ACIT vs. Vilas N. Tamhankar (ITAT Mumbai)

The law laid down in GE India Technology Centre (P.) Ltd. vs. CIT [2010] 327 ITR 456 (SC) that there is no obligation to deduct TDS u/s 195 if the sum is not chargeable to tax in India is not affected by Explanation 2 to section 195(1) inserted by the Finance Act, 2012 w.r.e.f. 01.04.1962 except where the basis of the payer’s belief as to the non-chargeability of the payment to tax in India is on the ground that the payee has no place of business or business connection or otherwise any presence whatsoever in India. In the present case, the edifice of the assessee’s case is the rendering of services outside India. Therefore, though for a consideration for marketing and sale support services and, thus, only in the nature of commission or service charges, the same has no nexus with India. All that, in our clear view, the said Explanation does is to remove the issue of the determination of the tax incidence on the basis of whether the payee is a tax resident in India from being a consideration for non-deduction of tax at source u/s.195. The payee in the instant case, being admittedly a resident of Canada, with the services being rendered thereat, the issue of place of business in India is not an issue. The assessee’s stating of the payee having no place of business or establishment in India, is only toward and in support of its contention of the services being rendered wholly outside India. There is in fact no charge by the Revenue of the payee having any place of business or otherwise business connection in India. The said explanation would therefore, be of no consequence.