TaxTMI 
TaxTMI 
2009 (9) TMI 65
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..... 1203 of 2006, 1204 of 2006, 1205 of 2006, 1206 of 2006, 1207 of 2006, 1208 of 2006, 1209 of 2006, 1210 of 2006, 1211 of 2006, 1212 of 2006, 1213 of 2006, 1214 of 2006, 1215 of 2006, 1216 of 2006, 1217 of 2006, 1218 of 2006, 1219 of 2006, 1220 of 2006, 1221 of 2006, 1222 of 2006. 1223 of 2006, 1224 of 2006, 1225 of 2006, 1236 of 2006, 1237 of 2006, 1238 of 2006, 1239 of 2006, 1240 of 2006, 1241 of 2006, 1242 of 2006, 1243 of 2006 and 1244 of 2006, ITA Nos. 1246 of 2006 & 543-548 of 2009, 1247 of 2006 & 605-610 of 2009, 1248 of 2006 & 580-584 of 2009, 1250 of 2006 & 576-579 of 2009 and 1251 of 2006, ІТА Nos. 77 of 2007 & 549-551 of 2009 and 94 of 2007 & 650-656 of 2009, ITA Nos. 919 of 2007 & 533- 542 of 2009 and 921 of 2007 & 503-532 of 2009 THE HON'BLE MR JUSTICE D V SHYLENDRA KUMAR AND THE HON'BLE MR JUSTICE ARAVIND KUMAR JUDGMENT The above appeals are all by the revenue directed against the orders passed by the Income Tax Appellate Tribunal, Bangalore Bench, where under the Tribunal had allowed the appeals filed by different resident assessecs in respect of different assessment years by holding that the resident - assessees were not liable ....
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....n all these appeals and for such purpose it is useful to borrow the facts as noticed by the Tribunal itself in the present case and that is as under: "The fact involved in the present case is that the assessee is a branch of Samsung Electronics Company Limited, Korea, engaged in the development, manufacture and export of software for use by its parent company, i.e., Samsung Electronics Co., Ltd., Korea. The assessee develops various kinds of software for telecommunication system, for office appliances, for computer systems and for mobile devices etc.,. The software developed by the assessee is for in-house use by the parent company. In the assessment year 1999-00, the assessee imported software products of Rs.2,28,960/- from Tektronix inc., USA. Similarly, during the other two years, it imported software product, namely, Telelogic Tau TTCN Suite, are readily available software in the market Hence, payment made to the foreign companies cannot be treated as Royalty, as per the provision of Sec.9[1][vi] read with Double Taxation Avoidance Agreements [DTAA for short] between India and USA, India and France respectively. The contention of the assessee was not accepted by the ITO [....
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....reement and the provision of the Act, it is the provisions of the agreement that has to prevail and therefore the conclusion of the original authority and the first appellate that it is royalty and therefore income is fallacious and sustainable. 7. Learned counsel for the assessees have contended in these appeals that the nature of payment is not 'royalty' even within the meaning and scope of section 9[1][vi] of the Act for the reason that the non-resident supplier has sold only a copyrighted article and not the copyright itself and on the authority of the decision of the Supreme Court in the case of 'TATA CONSULTANCY SERVICES vs. STATE OF ANDHRA PRADESH' reported in [2004] 271 ITR 401, the payment being in respect of goods, it is not payment in the nature of 'royalty' and at the best the payment can have the character of a payment made to a non-resident by resident-assessee for purchase of some articles/goods in connection with the carrying on of the business of the resident - assessee and again the relevant articles of the DTAA are to be looked into and they providing for assessment of income attributable to such a receipt being taxable only....
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....t result in transforming itself into a receipt bearing the character of income chargeable to tax under the provisions of the Act, under the heads of income other than the head "salaries". 11. A few other variations are such assessees contend that, there had been no obligation on their part to deduct any amount in the payments as they were fully and bonafide satisfied that the amount was not at all taxable in the hands of the non-resident in India and therefore had not chosen to apply for any relief or concession in terms of the provisions of section 195[2] and [3] of the Act and in such cases, nevertheless, being called upon to pay the amount by issue of a notice under section 201 of the Act by treating the assessee as a defaulter and in such cases the assessee having filed an appeal against the order of demand issued under section 201 of the Act by involving the provisions of section 246[1][i] of the Act and a further appeal to the Tribunal under section 253 of the Act wherein they succeeded; have all defended these appeals by supporting the orders passed by the tribunal holding that on the examination of the merits of the contentions put forth by the resident payers in t....
