COURT: | ITAT Mumbai |
CORAM: | G. S. Pannu (AM), Pawan Singh (JM) |
SECTION(S): | 9(1)(vii), Article 12, Article 15 |
GENRE: | Domestic Tax, International Tax |
CATCH WORDS: | Fees for technical services |
COUNSEL: | Harsh Kapadia, Paras Savla |
DATE: | May 6, 2016 (Date of pronouncement) |
DATE: | May 20, 2016 (Date of publication) |
AY: | 2009-10 |
FILE: | Click here to view full post with file download link |
CITATION: | |
S. 40(a)(ia): Payments by a CA firm to foreign professional entities for services rendered abroad is not taxable under Articles 12 and 15 of the India-USA DTAA. The retrospective amendment to s. 9(1)(vii) to tax services rendered outside India does not apply in the context of a disallowance u/s 40(a)(ia) in the hands of the payer |
Ostensibly, the requirement of rendering services in India in order to attract section 9(1)(vii) of the Act was removed by insertion of Explanation by the Finance Act, 2010 with retrospective effect from 1/4/1976. This has been understood by the Revenue to say that inspite of the services having been rendered by the recipients outside India, the same is taxable in India by applying the aforesaid amendment. In our view, such retrospective amendment would be determinative of the tax liability in the hands of the recipients of income. So however, in the present case, what is held against the assessee is the failure to deduct tax at source at the time of payment of such income. Ostensibly, dehors the aforesaid amendment, the impugned income was not subject to tax deduction at source in India as per the prevailing legal position. Taxability of a sum in the hands of recipient, on account of a subsequent retrospective amendment would not expose the assessee-payer to an impossible situation of requiring deduction of tax at source on the date of payment. Therefore, on this count also the assessee cannot be held to be in default in not deducting tax at source so as to trigger the disallowance under section 40(a)(i) of the Act
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