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DATE: December 23, 2019 (Date of pronouncement)
DATE: March 28, 2020 (Date of publication)
AY: 2015-16
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S. 199/205: In a case where the deductor has deducted tax at source but has not deposited the tax with the Govt, the assessee cannot be made to suffer. U/s 205, the assessee/ deductee cannot be called upon to pay the tax. Credit for the tax deducted at source has to be allowed in the hands of the deductee irrespective of whether the same has been deposited by the deductor to the credit of the Central Government or not (Yashpal Sahani 165 TM 144 (Bom), Sumit Devendra Rajani 49 TM.com 31 (Guj) & Pushkar Jain 103 TM.com 106 (Bom) followed)

In terms of section 205 of the Act, the assessee/deductee cannot be called upon to pay tax, to the extent to which tax had been deducted from the payments due. Consequently, it follows that credit for such tax deducted at source, which is deducted from the account of the deductee, by the deductor, is to be allowed as taxes paid in the hands of the deductee, irrespective of the fact whether the same has been deposited by the deductor to the credit of the Central Government or not. The deductee in such circumstances cannot be denied credit of tax deducted at source on its behalf. Under the Act, the provisions are enshrined under which recovery of tax from the account of the person, who had deducted the such tax, are provided

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DATE: April 5, 2019 (Date of pronouncement)
DATE: April 10, 2019 (Date of publication)
AY: 2008-09, 2009-10, 2010-11
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S. 201(1) TDS: The time limit specified in s. 201(3) & (4) for passing orders does not apply to cases where payments are made to non-residents. In cases of payments made to non-residents, an order passed after one year from the end of the FY in which the proceedings were initiated is void ab initio and liable to be quashed

In our considered opinion, where the payments are made to the entities/persons other than the persons specified in sub-section (3), the limitation period of one year from the end of financial year in which the proceedings u/s. 201 were initiated, as laid down by the Special Bench of Tribunal and affirmed by the Hon’ble Jurisdictional High Court would apply. In the instant case, since, the order u/s. 201 has been passed much after the elapse of one year period from the end of financial year in which proceedings u/s. 201 were initiated, the order u/s. 201 in the impugned assessment years is void-ab-initio and hence, is liable to be quashed

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DATE: October 8, 2018 (Date of pronouncement)
DATE: October 15, 2018 (Date of publication)
AY: -
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S. 197 TDS: No functionary other than the officer referred to in the relevant statutory provision, namely section 197 and Rule 28AA of the Income Tax Rules, 1962, is permitted to take over the jurisdiction or interfere in the exercise of the discretionary power envisaged by this statutory provision. The concerned official has to record his satisfaction while issuing the TDS certificate

While we allow withdrawal of these certificates and impugned in this Writ Petition with liberty to issue fresh certificates in accordance with law, we clarify that no functionary other than the officer referred to in the relevant statutory provision, namely Section 197 and the Rule 28AA of the Income Tax Rules, 1962 would be permitted to take over the jurisdiction or interfere in the exercise of the discretionary power envisaged by this statutory provision

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DATE: June 27, 2018 (Date of pronouncement)
DATE: July 3, 2018 (Date of publication)
AY: 2011-12
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S. 9/ 195(1) TDS: Law on whether commision paid to non-resident agents for services rendered outside India accrues in India and whether the assessee is liable to deduct TDS thereon explained (All judgements referred)

Section 195 of the Act has to be read alongwith the charging Section 4,5 and 9 of the Act. One should not read Section 195 of the Act to mean that the moment there is a remittance, the obligation to deduct tax automatically arises. Section 195 of the Act clearly provides that unless the income is chargeable to lax in India, there is no obligation to withhold tax. In order to determine whether the income could be deemed to accrue or arise in India, section 9 of the Act is the basis

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DATE: April 9, 2018 (Date of pronouncement)
DATE: May 26, 2018 (Date of publication)
AY: -
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S. 9/ 40(a)(i)/ 195: Explanation 2 to s. 195(1) inserted by Finance Act 2012 with retrospective effect from 01.04.1962 has bearing while ascertaining payments made to non-residents is taxable under the Act or not. However, it does not change the fundamental principle that there is an obligation to deduct TDS only if the sum is chargeable to tax under the Act. If the conclusion is arrived that such payment does not entail tax liability of the payee under the Act, s. 195(1) does not apply

It is indisputably true that such explanation inserted with retrospective effect provides that obligation to comply with subsection [1] of Section 195 would extend to any person resident or non-resident, whether or not non-resident person has a residence or place of business or business connections in India or any other persons in any manner whatsoever in India. This expression which is added for removal of doubt is clear from the plain language thereof, may have a bearing while ascertaining whether certain payment made to a non-resident was taxable under the Act or not. However, once the conclusion is arrived that such payment did not entail tax liability of the payee under the Act, as held by the Supreme Court in the case of GE India Technology Centre P. Limited [Supra], sub-section [1] of Section 195 of the Act would not apply

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DATE: April 11, 2018 (Date of pronouncement)
DATE: April 19, 2018 (Date of publication)
AY: 2010-11, 2011-12
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S. 9(1)(i)/ 40(a)(i): Entire law on whether commission paid by an Indian entity to foreign agents can be said to accrue in India and whether the assessee is obliged to deduct TDS thereon u/s 195 explained. All relevant judgements and CBDT Circulars Nos.7 dated 22.10.2009, 23 dated 23 July 1969, 163 dated 29th May 1975 and 786 dated 7th February 2000 considered