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....metrix Asia Pacific, Singapore; Peritus Software Service Inc., USA and Astral Computers Pvt. Ltd., Singapore on payment of Rs.3,43,095/- Rs.47,89,419/- and Rs.8,89,611/- was bound to have taken, into consideration the Ruling of the Advance Ruling Authority (238 ITR 296); the Double Taxation Agreement between India and USA and India and Singapore, provisions of Section 9(1)(vi) of the income Tar Act; Indian Copyright Act, 1957, the Revised entry on Article 12 of OECD; the Internal Revenue Service Regulation of USA; the Views of the High Powered Committee on E-Commerce and other facts and circumstances of the present case which could have clearly shown that the payments made by the Assessee was liable to tax in India and consequently the Assessee was bound to deduct tax at source? 5. Whether the Tribunal should have recorded a finding that it is under section 195(2) and (3) and (4) of the Act, the chargeability to tax or not of the recipient is decided and having failed to obtain such a decision the assessee was bound to deduct tax at source as held by the Apex Court in 239 ITR 587. 6. Whether the assessee can question the taxability of the recipient in section 201(1) i2nd 201(....
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.... ITA No.611 of 2006 connected with ITA No.609 of 2006 ITA No. 6l2 of 2006, ITA No.1055 of 2006 connected with ITA Nos.1056 of 2006,1067 of 2006,1053 of 2006, Sri. R B Krishna, learned counsel appears for respondents - assessees in ITA No.2911 of 2005, Sri. S Ganesh, learned senior counsel appearing for M/s. Universal Legal counsel for the respondents - assessee in ITA No.1258 of 2006, ITA No.1268 of 2006 connected with ITA No. 1269 of 2006, 1270 of 2006, Sri. S Parthasarathi, learned counsel appears for the respondents - assessees in ITA Nos. 268 of 2006, 269 of 2006, 270 of 2006. 16. Sri. Seshachala contends that the conclusion arrived at by the Assessing Officer that payment made by the Indian Company to the Suppliers of the software from abroad is in the nature of a royalty payment and as such the respondent was required to deduct tax at source as per Section 195 and thus the Assessing Officer was justified in calling upon the assessee to make the payment of this amount with interest. Sri. Seshachala contends that the appellant being in the business of software development had imported software from countries such as USA, France and Sweden and as such Section 9 of the A....
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....rink-wrapped' or 'off the shelf /branded software' which requires to be considered and gone into. Sri. Seshachala refers to clauses 12 and 13 of DTAA pertaining to USA, France, Sweden and points out that the contention of the respondent in this regard is of two fold: (i) software is 'goods' and it does not find a place in DTAA agreement. (ii) Even otherwise definition under Section 12 DTAA for royally the word software is not mentioned. 20. Sri. Seshachala learned senior standing counsel appearing for the revenue further contends that in the case of Tata Consultancy, the Hon'ble Supreme Court has held software is 'goods' as defined in A.P.General Sales Tax Act 1957 and not in any other context and thus the interpretation therein as relied upon by the respondent is of no relevance at all. On the contrary he relies upon the decision the case of ACC where the issue was whether the Customs Duty is leviable or not with reference to the entry in Customs Tariff Act, 1975 and contends that its examination in this case is to be with reference to the ....
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....then the assessee being construed as a person in default under Section 200 does not arise. This position the respondent can contend in an appeal before the authorities or the tribunal as respondent would step into the shoes of the assessee, submits that by reading the entire judgment in transmission Corporation case it dose not restrict the right of the respondent to challenge the liability/demand based on chargeability. Sri Kumar contends that chargeability (to pay advance tax) is referable to Section 4(2) read with Sections 190- 196 of the Act and contends that admittedly in the is instant case payment is not made in India and it is open to the respondents to urge that the recipient is not Chargeable to tax. In this regard Sect ions 4, 5(2b), 9(1)(vi) and 195 are passed into service. The decision in the case of CIT Vs. Eli Lilly (2009) 312 ITR 225(SC) at paragraph 29 page 247 is relied upon to conten that charging provision under Section 4 will have to be borne in mind while reading Section 195 and a person liable to deduct can look into as to whether income of the recipient is chargeable to tax in India and on such examination if it is found by the respondent. That it is not roy....
