Appellate Tribunal Upholds Assessee's Position on Non-TDS Internet Charges

The Appellate Tribunal ITAT Mumbai dismissed the Revenue's appeals against the Ld. CIT(A)'s order regarding the deletion of additions for non-TDS on Internet charges payments. The Tribunal applied the legal maxim "lex non cogit ad impossibillia," stating that the law cannot compel an impossible act. Citing precedents, the Tribunal held that the retrospective amendment adding Explanation-4 to Sec. 9(1)(vii) couldn't apply to transactions completed before its enactment. Therefore, the Tribunal upheld the assessee's position, emphasizing that legal obligations cannot be imposed retroactively on actions that were impossible at the time.

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Issues:
- Deletion of addition on account of non-TDS on payment towards Internet charges (Band Width charges).

Analysis:
The judgment by the Appellate Tribunal ITAT Mumbai pertains to two appeals filed by the Revenue against the order of the Ld. CIT(A)-13, Mumbai for the Assessment years 2010-11 & 2011-12. The appeals were consolidated due to identical grievances. The core issue was the deletion of the addition concerning non-TDS on payments for Internet charges. The Revenue contended that the payments required TDS under Sec. 194J, and the assessee's failure to deduct tax made them liable for interest under Sec. 201(1A) of the Act.

The Ld. Counsel for the assessee argued that similar issues had been decided in favor of the assessee in various cases. The Departmental Representative acknowledged this. Upon reviewing the orders, the Tribunal noted that the dispute regarding software purchase payments was resolved by the Finance Act 2012, which added Explanation-4 to Sec. 9(1)(vii) retrospectively. The Tribunal applied the legal maxim "lex non cogit ad impossibillia," stating that the law cannot compel an impossible act. Since the assessee had already transacted without TDS before the retrospective amendment, they couldn't be deemed to violate Sec. 194J. The Tribunal cited precedents like Channel Guide India Ltd. Vs ACIT and Rich Graviss Products (P) Ltd. to support its decision. Consequently, the Tribunal dismissed the Revenue's appeals, aligning with the decisions of the Coordinate Bench.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s findings, emphasizing that the retrospective amendment couldn't retroactively apply to transactions completed before its enactment. The judgment underscores the principle that legal obligations cannot be imposed on actions that were impossible at the time.

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