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TMI Blog2022 (12) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... Act on 17-04-2013.The grounds read as under: 1. The order of the Ld. CIT(A) is contrary to law, facts and circumstances of the case. 2. The Ld.CIT(A) erred in giving relief to the assessee on selling commission paid to non-resident company, when it being in the nature of marketing and consultancy services is taxable in India @ 15% as per Article 12 Clause 2(a)(2) of India-USA Double Taxation Avoidance Agreement (DTAA) and taxable @ 10% as per Article 12 Clause l(a)(ii)/l(b)(ii) of India-Australia DTAA. 3. The Ld.CIT(A) erred in giving relief to the assessee on selling commission when the same is within the ambit of section 195 of the Act in view of the DTAA clauses with USA &Australia. 4. The Ld.CIT(A) erred in giving relief to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. 343 ITR 366. The assessee also relied on CBDT circular no. 23 dated 23.07.1969 which was in force in this year since the same was withdrawn only on 22.10.2009. 2.3 Concurring with assessee's submissions Ld. CIT(A) held as under: - 13. The facts and circumstances of the case have been examined vis-à-vis the findings of the AO. The agreements entered into by the appellant with the non-residents have been examined. The prevailing judicial decisions pertaining to such cases have been noted. The services for procuring orders for the products sold by the assessees in India have been generally treated as instances which are not found to be technical service. Payments to agents for procuring export orders was an incident of export an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of the payee is shown to have any PE in India. Therefore, the findings of Ld. CIT(A), in that regard, could not be faulted with. The Ld. AO has invoked Explanation-2 to Sec.195(1) as inserted by Finance Act, 2012 w.r.e.f. 01.04.1962. However, the assessee could not be expected to deduct tax at source in this year by foreseeing such a future amendment to law. In the impugned year, there was no such obligation on the assessee to deduct TDS but such obligation has arisen out of subsequent amendment to law which assessee could never anticipate. 2.5 In this regard, the decision of Chennai Tribunal in M/s Rane Engine Valves Ltd. V/s DCIT (ITA Nos.1175/Chny/2017 &ors. dated 09.03.2022) would apply wherein the bench held as under: - 4. The Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble on record and gone through orders of the authorities below. We find that an identical issue has been considered by the Tribunal in the case of M/s.TVS Electronics Ltd. v. ACIT in ITA No.949/Chny/2017 for the AY 2005-06 dated 24.09.2021, wherein, on identical circumstances held that liability towards TDS cannot be fastened on the assessee on the basis of subsequent amendment to law with retrospective effect, because which was impossible on the part of the assessee to do the impossible things and deduct TDS on payment made to non-residents, because, the assessee cannot foresee the amendment and deduct TDS on said payment and consequently, payment made to non-residents, cannot be disallowed u/s.40(a)(i) of the Act, for failure to deduct TD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .1976 but, the law prevailing at the time of making payment by the assessee to the non-resident was on the basis of judgment of Hon'ble Supreme Court which clearly held that payment made to a non-resident for services rendered outside India cannot be brought to tax in India as fees for technical services in absence of place of business / permanent establishment in India. Since, there was clear law by the decision of Hon'ble Supreme Court, the assessee has made payment without deducting tax at source. Therefore, liability towards TDS cannot be fastened on the assessee on the basis of subsequent amendment to law with retrospective effect, because it was impossible on the part of assessee to deduct tax on income of nonresident because the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld.CIT(A) and direct the AO to delete the additions made towards disallowance of payment made to non-residents u/s.40(a)(i) of the Act. Thus, the bench held that the assessee could not be expected to deduct Tax at source on payment made to non-residents on the basis of subsequent amendment to the law with retrospective effect from earlier date because the assessee cannot foresee the amendment and deduct TDS. Therefore, the disallowance made u/s 40(a)(i) would be unwarranted. Similar is the situation before us. No contrary decision is on record. Therefore, following this decision, we confirm the stand of Ld. CIT(A). The corresponding grounds raised by the revenue stand dismissed. 3. Disallowance u/s 14A 3.1 The assessee earned exempt d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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