2016 (4) TMI 566 - AT - Income Tax

TDS u/s 195 - Addition made by the AO u/s 40(a)(i) - non deduction of tds - neither the assessee obtained TDS certificate from the department u/s 195(2) nor the TDS was deducted - Held that - We find that the assessee has paid commission to a person who is non-resident. As per the CBDT Circular 786 dated 7.2.2000, if a person pays commission to the non-resident no tax be deduced from the payment - Decided in favour of assessee.

Summary

Issues:
Challenge to deletion of addition under section 40(a)(i) of the Income Tax Act, 1961 for assessment year 2009-10.

Analysis:
The appellant, the revenue, challenged the deletion of an addition made by the AO under section 40(a)(i) of the Income Tax Act for the assessment year 2009-10. The AO observed that the assessee had paid a sum without deducting TDS, leading to the addition. The ld.CIT(A) accepted the assessee's contentions and granted relief, prompting the revenue to appeal. The appellant argued that tax should have been deducted as per section 195(2) since the agents were non-residents. The appellant relied on CBDT Circular 786 dated 7.2.2000, stating that tax is not deductible when payments are made to non-resident agents for services provided outside India. The appellant also cited precedents where similar issues were decided in favor of the assessee, emphasizing the absence of a territorial nexus with India in such cases.

The Tribunal examined the case, noting that the assessee paid commission to a non-resident, aligning with the CBDT Circular exempting TDS on payments to non-residents. The Tribunal referred to previous decisions where similar issues were decided in favor of the assessee. The Tribunal highlighted the interpretation of section 195 regarding tax deduction on payments to non-residents and emphasized the need for a territorial nexus with India for tax liability. The Tribunal found that the revenue failed to provide new material to challenge the ld.AR's submissions and upheld the decisions relied upon by the AR. Consequently, the Tribunal dismissed the revenue's appeal, following the precedent set by earlier Tribunal decisions.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the decision of the ld.CIT(A) to grant relief to the assessee based on the non-applicability of TDS provisions under section 195 for payments to non-residents without a territorial nexus with India. The Tribunal's decision was based on the interpretation of relevant legal provisions and precedents supporting the assessee's position in similar cases.