TaxTMI 
TaxTMI 
2009 (4) TMI 546
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....ch India (P.) Ltd. could have approached the department under section 195(2) to arrive at the taxability of the payments. (iv)The learned CIT(A) erred in appreciating the legal position settled by the Hon'ble Apex Court in the case of Transmission Corporation of AP Ltd. v. CIT [1999] 239 ITR 587 (SC) - [2002-TIOL-471-SC-IT], tax was deductible on gross sums and it was not relevant whether the transaction resulted in profit or loss." 3. The Assessing Officer on verification of records found that M/s. Intel Technology India Private Ltd. ('Intel') entered into assets and liabilities transfer agreement on 15-3-2003 with M/s. Intel Asia Electronics Inc. USA (India Branch Office) ("Intel Asia"). As per the agreement, M/s. Intel Asia transferred all assets of its Indian Branch to M/s. Intel on 1-4-2003. As per clause 2 of the agreement, the consideration agreed was a difference between the value of assets and the value of liabilities. The written down value of the assets was Rs. 4,61,02,591. M/s. Intel accounted the purchase of the above-referred assets in its books on 1-4-2003 by debiting the assets accounts and crediting M/s. Intel Asia account by an amount of Rs. 2,60,00,000. As the ....
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....[1985] 152 ITR 753 (AP). u Transmission Corpn. of AP Ltd. v. CIT [1999] 239 ITR 587 (SC). 5. Before the learned Assessing Officer, the assessee relied on the Explanation below section 191. It was submitted that when the deductee paid the tax then the deductor cannot be treated as an assessee-in-default. The deductee has duly deposited the tax and, therefore, no demand can be raised against the deductor. The Assessing Officer mentioned that the deductee has paid tax of Rs. 3,21,700 on other income and has not paid tax on the transactions on which tax was to be deducted. Therefore, the learned Assessing Officer treated the assessee-in-default in terms of provisions of section 201(1) and 201(1A). 6. Before the learned CIT(A), the assessee has relied on the decision of the Hon'ble Apex Court in the case of Hindustan Coca Cola Beverage (P.) Ltd. v. CIT [2007] 293 ITR 226 in which it was held by the Hon'ble Apex Court that there could be no recovery of the tax alleged to be in default once again from the assessee deductor considering that the deductee/recipient had already paid taxes on the amount received from the appellant. For this proposition, reliance was also placed on the....
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....argument only, that the appellant had made deduction of TDS of Rs. 1,06,60,000 on the amount credited to the account of the payee on 1-4-2003, the payee would be entitled to claim refund of the excess tax deducted in its return of income along with interest thereon. Thus, in view of the fact that the payee, i.e., Intel Asia Branch had included this transaction in its return of income and paid due taxes thereon, the Assessing Officer cannot try to recover tax once again from the appellant-payer on the same transaction. It would be pertinent here to refer to CBDT Circular No. 275/201/95-IT(B), dated 29-1-1997 which declares : "no demand visualized under section 201(1) of the Income-tax Act should be enforced after the tax deductor has satisfied the officer-in-charge of TDS that taxes due have been paid by the deductee-assessee". Section 195(2) provides that where the payer considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to determine the appropriate proportion of such sum so chargeable and, upon such determination, tax shall be deducted accordingly. In the instant case, however, no pr....
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....emedy is that the assessee was to have filed an appeal under section 248 and should have claimed that tax is not deductible. That appeal could have been filed after deducting tax at source. 10. Before us, the learned AR has filed the sequence of events as under:- Date Event March 15, 2003 Date of Assets A Liabilities Transfer Agreement entered into between the Respondent and Intel Asia Branch to the Respondent (copy enclosed at pages 9 to 15 of this submission). April 1, 2003 Transfer of assets and liabilities by Intel Asia Branch to the Respondent. November 1, 2003 Valuation report issued by Approved Valuer determining the value of assets at Rs. 2,60,00,000 (copy enclosed at pages 16 to 48 of this submission). November 9, 2004 Payment of consideration by the Respondent to Intel Asia Branch. Payment was made without deduction of tax at source. November 1, 2004 Filing of return of income by Intel Asia Branch in India. The acknowledged copy of the return and computation of total income are enclosed at pages 49 to 53 of this submission. Total income determined at Rs. 5,43,930. Entire tax (including interest) of Rs. 2,33,046 paid as advance tax on March 12, 2004. Advance t....
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....t section 195 is not applicable because the deductee is a tax resident of India and is being assessed in India. This ground of appeal has been decided by the learned CIT(A) against the deductor and the deductor has not filed any cross-objection. Therefore, it cannot be held that section 195 will not be applicable because the deductee is a tax resident of India and is being assessed in India as the deductee is having business presence in India. Moreover, it is clear from the assessment order of the deductee that status of the deductee has been taken as foreign company. Section 195 refers to payment to a foreign company. It nowhere mentioned that a foreign company, who is being assessed in India on account of its business presence, will be exempt from section 195. 13. The Tribunal had an occasion to consider the applicability of section 195 in a case where the deductor paid consideration and on account of that consideration, the deductee was liable to capital gain but in case the carried forward capital loss was to be adjusted then there would have been no income. The issue before the Tribunal was that under such circumstances whether the deductor was obliged to deduct the tax at so....