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....taken that the sum is not at all chargeable, what art the consequences is not a question answered in TRANSMISSION CORPORATION case. because that was not the question that arose for consideration before the Court. Sri Sarangan submitted that Section 195 applies only to pure income receipts like interest, rent etc,. and not to something in which the income is embedded and that the Supreme Court was not required to be consider a case of the present it nature in Transmission Corporation Case, and therefore the decision is not an authority for the present case, submits that considered in these appeals is as to whether the payment of a 'sum' to the non-resident is chargeable to tax under the Act or not? that sum may be income, pure income or income hidden or embedded therein. if so, then tax is required to be imposed on the said sum. Elaborating Sri sarangan submits that what would be the income is to be computed on the basis of various provisions of the Act including provision for computation of the business income, if the payment is a Trade receipt. Trade receipt they are not referred to sale proceeds of some property or what they say is receipt in the course of further expendi....
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.... 28. The purpose of sub-section (1) of section195 is to see that the sum which is chargeable under Section 4 of the Act for levy and collection of income-tax, the payer should deduct income-tax thereon at the rates in force, if the amount is to be paid to a not-resident. The said provision is for tentative deduction of income-tax thereon subject to regular assessment and by the deduction of income-tax, the rights of the parties are not, in any manner, adversely affected. Further, the rights of the payee or recipient are fully safeguarded under Sections 195(2), 195(3) and 197. Sub Section (2) of Section 195 refers to payee and Sub-Section (3) refers to a recipient. 29. It is contended by the learned counsel appearing for the assessees that the only thing which is required to be done by them is to file an application for determination by the Assessing officer that such sum would not be Chargeable to tax in the case of the recipient, or for determination of the appropriate proportion of such sum so chargeable, or for grant of certificate authorising the recipient receive the amount without deduction of' tax, or deduction of income-tax at any lower rates or no deduction. On su....
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....esident recipient; (4) if the payment should acquire the character of a payment for buying merchandize or a product in the sense, it is a price paid to a copy-righted article, which is sold in general and in a packaged from, available on the shelves of every seller, then, even assuming that it is a receipt in the nature of business receipt the hands of a non-resident, the non-resident recipient not having a permanent establishment or not carrying a regular activity in India, the payment even if it is business receipt and consequently the income receipt in the hands of the non-resident recipient, then also, it cannot be taxed under the Act. but can be subjected to tax only in the country of the non-resident recipient and therefore have contended that viewed from any angle, the payment by residents does not ultimately result in a receipt, any part of which is taxable under the provisions of the Income Tax Act and if so, the obligations under sub-section (1) of Section 195 of the Act on the resident buyer never arises. It is on such premise, further arguments are built to contend that the consequential demand notices under Section 201 of the Act, on the premises that there was failure....
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....56 ITR 20] * CIT v. SUPERINTENDING ENGINEER, AP [(1985) 152 ITR 753] 34. These are all appeals under section 260-A of the Act. The Income Tax Act is a piece of legislation enacted by the Parliament mainly for the purpose of raising revenue to the central government and the aim and object is to levy and collect tax on all incomes which come within the meaning and scope of the provisions of the Act and quantifying the liability created on such income. 35. Under the scheme of the Act such appeals have to be heard by a Division Bench of the High Court. The Act being a piece of fiscal legislation, on a settled and accepted principle of interpretation, all provisions of the Act should be read only with the object of giving effect to the intention of the legislature i.e., to raise revenue to the State by levying tax on income until and unless a particular income is expressly excluded from the total/taxable income, or by a fiction of law is nevertheless deemed to be not in the nature of income but something else. 36. While it is also a settled principle that the charging section of the Act i.e., section 4 of the Act is to be strictly construed. not to allow any enlargement of t....
