2023 (9) TMI 1445 - HC - Income Tax

TDS u/s 195 - deduction of TDS in respect of remittances made by the appellant to US based company i.e. M/s. IGTL Solutions (U.S.A.) - appellant strongly contended that once when the certificate was obtained from the Joint Director so far as the waiver of deduction of TDS in respect of remittances is made to M/s. IGTL Solutions (USA) has not been considered discussed referred to either by the Commissioner of Income Tax (Appeals) or by the Tribunal HELD THAT - Today when the matter is taken up for hearing the entire paper-book that was filed before the Tribunal was made available by the learned counsel for appellant and one such document therein is the certificate so issued u/s 195(3) of the Act granting exemption to M/s. IGTL Solutions (USA) so far as receiving of remittances without deduction of income tax at source. If the contents of the said document is to be accepted and on verification found to be genuine the consequences would be that the entire remittances that have been made to M/s. IGTL Solutions (USA) would be non-taxable so far as TDS is concerned. Further if the contents of the said letter stands accepted then the action on the part of the respondent in carrying out deduction at source on the remittances made to M/s. IGTL Solutions (USA) would be per se bad. Thus taking note of the fact that there is a non-reference or non-deliberation of the exemption so obtained under Section 195(3) of the Act by the two forums below we are of the considered opinion that it is a fit case where matter can be remitted back to the Tax Tribunal for considering the contentions raised by the appellant so far as exemption that they have got under Section 195(3) of the Act insofar as the remittances that have been made to M/s. IGTL Solutions (USA) is concerned. Considering the fact that the order of the Tribunal is one which was passed as early as on 03.08.2007 it is expected that the Tribunal shall reconsider this matter particularly taking into consideration the exemption so granted to the appellant on 10.02.2003.

Summary

Issues involved:
The denial of exemption under Section 195(3) of the Income Tax Act, 1961 despite an order passed by the Joint Director regarding the deduction of TDS for remittances made to a US-based company.

Summary:

Issue 1: Denial of exemption under Section 195(3) of the Act
The appellant challenged the order passed by the Income Tax Appellate Tribunal, where the denial of exemption under Section 195(3) of the Act for the Assessment Year 2003-04 was affirmed. The appellant argued that despite having a certificate from the Joint Director allowing the receipt of sums without deduction of income tax, the authorities in India made remittances after deducting tax at source, contrary to the Circular dated 18.02.2003. The appellant contended that the exemption under Section 195(3) of the Act was not considered by the Commissioner of Income Tax (Appeals) or the Tribunal, even though a certificate had been obtained for waiving the deduction of TDS for remittances to the US-based company. The appellant maintained that they were not liable to make deductions as they had obtained an exemption under Section 195(3) of the Act, which was not acknowledged by the lower authorities.

Issue 2: Remittance without deduction of TDS
The appellant presented the certificate issued under Section 195(3) of the Act, granting exemption to the US-based company for receiving remittances without deduction of income tax at source. If the authenticity of the document is verified, it would render the remittances to the company non-taxable in terms of TDS. The Court observed that the failure of the lower forums to refer to or deliberate on the exemption obtained under Section 195(3) warranted the matter to be remitted back to the Tax Tribunal for reconsideration. The Tribunal was directed to reexamine the case, giving priority to the exemption granted to the appellant on 10.02.2003, and to issue a decision within 90 days from the receipt of the order.

Conclusion:
The appeal was allowed to the extent mentioned above, with no order as to costs. Any pending miscellaneous applications were to be closed accordingly.