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TMI Blog2013 (11) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... to non-residents, were not taxable in India, then it could not be fastened with a liability to deduct tax under Section 195 of the Act. In any case, Assessing Officer has not given any finding that the non-residents had rendered any services which were in the nature of technical services. There is nothing on record to show that any technical knowledge was made available to the assessee through the services rendered by the non-residents, which assessee could make use of in future. In any case, sub-clause (b) of clause (vii) of Section 9(1) of the Act clearly mentions that fees paid in respect of services utilized in a business or profession carried on by such person outside India or for the purpose of making or earning income from any source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 69 and Circular No.786 dated 7.2.2000 redundant. When the source of income emanated from business activities of the assessee in India, the taxability of income was governed by Section 9 of the Act. Assessee having not deducted tax at source on the managerial service rendered by the foreign agents, Assessing Officer was of the opinion that rigours of Section 40a(i) was attracted. He disallowed the claim of Rs. 58,02,597/-. 3. In its appeal before CIT(Appeals), argument of the assessee was that at the time when assessee effected the payments to the foreign agents, what was applicable was Circular No.786 of 7.2.2000. Assessee could not foresee that the CBDT would withdraw the benefits given under Circular No.786 dated 7.2.2000 through subseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted tax at source as stipulated under Section 195 of the Act. Having not done so, Assessing Officer was justified in applying Section 40a(i) for making a disallowance. Learned D.R. submitted that the CIT(Appeals) fell in error by giving benefit of Circular No.786 dated 7.2.2000 to the assessee despite such Circular having become redundant by virtue of Circular No.7/2009 dated 22.10.2009. 6. Per contra, Sh. J. Prabhakar, FCA, ld. Counsel for the assessee, strongly supported the order of CIT(Appeals). 7. We have perused the orders and heard the rival submissions. The A.O. had made disallowance under Section 40a(i) for a reason that assessee could not take benefit of Circular No.786 dated 7.2.2000. However, the subsequent Circular No.7/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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