TaxTMI 
TaxTMI 
2014 (1) TMI 1501
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..... Ground No. 1 is general in nature and no specific finding is required as it is consequential to the outcome of the Ground No. 2. 4. Ground No. 2 regarding disallowance u/s 40(a)(i) of the Act. The assessee company is engaged in the business of charter hire of helicopters. During the assessment proceeding the AO noted that the assessee has not deducted tax at source while making payment towards training expenses paid to Bell Helicopter Textron Inc. The assessee was asked to explain as to why the said payments should not be disallowed as per section 40(a)(i) of the Income Tax Act. In response the assessee contended that the recipient company is a resident of USA and does not have any permanent establishments in India. The assessee explained before the AO that these agencies are approved by the Directorate General of Civil Aviation of India (DGCA) for providing such training to enable the pilots or engineers as the case may be to get their respective licenses endorsed, to operate/work on respective type of helicopter. On completion of the training the agencies provide a certificate based on which the DGCA make endorsed of respective licenses. Therefore, the assessee contended tha....
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....en otherwise the services in question does not fall under the definition of 'fees for technical services' or fees for included services (FIS) as per para 5 of Article 12 of the Indo-US DTAA. In support of his contention he has relied upon the decision of Ahmedabad Benches of this Tribunal in case of Sterling Abraive Ltd. v. Asstt. CIT 44 SOT 652 and the same has also been followed in the subsequent decision of the same assessee vide order dated 23.12.2010. 6. On the other hand, the Ld. DR has submitted that the training in question was given to maintenance and flying operation staff of the assessee apart from the pilots other staff who are the employees of the assessee and therefore the services were made available to the assessee. She has relied upon the decision of Delhi Benches of this Tribunal in case of Steel Authority of India Ltd. v. ITO [2009] 120 TTJ 297 and submitted that the training fee paid by the assessee for training of its personnel was held as in nature of 'fees for technical services' within the meaning of explanation 2 to section 9(1)(vii) as well as in terms of Article 13(4)(c) of Indo-UK DTAA. Thus, in the case in hand when the training was given to the empl....
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....d to do something which were impossible to perform. The Ahmedabad Bench of this Tribunal in case of Sterling Abraive Ltd. (supra) has extensively discussed this issue in para 8 to 11 as under: "8. We have heard the rival contentions and gone through the facts and circumstances of the case. We find that by amendment in the Finance Act, 2007, the Legislature inserted the explanation retrospectively with retrospective effect from 1-6-1976 to section 9(2) of the Act, whereas the assessment year involved is 2004-05 relevant to previous year 2003-04 and it is impossible for the assessee to deduct tax in the financial year 1-4-2003 to 31-3-2004, when the obligation to deduct TDS was not on the assessee during that period. The provision of section 9 provides for situations where income is deemed to accrue or arise in India to a non-resident. We find that the Legislature vide Finance Act, 1976, a source rule was provided in section 9 through insertion of clauses (v), (vi) and (vii) in sub-section (1) for income by way of interest, royalty or fees for technical services respectively and the intention of introducing the source rule was to bring to tax interest, roy....
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.... total income, whether or not, (a) the non-resident has a residence or place of business or business connection in India; or (b) the non-resident has rendered services in India. This amendment was made retrospectively from 1-6-1976 and will accordingly, apply in relation to the assessment year 1977-78 and subsequent years. 9. In view of the above facts and legal position, whether the assessee can be asked to do impossible Act, i.e., to deduct tax for the past period. With the insertion of the explanation retrospectively by the Finance Act, 2007 with retrospective effect from 1-6-1976 to section 9(2) of the Act, whereas the assessment year involved is 2004-05 relevant to previous year 2003 -04, it is impossible for the assessee to deduct tax in the financial year 1-4-2003 to 3 1-3-2004, when the obligation to deduct TDS was not on the assessee during that period. The argument canvassed by the Ld. counsel on the basis of a legal Maxim lex non cogit ad impossibilia, meaning thereby that the law cannot possibly compel a person t....
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....Revathi Equipment Ltd.[2008] 298 ITR 67, reproduced and thereafter approved the reasoning contained in the following passage of the Tribunal order. We have no doubt in our mind that the levy of interest under sections 234B and 234C are of mandatory nature, but at the same time, if we read sections 234B and 234C carefully, we find that such liability is fastened to those assessees who are liable to pay advance tax. Now, let us see who are liable to pay advance tax and how. Sections 207 and 208 read as under: "207. Tax shall be payable in advance during any financial year, in accordance with the provisions of sections 208 to 219 (both inclusive), in respect of the total income of the assessee which would be chargeable to tax for the assessment year immediately following that financial year, such income being hereafter in this Chapter referred to as "current income". 208. Advance tax shall be payable during a financial year in every ;-A case where the amount of such tax payable by the assessee during that year, as computed in accor....
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.... anything other than to estimate the liability to pay advance tax on the basis of existing provisions. We are of the considered opinion that in such situation, it cannot be said that the assessee was liable to pay advance tax. Once we come to the conclusion that the assessee was not liable to pay advance tax, there is no question of charging tax under sections 234B and 234C. In similar circumstances in the case of Priyanka Overseas Ltd. v. Deputy CIT [2001] 79 lTD 353 (Delhi) where the assessee had treated the receipt of cash assistance as capital receipts, which was subsequently amended to be business receipt by the Finance Act, 1990, it was held that in such cases interest under sections 234B and 234C was not chargeable. In these circumstances, we think that the assessee was not liable to pay advance tax and therefore levy of interest under sections 234B and 234C is not justified. Further, it is pertinent to note that the assessee by way of abundant caution deposited a sum of Rs. 90,00,000 on August 6, 2001, i.e., much before the due date of filing of the return, which also proves the bona fide credentials of the assessee. In these circumstances, we set aside the order of the lea....
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.... is a well-known maxim. It means the law does not compel a man to do that which he cannot possibly perform. If the Assessing Officer could not perform his duties to complete the order of assessment in the absence of any evidence furnished by the assessee, the Department cannot be blamed therefore. A law cannot be interpreted in vacuum. It has to be interpreted having regard to the facts and circumstances involved in each case." 11. We find from the above legal position and facts of the case that the assessee acted bona fide in conformity with the provision of act and the legal position as enumerated by Hon'ble Apex Court in the case of lshikawajma-Harima Heavy Industries Ltd. (supra). At the relevant point of time it was impossible on the part of the assessee to deduct tax on the income of non-resident. Admittedly, up to the insertion of explanation vide Finance Act, 2007, the assessee was under bona fide belief not to deduct tax and accordingly he acted as per law. Accordingly we allow the appeal of the assessee.' 9. Therefore, in view of the legal proposition discussed by the Ahmedabad Bench (supra) we agree with the cont....