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No s. 195 TDS Liability On Payer If Payee Not Assessed
The assessee made a public issue of Global Depository Receipts (GDR) for which it engaged international lead managers like Jardine Fleming, Merrill Lynch etc and paid management and underwriting commission of Rs. 7.68 crores without deducting TDS. The AO & CIT (A) held that the said commission constituted “fees for technical services” and that the assessee ought to have deducted TDS u/s 195. The assessee was held to be in default u/s 201. Before the Tribunal, the assessee argued that as no action has been taken by the department against the payees and the time for taking such action had expired, no order u/s 195 & 201 could be passed. HELD by the Tribunal:
No order u/s 201(l) or (1A) holding the payer to be in default can be passed where the Revenue has not taken any action against the payee and the time limit for taking action against the payee u/s 147 has expired. On facts, the admitted position is that no assessment has been made in the hands of the payee in respect of the sums received from the assessee in respect of GDR issues. Similarly no proceedings have been taken against it till date for assessing such income. The time limit for issuing notice u/s 148 has also come to an end. As the time limit for taking action against the payee u/s 147 is not available, and there is no course left to the Revenue for making the assessment of the non-resident, exconsequenti, no lawful order can be passed against the assessee either u/s 201(1) or (1A) (Mahindra & Mahindra 313 ITR 263 (Mum) (SB) (AT) followed).
See also Vodafone Essar vs. DCIT (included in file) where it was held that if the payee’s PAN was available, the AO should recover from him instead of from the payer.
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