TaxTMI 
TaxTMI 
2018 (12) TMI 116
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....facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the addition made u/s 40(a)(ia) of the Act in respect of the payment of professional fees outside India by relying on the order of his predecessors without realizing that the payments in question were made to different entities during the year and the taxability of each of the payments has to be discussed in terms of the domestic Tax provisions as well as the relevant Double taxation Avoidance Agreements with respective countries. 3. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in relying on the order of his predecessor while deciding about the taxability aspect of the payments made outside India during the year as the taxability of each of the payments has to be decided independently by considering the nature of services rendered by the outside parties and precedence of the previous years' decisions cannot be applied in blanket to the current year. 4. The appellant prays that the order of CIT (A) on the above ground be set aside and that of the Assessing officer be restored. 5. The appellant craves leave to amend or alter ....
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....been decided in earlier years, however relied on the grounds of appeal filed by the Revenue. 8. We have heard the rival submissions of both the parties and perused the material on record including the impugned order and the various decisions in assessee's own case by the various co-ordinate benches of the Tribunal. We find from the perusal of the said orders that identical issue was decided in the earlier years in favour of the assessee. We have perused the decisions of the co-ordinate bench of the Tribunal in A.Y. 2004- 05 in ITA No.1820/M/2009 order dated 22.02.13 wherein the Tribunal has dealt with the issue as under: "26. We have carefully considered the rival contentions and the case laws relied upon by either party. We find that the Assessing Officer has made the disallowance of the payment made to various persons mentioned above under section 40a(i) on the basis of the judgment of Hon'ble Supreme Court on Transmission Corporation of A.P. Ltd. (supra). Looking to the nature of services rendered by all these persons, which has been discussed in detail, it is seen that, firstly, none of these services fall in the nature of make available of any technical knowledge, exper....
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.... s. 200 of the IT Act r/w r. 30 of the IT Rules 1962. Failure to deduct tax or failure to pay tax would also render a person liable to penalty under s. 201 r/w s. 221 of the IT Act. In addition, he would also be liable under s. 201(1A) to pay simple interest at 12 per cent per annum on the amount of such tax from the date on which such tax was deductible to the date on which such tax is actually paid. The most important expression in s. 195(1) consists of the words "chargeable under the provisions of the Act". A person paying interest or any other sum to a non-resident is not liable to deduct tax if such sum is not chargeable to tax under the IT Act. For instance, where there is no obligation on the part of the payer and no right to receive the sum by the recipient and that the payment does not arise out of any contract or obligation between the payer and the recipient but is made voluntarily, such payments cannot be regarded as income under the IT Act. It may be noted that s. 195contemplates not merely amounts, the whole of which are pure income payments, it also covers composite payments which has an element of income embedded or incorporated in them. Thus, where an amount is pay....
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....the provisions of DTAA are also relevant, while applying TDS provisions. Reference to ITO(TDS) under s. 195(2) or 195(3) either by the nonresident or by the resident payer is to avoid any future hassles for both resident as well as nonresident. In our view, ss. 195(2) and 195(3)are safeguards. The said provisions are of practical importance. This reasoning of ours is based on the decision of this Court in Transmission Corporation (supra) in which this Court has observed that the provision of s. 195(2) is a safeguard. From this it follows that where a person responsible for deduction is fairly certain then he can make his own determination as to whether the tax was deductible at source and, if so, what should be the amount thereof. Submissions and findings thereon 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 s. 195(1). The said expression in s. 195(1) shows that the remittance has got to be of atrading receipt, the whole or part of which is liable to tax in India. The payer is bound to deduct TAS only if the tax (sic-inco....
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....visions of the IT Act one cannot read the charging sections of that Act de hors the machinery sections. The Act is to be read as an integrated code. Sec. 195 appears in Chapter XVII which deals with collection and recovery. As held in the case of CIT vs. Eli Lilly & Company (India) (P) Ltd. (2009) 223 CTR (SC) 20 : (2009) 21 DTR (SC) 74 : (2009) 312 ITR 225 (SC) the provisions for deduction of TAS which is in Chapter XVII dealing with collection of taxes and the charging provisions of the IT Act form one single integral, inseparable code and, therefore, the provisions relating to TDS applies only to those sums which are "chargeable to tax" under the IT Act. It is true that the judgment in Eli Lilly (supra) was confined to s. 192 of the IT Act. However, there is some similarity between the two. If one looks at s. 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, s. 195imposes 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 Chapte....
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....merit in these contentions. As stated hereinabove, s. 195(1) uses the expression "sum chargeable under the provisions of the Act." We need to give weightage to those words. Further, s. 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 s. 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-indefault. The abovementioned 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 IT Act. When the payer remits an amount to a non-resident out of India he claims deduction or allowances under the IT Act for the said sum as an "expenditure". Under s. 40(a)(i), inserted vide Finance Act, 1988 w.e.f. 1st April, 1989, payment in respect of royalty, fees for technical services or other sums chargeable under the IT 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 IT Act. This provision ensu....
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....necessary for him to make an application under s. 195(2) of the Act to the ITO(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 ITO (TDS) to compute the amount which was liable to be deducted at source. In our view, s. 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 that the observation refers to a case of composite payment where the payer has a doubt regarding the inclusion of an amount in such payment which is exigible to tax in India. In our view, the abo....