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....under this Act, other than interest, who denies his liability to make such deduction, may appeal to the Commissioner (Appeals) to be declared not liable to make such deduction. 15. As per section 195(1) of the Income-tax Act, the person responsible for payment to non-resident is required to deduct income-tax at the time of credit of such income to the account of the payee or at the time of payment. In the instant case, the third buy-back is resulting into an income to the non-resident. The Legislature has used the word 'such' before income in section 195(1) of the Income-tax Act. Hence, section 195(1) is applicable in respect of each credit of income or each payment of income. The words 'such income' will refer to the income in respect of the payment or of the credit. The word 'such' precede before the word has been a subject of interpretation. 16. The expression "such profits" was a matter of deliberation before the Hon'ble Calcutta High Court in the case of CIT v. Belliss & Morcom (I) Ltd. [1982] 26 CTR (Cal.) 76 : [1982] 136 ITR 481 (Cal.). The said matter was with reference to the allowability of deduction to priority industries under section 80-I of the Act. The Hon'ble Calc....
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....34 observed as under :- "The word 'such' appearing in the second part of sub-section (1) signifies that the recoupment or benefit must be in respect of the loss, expenditure or trading liability mentioned in the first part of sub-section (1)." 24. The word 'such' is used in section 271B. It required before the amendment in section 271B that the assessee has to obtain a report of such order as required under section 44AB. The use of the word 'such' before audit as required under section 44AB as interpreted by the Agra Bench in the case of Mahim Patran (P.) Ltd. v. Asstt. CIT [2003] SOT 332 to mean that such audit means, an audit required to be carried out under section 44AB. 25. Hence from section 195(1), it is clear that a deduction of tax at source is to be considered at the time of each credit or payment. 26. Similarly, in section 195(2), it is mentioned that where a person responsible for paying any such sum chargeable under this Act considers that the whole of such sum would not be income chargeable in the case of recipient, he may make application to the Assessing Officer to determine the appropriate proportion of such sum so chargeable. The words 'such sum' mentioned in s....
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....ion 197 is equally applicable when the payee has to deduct tax at source under section 195 of the Act. In section 197, the Assessing Officer has to be satisfied that the total income of the recipient justifies the deduction of income-tax at any lower rates or no deduction of income-tax then he can issue a certificate. In section 197, reference is to the total income while in section 195 reference is to the sum which is being paid. While ascertaining total income for the year under reference, the Assessing Officer could have considered the setting off of the losses. In the instant case, the assessee has not filed any application under section 197 of the Income-tax Act. 30. The Hon'ble Apex Court in the case of CIT v. Williamson & Financial Services 297 ITR 17 = (2007-TIOL-228-SC-IT) has observed that the definition of the term 'total income' as contained in section 2(45) of the Income-tax Act involves two ingredients - firstly, the income must consist of the total amount of income referred to in section 5; and secondly, it must be computed in the manner laid down in the Income-tax Act. Hence, for the purposes of issuing certificate under section 197, the Assessing Officer was to be....
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.... Section 248 of the Income-tax Act provides that an assessee filed an appeal if it denies its liability to make deduction under sections 195 and 200. Such appeal can be filed after deducting the tax at source. In the instant case, the appellant has not made an application under section 197 and we have already held that the appellant was required to deduct tax at source in accordance with provisions under section 195. Section 248 also specifies the deduction of tax at source of any sum chargeable under the Act. The word 'any sum' refers to the sum mentioned in section 195 and does not refer to the total income. Hence, the learned CIT(A) was justified in holding that the appellant was required to deduct tax at source after admitting the appeal of the assessee under section 248 of the Income-tax Act." 14. It is seen that the credit was made on 1-4-2003 while the valuation report is dated 1-11-2003. Hence, on the date of credit, it was not known to the deductor that the amount paid will be resulting into loss. The deductor cannot make an assessment of income in the hands of the deductee. The deductee filed the return of income and since the transaction in question was between the asso....
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....x Act." Thus, the deductee has disclosed the transaction and according to the deductee, it has resulted into loss. Of course, while making assessment, the Assessing Officer has not accepted the loss and as a result of transfer price adjustment, held that the transaction has resulted into short-term capital gain at Rs. 1,21,37,891 as compared to the short-term capital loss declared by the assessee at Rs. 2,01,03,430. Hence, in respect of transaction, the deductee filed the return and as per that return filed on 1-11-2004, no tax was payable on the transaction on which the deductor was required to deduct tax at source. Hence, the liability of the deductor to deduct tax at source will end when the deductee has filed the return. The deductor cannot be supposed to deduct tax at source in respect of adjustment if any made by the Assessing Officer in respect of income-tax assessment of the deductee. 18. Hon'ble Apex Court in the case of CIT v. Eli Lilly & Co. (India) (P.) Ltd. [2008] 297 ITR 300 (Delhi) (available on ITAT online.org.) observed as under:- "A Perusal of section 201(1) and section 201(1A) shows that both these provisions are without prejudice to each other. It means that ....