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....of the assessee against which the revenue could have proceeded for recovery of the amount. 39. Under the scheme of the Act and in the wake of the main charging section, i.e. section 4 of the Act in so far as the resident is concerned, all his income i.e., his global income taxable in India under the Act. So far as non-resident is concerned, as the tax liability Is directly linked to the total income of an assessee, it is only such income which is either received or deemed to have been received in India or accrues or arises or deemed to have been accrued or arisen to a non-resident in India in the year dining which the subject matter arises and even here the income which is deemed to accrue or arise in India in respect of a non-resident, also coming within the scope of the computation of the total income of the non-resident and therefore so far as is non-resident is concerned, there is considerable significance as to whether any income had arisen or accrued to the non-resident in India or has even been deemed to have accrued or arisen in India. This is to be found in section 5 of the Act providing for the scope of total income, while section 6 of the Act provide for the concept o....
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....ch has either been deemed to accrue or arise in India, in terms of section 9 the Act and if there is no actual income earned in India by the non resident, then also there is no liability on the part of the non-resident for payment of any tax under the Indian Income Tax Act in respect of consideration received by the non-resident for the value of the 'shrink wrapped software packages' and as a consequence, no liability under the charging section. 43. The net result even here is that there is no income to the non-resident which can be taxed under the provisions of the Indian Income Tax Act and therefore as a natural corollary there is no obligation on the part of the payer to deduct requisite percentage of the amount by way of deduction of tax at source and remit it to the account of the revenue. 44. It is in this background several contentions have been urged to demonstrate that payment as made by the residents and amount received by the non-resident company in respect of sale of 'shrink wrapped software packages a software having its application in office equipment and in computers and generally sold by the Indian counterpart cannot in any way rope in the non-resi....
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....e head "Salaries" shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income tax thereon at the rates in force: Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23-D)of Section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode: Provided further that no such deduction shall be made in respect of any dividends referred to in Section 115-O. Explanation.- For the purposes of this section, where any interest or other sum as aforesaid is credited to any account, whether called "interest payable account" or "Suspense account" or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly. (2) Where the person responsible for paying any such su....
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....ng P.No.30/1999 which is also reported in 238 ITR 296 [AAR] in holding that payments of the present nature made to the non-resident recipient who are American companies is fully and squarely covered by this ruling of the advance committee and to get over these two authorities, learned counsel for the assessees have gone to great lengths to contend and demonstrate that in the first instance the payment does not produce any income at all in the hands of the non- resident recipient within the meaning of the phrase 'income' which in turn can enable the assessing officer to arrive at the total taxable income and when once the total taxable income is determined with reference to which the rate of tax can be borrowed from the corresponding finance Act and the tax liability determined by the concerted effort of demonstrating that the payment does not partake the character of income at all within the meaning of section 9 of the Act. 50. In so far as the Judgment of the Supreme Court in TRANSMISSION CORPORATION OF A.P. LTD.,'s case [supra] is concerned, though valiant attempts have been made on the part of the learned counsel appearing for the assessee, particularly, Mr. K P K....
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....ng rendered in ABC, IN RE's case [supra] answering the questions such as, "(1) Whether payment due to the applicant under the transaction mentioned in Annexure B is liable to tax in India? (2) If the answer to the question No.1 is in the affirmative, whether the payment due to the applicant under the transaction mentioned in Annexure B is covered under art. 12(3)(a) or art.12(3)(b) of the DTAA between India and USA?" is in the affirmative, we are afraid the argument does not hold water, for both purposes, namely, that the ruling of the Supreme Court in TRANSMISSION CORPORATION OF A.P. LTD.,'s case [supra] is not an authority for the purpose of understanding the scope of sub-sections [2], [3], [4] of section 195 of the Act or even for examining the scope and extent of operation of section 195[1] of the Act. 51. We find it difficult to accept the submissions made on behalf of the assessees for the reason that the supreme court was directly involved in the exercise of understanding, interpreting and explaining the scope of the provision of section 195 of the Act and the scheme of this provision and the manner in....
