TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 164
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.... and further erred in coming to the following conclusion inpara-5 on page-06 of impugned order which is extracted below; Where the provisioned amount as higher than the invoiced amount, the balance has clearly not suffered tax. Since it has been held (Supra) that the liability for tx deduction existed o n the company at the time of making the provision the default for non-deduction of tax at source is to be limited only to the surplus over and above the invoice amount". 4. That theld.CIT(A) ought to have accepted assessee's plea that, the word 'credit' n section 195, 194C, 194J etc. refers to constructive credit and when assessee disallows voluntarily certain items gets effaced ab initio and consequently the assessee would not have had any obligation to deduct tax at source on those items u/s 95, 194C, 194J etc. 5. Without prejudice, that the ld. CIT(A) ought to appreciate the general legal principles that the assessee cannot be subjected to double disadvantage for a single failure and when assessee disallows voluntarily u/s 40(a)(i) or 40(a)(ia) and pays tax on the same, again he cannot be made liable to pay tax aga9in u/s 201(1) by treating him as assessee in default. 6.....
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....earned CITA) directed the TDS Officer to exclude those amounts in respect of which TDS has been made on the dates on which invoices have been raised. 5. Being aggrieved, the assessee company is in appeal before us. Learned counsel for the assessee company submitted and explained during the course of hearing that the procedure adopted in the books of accounts, accounting the expenditure which are outstanding as on 31st March of every financial year. It was submitted that the assessee company incurred certain expenditure towards service support charges, professional charges etc. where invoices have been raised by service provider or vendor and are acknowledged by the assessee company, were accounted in the books of accounts or the payments are made after duly complaining the provisions of TDS under Chapter XVII-B of the IT Act, 1961. 6. As regards the expenses for which the service provider or vendor had not raised any invoices nor acknowledgement by the assessee company made a provision for such expenses on a scientific basis and such provision was debited to its P&L account, on conformity with the provisions of accounting standard 29- pertaining to provisions, contingent liabilit....
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....whether the liability for deduction of tax at source has arisen the moment the amount is credited in the books of accounts. Having regard in the scheme of tax deducted at source, under Chapter-XVII-B of the IT Act, we are of the considered opinion that the liability to deduct tax at source arises only when there is accrual of income in the hands of the payee. We are holding so, keeping in view the ratio laid down by the Hon'ble Apex Court in the case of M/s GE India Technology Centre P. Ltd. Vs. CIT and another 327 ITR 456 (SC) wherein the Hon'ble Supreme Court held that if payment is not assessable to tax there is no question of tax at source being deducted. The relevant portion of the judgment is reproduced as under :- "If the contention of the Department that the moment there is remittance the obligation to deduct TAS arises is to be accepted then we are obliterating the words "chargeable under the provisions of the Act" in section 195(1). The said expression in section 195(1) shows that the remittance has got to be of a trading receipt, the whole or part of which is liable to tax in India. The payer is bound to deduct TAS only if the tax is assessable in India. If tax is not ....
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....he Act is to be read as an integrated code. Section 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of CIT vs. Eli Lilly and Co. (India) (P) Ltd. (2009) 312 ITR 225 the provisions for deduction of TAS which are in Chapter XVII dealing with collection of taxes and the charging provisions of the Income Tax Act form one single integral, inseparable code and, therefore, the provisions relating to TDS apply only to those sums which are " chargeable to tax" under the Income-Tax Act. It is true that the judgment in Eli Lilly (2009) 312 ITR 225 was confined to section 192 of the Income Tax Act. However, there is some similarity between the two. If one looks at section 192 one finds that it imposes statutory obligation on the payer to deduct TAS when he pays any income "chargeable under the head salaries". Similarly section 195 imposes a statutory obligation on any person responsible for paying to a nonresident any sum " chargeable under the provisions of the Act". Which expression, as stated above, do not find place in other sections of Chapter XVII. It is in this sense that we hold that the Income Tax Act constitutes one single integral inseparabl....
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....einabove, section 195(1) uses the expression " sum chargeable under the provisions of the Act". We need to give weightage to those words. Further, section 195 uses the word "payer" and not the word "assessee". The payer is not an assessee. The payer becomes an assessee-in-default only when he fails to fulfill the statutory obligation under section 195(1). If the payment does not contain the element of income the payer cannot be made liable. He cannot be declared to be an assessee-in-default. The above-mentioned contention of the Department is based on an apprehension which is ill founded. The payer is also an assessee under the ordinary provisions of the Income Tax Act. When the payer remits an amount to a non-resident out of India he claims deduction or allowances under the Income Tax Act for the said sum as an ' expenditure' . Under Section 40(a)(i), inserted, vide Finance Act, 1988, with effect from April 1, 1989, payment in respect of royalty, fees for technical services or other sums chargeable under the Income Tax Act would not get the benefit of deduction if the assessee fails to deduct TAS in respect of payments outside India which are chargeable under the Income-tax Act. T....
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.... the gross amount but on the lesser amount on the footing that only a portion of the payment made represented ' income chargeable to tax in India' then it was necessary for him to make an application under section 195(2) of the Act to the Income Tax Officer (TDS) and obtain his permission for deducting TAS at lesser amount. Thus, it was held by this court that if the payer had a doubt as to the amount to be deducted as TAS he could approach the Income-tax Officer (TDS) to compute the amount which was liable to be deducted at source. In our view , section 195(2) is based on the "principle of proportionality"". The said sub section gets attracted only in cases where the payment made is a composite payment in which a certain proportion of payment has an element of 'income' chargeable to tax in India. It is in this context that the Supreme Court stated, 'if no such application is filed, income tax on such sum is to be deducted and it is the statutory obligation of the person responsible for paying such 'sum' to deduct tax thereon before making payment. He has to discharge the obligation to TDS". If one reads the observation of the Supreme Court, the words ' such sum' clearly indicate t....