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2013 (11) TMI 283 - HC - Income TaxTDS u/s 195 - PE - income u/s 9(1)(i) Held that - Since IPI is a non-resident body and has no permanent establishment in India Section 9 (1) (i) does not apply at all. The said provision will apply only if there is any property, asset or source of income in India which belong to IPI and such source must be used for earning income in India. It was hence found that since the IPI is a non-resident body incorporated by a law in another country having no business or other connection in India any reference to Section 2 (24) (ii) (a) of the Income Tax Act become superfluous and therefore Section 195 (1) of the Income Tax Act does not apply in the case of the payments made to the IPI. No material is produced by the revenue to arrive at a different finding. IPI had no permanent establishment in India and the assessee is not an agent of IPI. The assessee is only a member of IPI and by giving advertisement membership fee or other donation the assessee is not getting any monetary advantage. The only benefit available to the assessee is the right to participate and to strive for achieving the objects of IPI through publications, seminars, conferences etc. Therefore it could be seen that on finding of fact itself the authorities have come to a conclusion that the assessee is not liable to comply with the provisions under Section 195 of the Income Tax Act Decided against the Revenue.
Issues:
1. Whether the assessee is liable to deduct tax at source on membership fee contribution to an international body. 2. Whether the provisions of Section 195(1) of the Income Tax Act apply in the given case. 3. Whether the Tribunal's decision on the liability to deduct tax at source is correct. Issue 1: The appeal concerns the liability of the assessee to deduct tax at source on a membership fee contribution of U.S. $10,000 to the International Press Institute (IPI) for the assessment year 1999-2000. The Assessing Officer directed the assessee to deduct tax at source under Section 195(1) of the Income Tax Act, 1961. The Commissioner of Income Tax allowed the assessee's appeal, stating that Section 9(1)(i) of the Act does not apply. The Tribunal upheld this decision, noting that since IPI had no permanent establishment in India and the assessee was not an agent of IPI, the appeal was dismissed. Issue 2: The Tribunal found that Section 195(1) of the Income Tax Act does not apply in this case as the IPI, being a non-resident body with no permanent establishment in India, did not fall under the purview of the section. The Tribunal determined that the assessee, merely a member of IPI, did not receive any monetary benefit from the membership fee, but only gained the right to participate in IPI's activities. As such, the provisions of Section 195(1) would only be applicable if the payment was made to an income tax assessee in India, which was not the case here. Issue 3: The High Court concurred with the Tribunal's findings, stating that the assessee was not obligated to comply with the provisions of Section 195 of the Income Tax Act. The Court emphasized that the authorities correctly considered the scope and effect of deducting tax at source, and since IPI had no permanent establishment in India and the assessee was not an agent of IPI, the provisions of Section 195(1) did not apply. The Court held that the questions of law raised by the Revenue did not arise for consideration based on the factual findings, and consequently, the appeal was dismissed. In conclusion, the High Court upheld the Tribunal's decision, ruling that the assessee was not liable to deduct tax at source on the membership fee contribution to the International Press Institute due to the non-resident status of IPI and the absence of a permanent establishment in India.
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