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....mmission, transfer of rights of patents, goodwill or drawings for plant and machinery and such other transactions, it may contain large sum as taxable income under the provisions of the Act. Whatever may he the positions, if the income is from profits a gains of business, it would he computed under the Act as provided at the time of regular assessment. The purpose of sub-s.(1) of s. 195 is to see that the sum which is chargeable under s. 4 of the Act for levy and collection of income-tax, the payee should deduct income-tax thereon at the rates in force, if the amount is to be paid to a non-resident. The said provision is for tentative deduction of income-tax thereon subject to regular assessment and by the deduction of income-tax, rights of the parties are not, in any manner, adversely affected. Further, the rights of payee or recipient are fully safeguarded under ss. 195(2), 195(3) and 197. Only thing which is required to be done by them is to file an application for determination by the AO that such stun would not be chargeable to tax in the case of recipient, or for determination of appropriate proportion of such so chargeable, or for grant of certificate authorising recipient t....
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....portion of income chargeable under the Act, are correct." 52. The interpretation by the Supreme Court being in respect of a statutory provision, namely, section 195 of the Act that interpretation becomes the law declared by the supreme court within the meaning of Article 141 of the Constitution of India and such law will have to be necessarily applied to all cases and situations wherein arises the question of applying section 195 of the Act and the manner in which section 195 of the Act operates in any given case, notwithstanding the fact that an answer given by the supreme court in TRANSMISSION CORPORATION OF A.P. LTD., 's case [supra] was an answer in respect of a question that had actually not arisen in the case or even if the interpretation so placed does not necessarily partake the character of the ratio of the case, in the sense, that the Judgment does not necessarily become an authority for a particular proposition and therefore cannot be cited as a precedent, on applying the tests as are relevant for determining the question as to whether a Judgment Is an authority and a binding precedent for a particular proposition when the ratio if any has not even been applied to....
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....r on the premise that the said Judgment is distinguishable for any other reason for the purpose of applying the ruling in that Judgment to the fact situation as they prevail in the present appeals. 55. There are certain appeals wherein the very argument is raised by the respondents - assessees before the appellate authority in their appeals filed under section 246 of the Act as against an order passed under section 201 of the Act which is a provision providing for the consequential action that can be taken by the assessing authority against an assessee who has failed to comply with the requirement of deduction of tax at source i.e., at the time of payment and not remitting the amount to the revenue after such deduction etc.,. 56. As we have already indicated that a question of the nature involving exercise of determining the liability of the non-resident assessee in respect of the payment received by the non-resident from a resident assessee cannot be an exercise that can be resorted to even for the purpose of determining the extent of obligation on the part of the resident payer and to ascertain as to whether there is any scope for relieving the resident payer totally from t....
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....eduction of tax at source and for remittance of the amount to the revenue as they occur in chapter - XVII of the Act and therefore the very demand is a consequential order in terms of section 201 of the Act is bad in law and not tenable and not enforceable and perhaps question of this nature could be a question which can be examined in an appeal under section 246 of the Act and within the scope of appellate jurisdiction under section 246 of the Act in respect of an order passed and demand issued under section 201 of the Act, only if it relates to the correctness of the order vis-a-vis this aspect and all questions incidental to the aspect being excluded as indicated above because of the express provisions of section l95 [2] of the Act, the answer to this question is again, against the assessee in favour of the revenue for the simple reason that the relevant statutory provisions, namely, section 200 and 201 of the Act at the relevant point of time were as under: 200. "Duty of person deducting tax. - (1) Any person deducting any sum in accordance with the foregoing provisions of this Chapter shall pay within the prescribed time, the sum so deducted to the credit of the Central Gov....
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.... it is deducted, the amount of the tax together with the amount of simple interest thereon referred to in sub-section (1-A) shall be a charge upon all the assets of the person, or the company, as the case may be, referred to in sub-section (1)." and a sequential reading of section 195 of the Act which is a provision obviously preceding section 200 of the Act because which it does get into section 200 of the Act and at the relevant time section 200 also covering the ease of the total failure of deduction and not only a situation of deduction and thereafter a failure to remit the amount and in fact the heading of section 201 clearly indicating that it is a provision which springs into action as a consequential measure in situations of the assessee failing either to deduct or to pay, the order passed under section 201 of the Act is bad and is a relevant order even in situations of failure on the part of the assessee for not deducting the amount at source at the time of remittance of the amount to a non-resident and consequential non payment however bona tide the assessee might have entertained the thought and the belief that. in fact no part of the payment to the non-resident was n....
