TaxTMI 
TaxTMI 
2021 (10) TMI 210
X X X X Extracts X X X X
X X X X Extracts X X X X
....4,50,448 under section 40(a)(i) of the Act for non-deduction of tax at source on payment made to non-resident 1.1. The learned CIT(A) has erred on the facts and circumstances of the case and in law 'in confirming the disallowance of Rs. 1,04,50,448 under section 40(a)(i) of the Act for non-deduction of tax at source on payment made to a nonresident towards fees for conducting market survey for consumer electronics sector in Asia. 1.2 The learned CIT(A) erred in concluding that the fees for providing market survey services qualify as fees for technical services under section 9(1)(vii) read with Explanation to section 9 of the Act. 1.3 The learned CIT(A) erred in relying on the Hon'ble Income Tax Appellate T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessment year 2005-06 on 31.10.2005 declaring loss of Rs. 43,16,754/-. The case was taken up for scrutiny and during the course of assessment proceedings, the AO noticed that the assessee has made a payment amounting to Rs. 1,04,50,458/- to M/s. Rosewell Group Services Ltd., based in Mauritius, for a survey conducted by them for preparation of project report called 'Opportunities in Asia for Electronics'. Since, the assessee has not deducted TDS on said payment, the AO has disallowed entire sum u/s. 40(a)(i) of the Income Tax Act, 1961 (hereinafter the 'Act') and the ld. CIT(A) has allowed relief to the assessee and deleted additions made by the AO towards management fees paid to M/s. Rosewell Group Services. The Revenue....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y the assessee and according to him, as per explanation to Section 9(2) of the Act, introduced by Finance Act, 2010 with retrospective effect from 01.06.1976, the requirement for a non-resident to have a residence or place of business or business connection is no more necessary and thus, the assessee cannot take refuge to an alternative stance in the wake of such clarity in the statute. He, further observed that as per Section 90 (1) & (2) of the Act, it is very clear that when there is no specific provision in DTAA for taxation of particular income then, the provisions contained in Income Tax Act needs to be brought in. Therefore, he opined that as per provision of Section 9(1)(vii), explanation 2, payment made for any services in the natu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us decisions including decision of Hon'ble Supreme Court in the case of Ishikawajma-Harima Heavy Industries Ltd., vs. DIT, 288 ITR 408, when liability was fastened on the assessee on the basis of subsequent retrospective amendment of law then, on the basis of impossibility of performance to deduct TDS, disallowance cannot be made u/s. 40(a)(i) for non-deduction of tax at source u/s. 195 of the Act. The assessee has relied upon the following judicial precedents: (i). Ishikawajma-Harima Heavy Industries Ltd. vs. DIT, 288 ITR 408 (SC) (ii). Channel Guide India Ltd., vs. ACIT, 20 ITR 0438 (Mum-Trib) (iii). Sterling Abrasive Ltd., vs. ACIT, 140 TTJ 0068 (Ahmd-Trib) (iv). Metro & Metro vs. Addl. CIT, 147 IT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....overed under DTAA, then by virtue of residual clause 22 of DTAA between India and Mauritius, said sum can be considered under Article 7 as business profits. Further, as per Article 22, where any item of income of a resident of a contracting state, wherever arising, which are not expressly dealt with in the foregoing Articles of this Convention, shall be taxable only in that Contracting State. If you go by Article 22, then if anything not expressly provided in this convention, then same cannot be taxed in India, even if said sum comes under the definition of FTS as per Indian Tax laws. Insofar as, taxation of impugned payment under Article 7 as business profits, we find that since non-resident does not have permanent establishment in India, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w prevailing at the time of making payment by the assessee to the non-resident was on the basis of judgment of Hon'ble Supreme Court which clearly held that payment made to a non-resident for services rendered outside India cannot be brought to tax in India as fees for technical services in absence of place of business/permanent establishment in India. Since, there was clear law by the decision of Hon'ble Supreme Court, the assessee has made payment without deducting tax at source. Therefore, liability towards TDS cannot be fastened on the assessee on the basis of subsequent amendment to law with retrospective effect, because it was impossible on the part of assessee to deduct tax on income of non-resident because the assessee canno....