2014 (11) TMI 1014

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.... vide order dated 12.12.2011. 2. The instant appeal by the Revenue raises the issue of the validity in law of the disallowance in the sum of Rs. 91,05,348/-, effected u/s.40(a)(i), since deleted by the first appellate authority. 3. The facts of the case are brief and undisputed. The assessee made the impugned payment to one, Sangeeta Choudhary, a resident of Canada, without deducting tax at source. No application u/s.195(2) was made to the Assessing Officer (A.O.), in whose view there was thus a contravention of section 195 of the Act and, consequently, the nonobstante provision of section 40(a)(i) would get attracted, proscribing allowance of deduction of any sum, notwithstanding the fact that it may otherwise be deductible under the....

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....est, royalty, fees for technical services or other sum chargeable under the Act, is paid either outside India or in India to a non-resident (not being a foreign company) or to a foreign company, on which tax is deductible at source under Chapter XVII-B, and such tax has not been deducted or, after deduction not been paid during the previous year or in the subsequent year before the expiry of the time allowed u/s. 200(1), the said amount shall not been allowed in computing the business income. The first thing, therefore, that we would need to see is whether the provisions of Chapter XVII-B are attracted to the impugned payment. The payments to a non-resident being covered under section 195, we begin by reproducing the same in its relevant pa....

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....ch determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable.' The ld. CIT(A) having allowed relief to the assessee on the basis that the decision by the apex court in GE India Technology (supra), rendered after considering the decision in the case of Transmission Corpn. of A.P. Ltd. (supra), covers the assessee's case, so that no tax was deductible u/s. 195, what we are required to, in order to decide the Revenue's appeal there-against, do is to examine the validity of the said finding, and toward the same, the said decision. As explained by the apex court therein, if the interpretation being accorded by the Revenue to section 195, i.e., that the moment payment to a non-resid....

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....he gross amount on the footing that only a part thereof represented income chargeable to tax in India, it was necessary for him to approach the A.O. u/s.195(2) and obtain permission for deduction at source of tax at a lesser amount. Section 195(2), thus, gets attracted only in case of composite payments, a part of which have an element of income chargeable to tax in India. The observations by it in Transmission Corpn. of A.P. Ltd. (supra) that if no such application was filed, income tax on such sum was to be deducted and that it was the statutory obligation of the person responsible for paying this sum to deduct income tax thereon before making the payment, it was explained, were made in that context. In our view too, the said decision ....

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....nation 2 to section 195(1) has since been co-opted on the statute, i.e., by Finance Act, 2012 w.e.f. 01.04.1962, and which reads as under: 'Other sums. 195. (1) ................ Explanation 2.-For the removal of doubts, it is hereby clarified that the obligation to comply with sub- section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has- (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India.' The same, however, in our view, would not operat....