9911796707
TMI Blog2013 (12) TMI 1096X X X X Extracts X X X X X X X X Extracts X X X X ..... peal of the assessee – Decided against Revenue. X X X X Extracts X X X X X X X X Extracts X X X X ..... t of salary credited to the accounts of Mr.Hoffman for FY's 2001-2004 and Mr.Bowes for FY 2003-04 was not an expenditure for CMS Resource Development Company, but rather was made to assist CMS (India) Operations & Maintenance Co. Pvt. Ltd. in the payment of salary to Mr.Hoffman and Mr.Bowes outside of India. Accordingly, the agreements are of reimbursements of monies advanced by CMS Resource Development Company." 9(c) The third letter dt.15.12.2009 read as under:- "At the end of the month, Resource charged CMS India O&M Company, and other companies, with the salaries, recording Accounts Receivable from them. The credit side of the entry went to Billed Project Costs, which was not a revenue account, but rather a contra account to Salary Expense. Thus, the salaries of Mr.Hoffman and Mr.Bowes were temporarily recorded in an expense account as part of a journal entry intended to record total payroll, but were reversed to zero at the end of the month" 9(d) For the other Assessment Years, assessee also produced a copy of the agreement dt.01.06.2003 between assessee and CMS RDC and relevant articles 2, 4 & 5 of the said agreement read as follows: "Article II-Scope : 2.1. This Agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in which such tax has been paid. Explanation.--For the purposes of this sub-clause,-- (A) "royalty" shall have the same meaning as in Explanation 2 to clause (vi) of sub-section (1) of section 9; (B) "fees for technical services" shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9;" The above clause stipulates blanket disallowance where a person has made a payment of the nature mentioned therein, to a non-resident without deducting tax at source. The terminology used is that amount should be one on which the tax is deductible at source under Chapter XVII-B. The said Chapter-XVII-B consists of sections 192 to 206-AA. Out of these sections, there are only two sections on which assessee could be fastened with a liability to deduct tax and these are Section 195 and Section 192. Sec.192 mandates deduction of tax at source on payment of salaries and Sec.195 mandates deduction of tax at source on payments effected to non-resident whether interest or any other sum chargeable under the provisions of the Act. 11. Applying this position of law to the facts here, if the payments effected were salaries, no doubt by virtue of sec.192, which does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the DTAA, specify at paragraph-4 that technical services should be made available. Assessee might have come to a bona fide belief that there was no technical services made available to it by M/s.CMS RDC. As already mentioned by us, there is a clear finding by the Commissioner of Income Tax(A) that when salaries were paid to the deputed employees by CMS RDC, taxes were duly deducted and such tax deducted were reflected in the income tax return filed by the said employees. The agreements between assessee and M/s.CMS RDC which has been reproduced at para - 9(d) clearly show that no technical know-how was made available to the assessee. Assessee could therefore, have formed a bona fide impression that no part of the payment it had effected to M/sCMS RDC had any element of income therein. In our opinion, decision of Special Bench of this Tribunal in Prasad Productions Ltd (supra) readily comes to the aid of the assessee. Para Nos.26 & 27 of the said order, which is relevant is reproduced hereunder for brevity. "26. A pertinent question was raised by the learned Departmental Representative as to who decides whether the payment bears any income character or not. In his view, it could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of the payment is income chargeable to tax and does not make an application under s.195(2), he will have to deduct tax from the entire payment. (e) If the payer believes that the entire payment or a part of it is income chargeable to tax and fails to deduct tax at source, he will face all the consequences under the Act. (f) If the payer believes that he has to deduct tax and expresses this duty of his to the payee, it is for the payee then to apply under s.195(3) to receive the payment without any deduction at source. (g) If the payee fails to obtain certificate under s.195(3), the payer, based on his belief will certainly withhold the tax. Thus, in our opinion, these are the various situations which one can visualize for the application of the entire provision of s.195. The above discussion goes to show that in case of a bona fide belief by the payer that no part of the payment bears income character, it is not mandatory for him to undergo the procedure of s.195(2) become making any payment to a non-resident. 27. Having visualized the various situations let us consider the fallout of each situation and how the interests of both, the taxpayer as well as the tax collector ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the payee wants to receive the payment without deduction of tax, he can apply for a certificate to that effect under s.195(3) and if he gets the certificate, no one is adversely affected. (g) If the payee fails to get the certificate, he will have to receive payment net of tax. No interest is jeopardized. Thus, in all the possible situations described above, the interests of all the parties are protected. Further, one cannot lose sight of one underlying principle in the above processes that the entire exercise is tentative as has been held in the case of Transmission Corporation (supra). From the above discussion, one important point we are trying to drive home is that if the payer is under a bona fide belief that no part of the payment is chargeable to tax, he will have the right to defend that belief in the proceedings under s.201 of the Act. Number of such proceedings have taken place and have been adjudicated upon by various High Courts as well as by the Supreme Court. To repeat, the payer is an assessee under the Act and the order under s.201 is an assessment order. Therefore, the payer has the right to get his liability determined as per the provisions of the Act despit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S RDC. He thus ruled in favour of assessee. 4. Now before us, learned D.R., strongly assailing the order of CIT(Appeals), submitted that CIT(Appeals) fell in error in entertaining the appeal filed by the assessee under Section 248 of the Act. According to him, assessee ought have approached the Department for a certificate under Section 195(2) of the Act and could not deny its liability for deducting tax at source, after having effected such deductions so, suo moto. As per learned D.R., the CIT(Appeals), in any case, fell in error in holding that there was an employee-employer relations between assessee and expatriate employees deputed by M/s CMS RDC to the assessee-company. Further, as per learned D.R., the payments effected by the assessee to M/s CMS RDC were not towards salary, but, for managerial services rendered and therefore, fell within the purview of Section 9(1)(vii) of the Act. 5. Per contra, learned A.R. supported the order of CIT(Appeals). 6. We have perused the orders and heard the rival submissions. In our opinion, Section 248 does enable an assessee to file an appeal even after deduction of tax at source claiming that no tax was required to be deducted at source ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