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....on is the rates as in force and as given in advance by the Finance Act of each year with reference to the current year [unlike the rate of income tax which is provided in the Finance Act with reference to an assessment year]. The exercise of determination of the lax liability of a resident payer or the tax liability of the non-resident recipient do not happen and are not carried out under the provisions of section 195 of the Act. 61. However, section 195[2] of the Act provides for a limited extent of a possible reduction in the actual amount to de ducted at source by the resident payer if the resident payer is able to demonstrate before the assessing officer that the entire payment does not bear the character of income, but only a part of the payment bears the character of income and the payment in respect of goods purchased by the resident and paid to the non-resident is a very good illustration where the cost of the goods i.e., the entire cost of the goods by itself does not constitute income even in the hands of the non-resident recipient but only the profit part of the payment which has to be ascertained in the manner as provided for under the Act, particularly, under the he....
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.... turn around and contend that no part of the payment had resulted in any taxable income in the hands of the non-resident recipient and therefore it cannot be said that there was any failure on the part of the resident payer in fulfilling its obligation under section 195 [1] of the Act and consequently the demand raised in terms of section 201 of the Act is not sustainable as the demand proceeds on the premise that there was a failure on the part of the payer. 65. We further clarify this legal position and if it is to be put in other words, we hold that while it is not open to a resident payer to invite the assessing officer to embark upon the exercise of determining the tax liability of the non-resident recipient on a mere filing of objections to a demand under section 201 of the Act by merely contending that the payment did not result in any taxable income in the hands of the non-resident and this can be an exercise undertaken by the assessing officer only in an actual return of income filed by the non-resident recipient for such determination of the non-resident's tax liability. in so far as the resident payer is concerned, the limited option was to have applied to the ass....
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....ibly avoided any liability for payment of tax under the Act by the over all operation of different provisions of the Act or even by the combined operation of the provisions of a double taxation avoidance agreement and the Act as is sought to be contended by the respondents in the present appeals. 67. The only limited way of either avoiding or warding off the guided missile is by the resident payer invoking the provisions of section 195 [2] of the Act and even here to the very limited extent of correcting an incorrect identification, an incorrect computation or to call in aid the actual determination of the tax liability of the non-resident which in fact had been determined as part of the process of assessing the income of the non-resident and by using that as the basis for claiming a proportionate reduction in the rate at which the deduction is required to be made on the payment to the non-resident. Except for this method, there is no other way of the resident payer avoiding the obligations cast on it by the provisions of section 195[1] of the Act and as a consequence of such default when is served with a demand notice in terms of section 201 of the Act. 68. This position is ....
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....s case [supra] while there was absolutely no scope for the assessing authority or the first appellate authority or even the second appellate authority to embark on an exercise for determination of the tax liability of the non-resident recipient of the payments, in a proceeding under section 195 of the Act and afortiari so in a case where the resident payer had not even invoked the enabling provisions of section 195[2] of the Act and is the case of all the assessees figuring in the above appeals as respondents and as we have already noticed such developments of requirements of law in terms of section 195[1] of the Act had never filed any application under section 195[2] of the Act and for the very reasoning the assessing officer should not have embarked upon the exercise determination of the tax liability of the non-resident assessee on the premise that the payment by the resident payer to the non-resident recipient partakes the character of a royalty payment and therefore applying the relevant provisions of the DTAA and even the exercise of holding that the actual percentage of deduction at source was at l0% or 12% or 15% as the case may be depending upon the country in which the n....
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....income filed later by the non-resident assessee, it will result in there being two versions of the actual tax liability of the non-resident recipient of a payment from this country, one version when the liability is determined even in advance and that too in the hands of the resident payer and the second version of the liability when the precise tax liability of the non-resident recipient of a payment from this country is actually determined resulting in a different determination of the tax liability of the non-resident recipient. 73. A situation of this nature should necessarily be avoided and it can be avoided if we should bear in mind that the exercise under section 195[2] of the Act is only for extending a limited concession in favour of the resident payer when things are very clear or does not involve any doubt or ambiguity such as in a situation where the non-resident recipient of the amount, has filed a return of his income as one arising from such a transaction with the resident payer and the assessing officer has actually examined the nature of payment and has indicated in an assessment order passed on the return of income flied by the non-resident that no part of the r....
