TMI Blog2022 (3) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, at the time of payment made by the assessee to non-residents, there was an ambiguity in the definition of royalty and because of this the assessee could not deduct TDS as per provisions of section 195 - Although, the definition has been amended by the Finance Act, 2012, with retrospective effect, but because there was an ambiguity in the definition, the assessee cannot do impossible things by foreseeing an amendment to the definition of royalty and deduct TDS on payment made to non-residents. This principle is supported by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd . [ 2021 (3) TMI 138 - SUPREME COURT] where it was held that person mentioned in section 195 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merica) Inc for non-deduction of tax at source u/s 195 of the Act without assigning proper reasons and justification. 3. The CIT (Appeals)-1 ought to have appreciated that the payment towards Internet Private Line Charges (IPLC) would not fall within the ambit of the term Royalty and went wrong in placing reliance on the judgment in the case of Verizon Communications Singapore Pvt Ltd. Vs. ITO in TCA Nos 147 to 149 of 2011 and TCA 230 of 2012 without assigning proper reasons and justification. 4. The CIT (Appeals)-1 failed to appreciate that the Income Tax Appellate Tribunal, Chennai remitted the issue with a limited purpose of consideration of the Double Taxation Avoidance Agreement to the facts of the case and ought to have ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer and directed the Assessing Officer to reexamine claim of the assessee in light of material that may be filed by the assessee and also Double Taxation Avoidance Agreement between India USA. Accordingly, the Assessing Officer has taken up case for fresh examination on applicability of TDS and consequent disallowances of payment made to certain non-residents u/s.40(a)(ia) of the Income Tax Act, 1961. The Assessing Officer after considering relevant facts and also amendment to provisions of section 9(1)(vi) / 9(1)(vii) by the Finance Act, 2012, with retrospective effect from 01.06.1976, held that payment made by the assessee to non-resident is in the nature of royalty within the meaning of section 9(1)(vi) read with Article 12 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to M/s.Tata communications (America) Inc. payments were made for internet private line charges and such services has been rendered by the nonresident service provider through equipment in USA and such service is coming within the definition of royalty and thus, sustained additions made by the Assessing Officer towards disallowance of payment made for internet private line charges. Aggrieved by the learned CIT(A) order, the assessee is in appeal before us. 5. The learned A.R for the assessee submitted that the assessee could not deduct TDS u/s.195 of the Act, on payment made to non-residents service provider, because there was ambiguity in the definition of royalty, as defined under section 9(1)(vi) / 9(1)(vii) before insertion of E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A), after considering relevant facts has rightly held that same is liable for TDS u/s.195 of the Act, and for non-deduction of TDS, the Assessing Officer has rightly disallowed payment made to non-residents u/s.40(a)(ia) of the Act. 7. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The assessee has made certain payments to M/s. Tata communications (America) Inc. for rendering internet private line services and such services were rendered by the recipient through an equipment in USA and the India via internet. The Assessing Officer has considered payments made to non-residents as royalty u/s.9(1)(vi) / 9(1)(vii) read with Article 12 of the DTAA between India and USA a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty and because of this the assessee could not deduct TDS as per provisions of section 195 of the Act. Although, the definition has been amended by the Finance Act, 2012, with retrospective effect, but because there was an ambiguity in the definition, the assessee cannot do impossible things by foreseeing an amendment to the definition of royalty and deduct TDS on payment made to non-residents. This principle is supported by the decision of the Hon'ble Supreme Court in the case of Engineering Analysis Centre of Excellence Pvt. Ltd Vs. CIT in Civil Appeal No.8733 8734 of 2018, where it was held that person mentioned in section 195 of the Income Tax Act cannot be expected to do the impossible, namely, to apply the expanded definition o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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