2016 (1) TMI 1025 - AT - Income Tax

TDS u/s 194J - Non deduction of TDS on payment towards Internet charges (Band Width charges) - CIT(A) deleted the disallowance - Held that - the dispute with regard to the nature of payment made for purchase of software was settled at rest only by Finance Act 2012 through which Explanation-4 was added to Sec. 9(1)(vii). Although the said amendment was given retrospective effect, legal maxim, lex non cogit ad impossibillia, meaning thereby that the law cannot possibly compel a person to do something which is impossible to perform. As mentioned elsewhere, the amendment was given a retrospective effect but by that time the assessee has already done the transactions without deducting tax at source. On these facts, the assessee cannot be held to have violated the provisions of Sec. 194J of the Act. Our view is fortified by the decisions of the Tribunal in the case of Channel Guide India Ltd. Vs ACIT 2012 (9) TMI 95 - ITAT MUMBAI and Rich Graviss Products (P) Ltd. 2014 (9) TMI 165 - ITAT MUMBAI and also by the decision in the case of New Bombay Park Hotel Pvt. Ltd Vs ITO 2014 (4) TMI 68 - ITAT MUMBAI . Respectfully following the decisions of the Coordinate Bench (supra), we do not find any reason to interfere with the findings of the Ld. CIT(A) - Decided against revenue

Summary

Issues:
- Deletion of addition on account of non-TDS on payment towards Internet charges (Band Width charges).

Analysis:
The judgment by the Appellate Tribunal ITAT Mumbai pertains to two appeals filed by the Revenue against the order of the Ld. CIT(A)-13, Mumbai for the Assessment years 2010-11 & 2011-12. The appeals were consolidated due to identical grievances. The core issue was the deletion of the addition concerning non-TDS on payments for Internet charges. The Revenue contended that the payments required TDS under Sec. 194J, and the assessee's failure to deduct tax made them liable for interest under Sec. 201(1A) of the Act.

The Ld. Counsel for the assessee argued that similar issues had been decided in favor of the assessee in various cases. The Departmental Representative acknowledged this. Upon reviewing the orders, the Tribunal noted that the dispute regarding software purchase payments was resolved by the Finance Act 2012, which added Explanation-4 to Sec. 9(1)(vii) retrospectively. The Tribunal applied the legal maxim "lex non cogit ad impossibillia," stating that the law cannot compel an impossible act. Since the assessee had already transacted without TDS before the retrospective amendment, they couldn't be deemed to violate Sec. 194J. The Tribunal cited precedents like Channel Guide India Ltd. Vs ACIT and Rich Graviss Products (P) Ltd. to support its decision. Consequently, the Tribunal dismissed the Revenue's appeals, aligning with the decisions of the Coordinate Bench.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s findings, emphasizing that the retrospective amendment couldn't retroactively apply to transactions completed before its enactment. The judgment underscores the principle that legal obligations cannot be imposed on actions that were impossible at the time.