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2024 (3) TMI 712 - AT - Income TaxTDS u/s 195 - Remittances made to US based company M/s. IGTL Solutions (USA) - HELD THAT - A Co-ordinate Bench of the Tribunal 2024 (3) TMI 633 - ITAT HYDERABAD directed AO to cause verification of the certificate and in the event the contents of the certificate issued in section 195(3) are found to be correct and genuine, then the consequences would be that the remittances that have been made to M/s. IGTL Solutions (USA) would be non-taxable so far as the TDS is concerned, since if the contents of such certificate are accepted, then the action on the part of the Revenue in carrying out a deduction at source on the remittances made to M/s. IGTL Solutions (USA) would be bad. Hence, while respectfully following the order of the Hon ble High Court 2023 (9) TMI 1445 - TELANGANA HIGH COURT direct the learned Assessing Officer to cause verification of the certificate dated 10/02/2003, issued under section 195(3) of the Act and if it is found to be genuine, the consequence shall be that the entire remittances that were made to M/s. IGTL Solutions (USA) would be non-taxable so far as TDS is concerned, and the impugned order under section 201(1A) of the Act will have no legs to stand. Grounds are answered accordingly.
Issues:
The judgment involves issues related to non-deduction of tax at source under section 195 of the Income Tax Act, 1961, liability of the assessee as an assessee in default under section 201(1) of the Act, charging of interest under section 201(1A) of the Act, subsequent grant of exemption under section 195(3) of the Act, and verification of the genuineness of the certificate issued under section 195(3) of the Act. Non-Deduction of Tax at Source: The assessee, engaged in software development and running a call center, made payments to foreign entities without deducting tax at source under section 195 of the Act. The Assessing Officer held the assessee liable as an assessee in default under section 201(1) of the Act for not deducting tax at source and charged interest under section 201(1A) of the Act. Subsequent Grant of Exemption: The assessee contended that a certificate under section 195(3) of the Act was issued subsequently, exempting the remittances made to a foreign entity from tax deduction at source. However, the CIT(A) held that the subsequent exemption granted would not affect the assessee's liability. Judicial Review and High Court Intervention: The matter was taken to the Tribunal, which dismissed the appeals and upheld the CIT(A)'s findings. The assessee then appealed to the High Court, emphasizing the certificate obtained under section 195(3) for waiver of TDS deduction, which had not been considered by the lower authorities. High Court Directions and Tribunal's Decision: The High Court, upon verification of the certificate, directed the Tribunal to consider the exemption obtained under section 195(3) for the remittances made to the foreign entity. The Tribunal, in line with the High Court's order, directed the Assessing Officer to verify the genuineness of the certificate and stated that if found genuine, the remittances would be non-taxable concerning TDS. Conclusion: Respecting the High Court's order, the Tribunal directed the Assessing Officer to verify the certificate issued under section 195(3) of the Act. If the certificate is genuine, the remittances to the foreign entity would be non-taxable regarding TDS, rendering the impugned order under section 201(1A) of the Act invalid. Consequently, the appeal of the assessee was allowed.
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