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TMI Blog2013 (10) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... dia Technologies Centre Private Limited versus CIT, [2010 (9) TMI 7 - SUPREME COURT OF INDIA], once the income was not exigible or chargeable to tax, TDS was not required to be deducted. Money paid to the third parties, who did not have any office or permanent establishment in India, was exempt and not chargeable to tax. Thus on payments or income, TDS was not required to be deducted - Payments in question were made prior to circular No. 7/2009. On this aspect, there is no dispute – Deleted the addition made by the Assessing Officer under Section 40(a)(i) of the Act. The appeal, being devoid of merit, is dismissed – Decided against the Revenue. Mandatory nature of Circular – Held that:- No any inconsistency or contradiction between the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent : Nemo. ORDER Sanjiv Khanna, J. (Oral):- Revenue by this appeal under Section 260A of the Income Tax Act (Act, for short) claims that the assessee had defaulted and failed to deduct tax at source on commission/discount on sale of Rs.37,87,26,158/- paid to non-residents situated outside India and who do not have any office or permanent establishment in India. This amount of Rs.37,87,26,158/-, actually paid and incurred as expenditure by the respondent assessee, has been disallowed relying upon Section 40(a)(i) of the Act. 2. Factually, there is no dispute and it is accepted that the payments were made and are genuine payments. It is accepted that the parties to whom payments have been made do not have permanent establishm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the Indian assessee and payment to the foreign companies; and secondly whether procurement of export orders by foreign company for the Indian company had resulted in business connection. The contentions were rejected relying upon the aforesaid circulars. In the present case, the Assessing Officer has not invoked Section 9(1)(i) but relied on Section 9(1)(vii). However, Circular Nos. 23 dated 23rd July, 1969 and 786 dated 7th February, 2000 do not make any such distinction. The relevant portions of the said circulars were quoted in Eon Technology Private Limited (supra) and read as under:- Circular No. 23, dated July 23, 1969 Foreign agents of Indian exporters.- A foreign agent of Indian exporter operates in his own country and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced before the Court in the correct perspective because the latter circular continuing certain benefits to the assessees was overlooked and the withdrawn circular was looked upon as in conflict with law. Such circulars, however, are not meant for contradicting or nullifying any provision of the statute. They are meant for ensuring proper administration of the statute, they are designed to mitigate the rigours of the application of a particular provision of the statute in certain situations by applying a beneficial interpretation to the provision in question so as to benefit the assessee and make the application of the fiscal provision, in the present case, in consonance with the concept of income and in particular, notional income as also t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot actually received..... 17. We do not see any inconsistency or contradiction between the circular so issued and Section 145 of the Income Tax Act. In fact, the circular clarifies the way in which these amounts are to be treated under the accounting practice followed by the lender. The circular, therefore, cannot be treated as contrary to Section 145 of the Income Tax Act or illegal in any form. It is meant for a uniform administration of law by all the Income Tax Authorities in a specific situation and, therefore, validly issued under Section 119 of the Income Tax Act. As such, the circular would be binding on the Department. 8. Referring to this decision, in Catholic Syrian Bank Limited versus Commissioner of Income Tax, (2012) 3 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduct at source, though it was mandated and required. The respondent was entitled to rely upon the circulars. In light of the judgments of the Supreme Court in CIT versus Eli Lilly Company (India) Private Limited, (2009) 312 ITR 225 (SC) and G.E India Technologies Centre Private Limited versus CIT, (2010) 327 ITR 456 (SC), once the income was not exigible or chargeable to tax, TDS was not required to be deducted. Money paid to the third parties, who did not have any office or permanent establishment in India, was exempt and not chargeable to tax. Thus on the said payments or income, TDS was not required to be deducted. We also note that the payments in question were made prior to circular No. 7/2009. On this aspect, there is no dispute. W ..... X X X X Extracts X X X X X X X X Extracts X X X X
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