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TMI Blog2014 (1) TMI 1501X X X X Extracts X X X X X X X X Extracts X X X X ..... b) of Article 12 of Indo-US DTAA fees for included services means if such services made available technical knowledge, experience, skill, know-how, or processes, or consists of the development and transfer of a technical plan or technical design. The training was given to the pilots and other staff as per the requirement of the DGCA Rules – thus, it was only a part of the eligibility of the pilots and other staff for working in the industry of aviation and such training would not fall under the term "service make available" - the disallowance of u/s 40(a)(i) is not justified and accordingly the same is deleted – Decided in favour of Assessee. - IT Appeal Nos. 5135 & 5136 (Mum.) of 2011 - - - Dated:- 14-8-2013 - B. RAMAKOTAIAH AND VIJAY PAL RAO, JJ. For the Appellant : Mayur Kisnadwala and Ms. Arati Deshmukh. For the Respondent : Neeraja Pradhan. ORDER:- PER : Vijay Pal Rao These appeals by the assessee are directed against two separate orders of the Commissioner of Income Tax(Appeals) both dated 31.5.2011 for the assessment years 2006-07 and 2007-08. 2. The assessee has raised common grounds in these appeals except the amount of disallowance. The grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Act 2010, as retrospective amendment w.e.f 1.6.1976. 5. Before us the Ld. AR of the assessee has submitted that the said expenditure is incurred within the framework of the Government of India Regulations applicable to the Aviation Industry and with approval of DGCA. The training was conducted abroad and none of the companies have any place of business in India. The Ld. AR has further pointed out that the retrospective amendment brought into the statute by Finance Act 2010 is subsequent to the payments made by the assessee and therefore the payments which were made prior the amendment does not attract the provisions of section 40(a)(i). He has vehemently contended that prior to the assessment year 2006-07 there was no disallowance u/s 40(a)(i) and the assessee was under bonafide belief that no TDS is required to be deducted on these payments. The Ld. AR has also contended that the payments in the hand of the recipient are not taxable in India even as per the Article 12 of the Indo-US DTAA. He has referred para 4 of Article 12 and submitted that as per the meaning given in para 4 of the Article 12 of the Indo-US DTAA the 'fees for included services' means inter alia if such s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding B.V Vs ADIT reported in 342 ITR 200. 7. In rejoinder/rebuttal the Ld. AR of the assessee has submitted that the decision relied upon by the Ld. DR are not applicable in the facts of the assessee's case because the training provided in the case of the assessee is a standard training as per the requirement of DGCA and no specific technical knowledge, experience, skill, know-how was transferred or made available to the assessee. 8. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has disallowed the payment in question as per the provisions of section 9(1)(vii) without considering the provisions of DTAA. The CIT(A) has also relied upon the retrospective amendment brought to the statute by Finance Act 2010 whereby the explanation has been introduced. There is no dispute on the point that prior to the assessment year 2006-07 there is no disallowance by the AO u/s 40(a)(i). The retrospective amendment brought by Finance Act 2010 was not in existence when the assessee made the payments. Therefore, it cannot be ruled out that the assessee has acted under bonafide belief that no TDS was required to be deducted on such payment. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, to remove doubts regarding the source rule, an Explanation was inserted below sub-section (2) of section 9 with retrospective effect from 1-6-1976 vide Finance Act, 2007. The Explanation sought to clarify that where income is deemed to accrue or arise in India under clauses (v), (vi) and (vii) of sub-section (1) of section 9, such income shall be included in the total income of the non-resident, regardless of whether the non-resident has a residence or place of business or business connection in India. Even after that, the Hon'ble Karnataka High Court, in a recent judgment in the case of Jindal Thermal Power Co. Ltd. v. Dy. CIT (TDS) [2010] 321 ITR 31 has held that the Explanation, in its present form, does not do away with the requirement of rendering of services in India for any income to be deemed to accrue or arise to a non-resident under section 9. It has been held that on a plain reading of the Explanation, the criteria of rendering services in India and the utilization of the service in India laid down by the Supreme Court in its judgment in the case of Ishikawajma-Harima Heavy Industries Ltd. (supra) remains untouched and unaffected by the Explanation. Further the Legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Imtiaz Hussain [2006] 1 SCC 380, Shaikh Salim Haji Abdul Khagumsab v. Kumar [2006] 1 SCC 46, Mohammad Gazi v. State of MP [2000] 4 SCC 342 and Gursharan Singh v. New Delhi Municipal Committee [1996] 2 SCC 459." Similarly, while dealing with a question as to whether an assessee can be penalized for failure to carry out an act prior to its incorporation the Apex Court in the case of Life Insurance Corporation of India v. CIT [1996] 219 ITR 410 made following observations. "11. It is obvious that in the surplus or deficit in any inter-valuation period relating to the Corporation which came to be formed only on the appointed day in 1956, this amount could not be reflected since it related to a period prior to the formation of the Corporation. The law does not contemplate or require the performance of an impossible act - Lex non cogit ad impossibilia. It is now to be seen whether the expression "included therein" in rule 2(1)(b) is alone sufficient to negative the logical legal effect of section 7 of the LIC Act." While dealing with question as to whether an assessee can be liable to pay interest for failure to pay advance tax during the year when the liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is made into the Act after passing the Bill in both the Houses of Parliament and receiving the assent of the Hon'ble President of India some where in May or June, which means till that date no assessee can visualize that a new liability would be fastened to him. Normally, new provisions are introduced with effect from the next assessment year, but this provision under section 35DDA was introduced by Parliament in its wisdom with effect from April 1, 2001, i.e., the same year and that is why difficulty has arisen for visualizing the liability and the assessee could not deduct such expenditure. In fact in almost identical circumstances in the Third Member decision by the Delhi Bench in the case of Haryana Warehousing Corporation v. Deputy CIT [2001] 252 ITR (AT) 34 it was held that in such situations the legal dictum ad impossibilia would be attracted. The simple meaning of this dictum is that 'law cannot compel you to do the impossible'. In the case before us also, the assessee could not have visualized till the last instalment of advance tax, i.e., March 15, 2001, that it would not be entitled to deduct the VRS payments. Therefore, the assessee could not have done anything other th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amined the scope of a stay order on calculation of time/limitation. In this case, an award could not be registered within the time stipulated by the Registration Act owing to an interim injunction and an order directing the award to be deposited in Court. The Supreme Court allowed the entire period during which the stay order was in operation to be excluded while applying the maxim lex non cogit ad impossibilia or the law, does not compel a man to do that which he cannot possibly perform." In the case of Escorts Ltd. v. CIT [2002] 257 ITR 468, Hon'ble Delhi High Court was concerned with claim of an assessee for grant of refund under section 244 of the Act, which was denied to an assessee by the revenue on the ground that the assessee himself was responsible for delay of refund, and therefore cannot claim the amount of interest. While considering the rights of the assessee to claim interest, the Delhi High Court held as follows: "Lex non cogir ad impossibilia' is a well-known maxim. It means the law does not compel a man to do that which he cannot possibly perform. If the Assessing Officer could not perform his duties to complete the order of assessment in the abse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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