It is not disputed that that the withdrawal of the circulars No. 23 and 786 has been made on 22.10.2009 vide CBDT Circular No. 7 of 2009 and mere withdrawal of the circular does not negate the principles of income deemed to accrue or arise in India or outside India. The CBDT has not stated that any part of the circulars is contrary to law or that the circulars were wrongly issued or that the law has undergone changes holding their withdrawal. Thus, in respect of cases, which directly follow with the situations covered by the circulars, the liability to tax should continue to be in accordance with section 9 of the Act and its intent. The relevant sections, namely section 5(2) and section 9 of the Income-tax Act, 1961 not having undergone any change in this regard, the clarification in Circular No. 23 still prevails even after the withdrawal. No tax is therefore deductible under section 195 and consequently, the expenditure on export commission payable to a non-resident for services rendered outside India is not liable for withholding tax

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DATE: October 23, 2017 (Date of pronouncement)
DATE: October 28, 2017 (Date of publication)
AY: 2007-08 to 2012-13
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Royalty u/s 9(1)(vi) & Article 12: The Google Adwords advertisement module is not merely an agreement to provide advertisement space but is an agreement for facilitating the display and publishing of an advertisement to the targeted customer using Google's patented algorithm, tools and software. Google Adwords uses data regarding the age, gender, region, language, taste habits, food habits, etc of the customer so as to maximize the impression and conversion to the ads of the advertisers. Consequently, the payments to Google Ireland are taxable as "royalty" and the assessee ought to have deducted TDS thereon u/s 195

If we look into the advertisement module of Adword program stated herein above, then we will come to an irresistible conclusion that it is not merely an agreement to provide the advertisement space but is an agreement for facilitating the display and publishing of an advertisement to the targeted customer. If we look into the submission made by the learned AR, it is clear that the advertiser, selects some key words and on the basis of key words, the advertisement is displayed on the website or along with the search result as and when the customer selects the key words relatable to the advertisement. The module as suggested does not merely work by providing the space in the Google search engine, but it works only with the help of various patented tools and software. As we have analyzed detailed functioning of Adword program, it is clear that with the help of the search tool/software / data base, the Google is able to identify the targeted consumer/person as per the requirement of the advertiser

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DATE: September 14, 2017 (Date of pronouncement)
DATE: September 25, 2017 (Date of publication)
AY: 2010-11
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S. 195 TDS: Entire law explained on whether payment of commission to non-resident agents for services rendered outside India is liable to tax in India u/s 5(2)(b) and 9(1)(i) on the ground that the "source" of the payment is in India and that the insertion of the Explanation to s. 9(2) with retrospective effect by the Finance Act 2010 makes such payments taxable

The Hon’ble Allahabad High Court in the case of CIT vs. Model Exims reported in 363 ITR 66 has held that failure to deduct tax at source from payment to non-resident agents, who has their own offices in foreign country, cannot be disallowed, since the agreement for procuring orders did not involve any managerial services. It was held that the Explanation to section 9(2) is not applicable. It was further held that the situation contemplated or clarified in the Explanation added by the Finance Act, 2010 was not applicable to the case of the assessee as the agents appointed by the assessee had their offices situated in the foreign country and that they did not provide any managerial services to the assessee. Section 9(1)(vii) deal with technical services and has to be read in that context. The agreement of procuring orders would not involve any managerial services. The agreement did not show the applicability or requirement of any technical expertise as functioning as selling agent, designer or any other technical services

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DATE: February 13, 2017 (Date of pronouncement)
DATE: February 22, 2017 (Date of publication)
AY: 2011-12
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S. 206AA does not have an overriding effect over the other provisions of the Act. By virtue of s. 90(2), the provisions of the Treaty override s. 206AA to the extent they are beneficial to the assessee. Consequently, the payer cannot be held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN

In view of the above discussion, we are of the view that the provisions of section 206AA of the Act will not have a overriding effect for all other provisions of the Act and the provisions of the Treaty to the extent they are beneficial to the assessee will override sect ion 206AA by virtue of section 90(2). In our opinion, the assessee therefore cannot be held liable to deduct tax at higher of the rates prescribed in section 206AA in case of payments made to non-resident persons having taxable income in India in spite of their failure to furnish the Permanent Account Numbers

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DATE: March 11, 2015 (Date of pronouncement)
DATE: July 8, 2016 (Date of publication)
AY: 1999-00
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Law laid down by the Tribunal in (i) Central Bank of India v/s. DCIT 42 SOT 450 that under Art 26(3) of India-USA DTAA payments to Non-Residents are equated with payments to Residents & so s. 40(a)(i) disallowance is not valid and (ii) in DCIT v/s. Bank of Baharain & Kuwait 132 TTJ (Mum) 505 that loss arising from unmatured foreign exchange contracts is not a notional loss but is allowable as a definite liability is final as Dept has not challenged these verdicts and the issue cannot be raised in case of other assessees

The Assessee during subject Assessment Year made payment through Master Card International and Visa Card International being assessment and equipment fees. The payments were made by the Assessee without deducting tax at source. In view of the above, the Assessing Officer & CIT(A) disallowed the entire amount of fees remitted, aggregating to Rs.82.33 lakhs in terms of Section 40(a)(i) of the Act. The Tribunal allowed the Appeal of the Assessee by followed its decision in the case of Central Bank of India v/s. DCIT 42 SOT 450 – wherein on similar facts, it was held that even if no TDS is deducted, the payments made to Visa Card International and Master Card International on account of fees could not be disallowed in view of Article 26(3) of Indo-US Double Taxation Avoidance Agreement (DTAA)

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