordinate bench. Even though as submitted by learned DR that the matter of payee is pending before High Court. In our view, as far as the current position available on record that the income of the payee is not chargeable to tax in India. Consider ..... X X X X Extracts X X X X X X X X Extracts X X X X
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