2014 (7) TMI 1156

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....of the case, the ld. CIT(A) has erred in holding that no withholding of taxes are required u/s 195 on the payments made by the assessee to noresident for purchase of new designs of furniture clearly being transfer of special knowledge and in ignoring the fact that Circular No. 786 dated 7-02-2000 has been withdrawn with retrospective effect by Circular No. 7/2009 dated 22-10-2009." 2.1 The brief fact of the case are that the assessee is engaged in the business of export of granites. For promoting its goods in international market, it had made payment of advertisement charges to M/s. BNP Media, USA for advertisement of its products in the international monthly magazine 'Stone World' printed and published in USA. The copy of advertisement ....

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....ithholding tax. (iv) The reliance of the assessee on the decision in the case of Morgan Stanley and Co. In the case of (292 ITR 416) was out of context and did not pertain to the facts of the case of the assessee. (v) The AO further relied on the following decisions:- (a) Rajiv Malhotra (284 ITR 564) (AAR) (b) Wallace Pharmaceuticals (P) Ltd. (278 ITR 97) (AAR) (c) South West Mining Ltd. (278 ITR 233) (AAR) (d) Maruti Udyog Ltd. vs. ADIT (2010) (e) CIT vs. Samsung Electronics (Karnataka) 320 ITR 209) Accordingly, the AO raised the demand of tax u/s 201(1) and demand for interest u/s 201(1A) of the Act. 2.2 Aggrieved, the assessee preferred first appeal where the assessee contended tha....

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....igh Court in the case of CIT Vs. Samsung Electronics Co. Ltd (320 ITR 209) relied on by the A.O. dealt with the question whether tax was to be deducted at source under section 195 of the Act in respect of payment made to non resident on import of software or not. The judgment of the Karnataka High Court was largely based on the judgment of the Supreme Court in the case of Transmission Corporation of A.P. Ltd. Vs. CIT (239 ITR 587). However, the Karnataka High Court had not followed the subsequent binding judgment of the Supreme Court in the case of Vijay Ship Breaking Corporation Vs. CIT (314 ITR 309) wherein the Apex Court has categorically held that the resident was not required to deduct TDS under section 195(1) of the Act, if the income....

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....ll settled law that the provisions of the Double Taxation Avoidance Agreement would prevail over the provisions of the Income Tax Act, therefore, this preposition was not completely followed by the Karnataka High Court while rendering its decision in the case of Samsung Electronics Co. Ltd (320 ITR 209). Therefore, in my considered opinion, the law relating to deduction of tax at source under section 195 has not been changed consequent to the judgment of Samsung Electronics or withdrawal of earlier circulars, on this issue by the Central Board of Direct taxes. Therefore, no demand under section 201(1) and interest under section 201(1A) can be charged in the present circumstances. I, therefore, direct A.O. to cancel the order charging tax of....