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....als, having not taken any steps or not having invoked the relieving provisions of sub-section [2] of section 195 of the Act, such obligation on the resident payer remaining in tact and having regard to the limited scope for examination in an appeal under section 246-A[1][h-a] of the Act as discussed above, there was absolutely no way in law, for the Income Tax Appellate Tribunal, while exercising its appellate powers under section 253 of the Act, to have modified or varied the order passed by the Commissioner [Appeal] exercising his appellate powers under section 250 of the Act and therefore all orders passed by the appellate tribunal for allowing the appeals of the assessees filed under section 253 of the Act, have to be declared as illegal, not sustainable in law and are hereby set aside. 76. The Tribunal is clearly in error in enabling a resident payer to seek for determination as to the extent of the tax liability of the non-resident recipient, even in a situation wherein an application is made obligation under section 195[1] of the Act not by recourse to the provisions of section 195[2] of the Act, but as though the exercise was one of determining the tax liability of the n....
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.... the original/assessing authority in respect of 11 remittances [corresponding to ITA Nos.931 to 941/Bang/2006] and another 31 remittances [corresponding to ITA Nos.672 to 702/Bang/2007] made during the accounting period relevant for the assessment year 2006-07 and wherein the first appellate authority had declined to examine the merits of the orders passed by the assessing authority relating to these 42 remittances where under the original authority had concluded that the remittances being in the nature of a royalty payment, the amount to be deducted while making the remittance is at such percentage of the amount as had been indicated in the Double Taxation Avoidance Agreement between India and the United States of America, particularly, as per Article XII [2] of the agreement.. 81. The first appellate authority had dismissed the appeal which had been flied by the assessee under section 248 of the Act at the threshold, only for the reason that the assessee/resident remitter had not availed the procedure of making an application under section 195[2] of the Act, seeking for determination of the proportionate amount in the payment to the non-resident constituting the taxable part o....
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....y the Commissioner of Income Tax (Appeals), who had rejected the appeal under Section 248/249 at the threshold as not maintainable. The assessee who has in fact deducted and remitted the amount in terms of sub-section (1) of Section 195 is definitely entitled to maintain an appeal before the First Appellate Authority. 88. The statutory provisions in the Section is very clear on this aspect and the Tribunal is correct in holding that the appeals were maintainable and could not have been disposed of at the threshold and the Commissioner of Income Tax (Appeals) could not have disposed of the appeals at the threshold, as not maintainable. 89. However, insofar as the scope of examination of an appeal under Section 248 is concerned and in the light of the view that we have expressed in the other appeals. that view equally applies to the present appeals also and while the remand order passed by the Tribunal is left undisturbed and the appeals of the Revenue are dismissed, the observations and the interpretation of law that we have placed on the provisions of Section 195 of the Act, as above necessarily governs the examination of the appeal under Section 248 of the Act, when the Comm....
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....e present case which could have clearly shown that the payments made by the Assessee was liable to tax in India and consequently the Assessee was bound to deduct tax at source? In the negative, against the assessee and in favour of the revenue 5 Whether the Tribunal should have recorded a finding that it is under Section 195(2) and (3) and (4) of the Act, the chargeability to tax or not of the recipient is decided and having failed to obtain such a decision the assessee was bound to deduct tax at source as held by the Apex Court in 239 ITR 587. In the affirmative, in favour of the revenue and against the assessee 6 Whether the assessee can question the taxability of the recipient in section 201(1) and 201(1A) of the Act proceeding when the assessee has to show only "without good and sufficient reasons failed to deduct and pay tax", which has not been shown in the facts of the present case and non taxability cannot be taken as a sufficient reason, when section 195(2)(3)(4) of the Act certificate is not obtained. In the negative, against the assessee and in favour of the revenue 7 Whether the Tribunal was correct in holding tha....