TaxTMI 
TaxTMI 
2016 (9) TMI 1032
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....s paid to non- residents is squarely covered u/s.9(1)(vii) r.w. Explanation 2 as fees for technical services". 1.3 "On the facts and in the circumstances of the case as well as in law, the Ld. CIT(A) erred in holding that the assessee's case is not covered by exception provided in clause (b) to sec. 9(1)(vii) of the Act and that the Explanation introduced by the Finance Act 2010 is a retrospective Amendment w.e.f. 1/6/1976. 2.1 "On the facts and in the circumstances of the case as well as in law, the Ld. CIT(A) erred in deleting the addition of Rs. 43,90,000/- made by the AO on account of disallowance ix] s.40(a)(ia) of the Act due to non-deduction of TDS on the mobilization expenses paid in foreign currency. 2.2 "On the facts and in the circumstances of the case as well as in law, the Ld. CIT(A) erred in not appreciating that, during assessment, assessee claimed before AO that such payment is exempt u/s.10(15A) and as the said claim was rejected by the AO on merits, the assessee took a stand before the Ld.CIT(A) that it is simply in the nature of reimbursement and no TDS ought to have been made. The appellant craves leave to add, amend, vary....
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....raised by the assessee are inter-connected and inter-related therefore we thought it fit to dispose off the same through the present common order. The said ground has been dealt by CIT(A) in para number 2.1 & 2.2 and the same is reproduced herein below for the sake of reference: "2.1 The facts of the / were that the appellant is engaged in the business of providing helicopter service on hire. The A.D. during the year under consideration had disallowed training expenses paid to CHC Helicopters International Rs. 2,86,364/- (anada), Bell Textron Rs. 12,87,990/- and Flight Safety International Rs. 14,30,346/- (USA) on the ground that tax was not deducted at source. 2.2 I have considered the facts of the case. This issue has come into consideration in the assessee's own case wherein the Hon'ble ITAT, Mumbai in para no.9 held as under: 9. Therefore, in view of the legal proposition discussed by the Ahmedabad Bench (supra), we agree with the contention of the assessee that the assessee has acted under bonafide belief that no tax was to be deducted at source on these payments. Apart from the bonafide belief we further noted that as per para 4(b) of Article 12....
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.... assessee made the payments. Therefore, it cannot be ruled out that the assessee has acted under bonafide belief that no TDS was required to be deducted on such payment. In view of the fact that there was no such disallowance made prior to the assessment year 2006-07 and it is not the case of the assessment of income in the hand of the non-resident recipient of the amount but it is a case of disallowance of the claim of expenditure claimed by the assessee. At the time of such payment the provisions relied upon by the CIT(A) was not in existence. Thus, the assessee was not expected to do something which were impossible to perform. The Ahmedabad Bench of this Tribunal in case of Sterling Abraive Ltd. Vs ACIT (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 deduc....
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....rvice in India laid down by the Supreme Court in its judgment in the case of Ishikawajma-Harima Heavy Industries Ltd. (supra) remains untouched and unaffected by the Explanation. Further the Legislature vide Finance Bill, 2010 in order to remove any doubt about the legislative intent of the aforesaid source rule, substituted in place of the existing Explanation a new Explanation to specifically state that the income of a non- resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) of section 9 and shall be included in his 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 retrospecti....
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....ical legal effect of section 7 of the LlC Act. While dealing with question as to whether an assessee can be liable to pay interest for failure to pay advance tax during the year when the liability to pay tax had arisen on account of amendment to law which took place after the end of the year, Hon 'ble Madras High Court in the case of OT v. 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 here....
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....us also, the assessee could not have visualized till the last instalment of advance tax, i.e., March 15, 2001, that it would not be entitled to deduct the VRS payments. Therefore, the assessee could not have done 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 2348 and 234C. In similar circumstances in the case of Priyanka Overseas Ltd. v. Deputy OT [2001J 79 ITD 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 2348 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 2348 and 234 C is not justified. Further, it is pertinent to note that the assessee by way of abundant caution deposited a su....
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.... "Lex non cogir ad impossibitie' 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 Ishikawajma-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 w....
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....Considering the totality of the facts and circumstances of the present case, we are of the view that the learned CIT (A) has passed a reasonable and judicious order. Therefore, we find no reason to deviate from or interfere with the findings of the learned CIT (A). Accordingly, we uphold his order. These grounds of appeal of the revenue stand rejected. Ground No.2.1&2.2 6. Since all the grounds raised by the assessee are inter-connected and inter-related therefore we thought it fit to dispose of the same through the present common order. The said ground has been dealt with by CIT(A) in para no.3.1 and the same is reproduced herein below for the sake of reference: "3.1 I have considered the facts and circumstances of the case. This issue has come into consideration of CIT(A) order in A.Y. 2005-06 wherein in para 3.7 it is held as under: "3.7 In the light of the above judgement, I am of the view that in the case of appellant company, the TDS was not deductible for reimbursement of expenses by the appellant company for transporting/mobilizing these helicopters in India. In absence of any embedded income in the reimbursement of these expenses, the question of de....