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TMI Blog2010 (9) TMI 1147X X X X Extracts X X X X X X X X Extracts X X X X ..... brief are that assessee is running a five star deluxe hotel in the name of The Grand in Vasant Kunj. During the year under consideration, it incurred expenditure of ₹ 24,86,388/- on account of commission and brokerage paid in foreign currency to the travel agents outside India. As no tax was deducted at source, the AO disallowed the deduction by invoking the provisions of Section 40(a)(i). Contention of assessee was that these travel agents were not having any business connection in India, therefore such commission paid outside India was not taxable in India and therefore, no TDS was required to be deducted thereon. The AO was of the view that provisions of Section 40(a)(i) require that where any interest, royalty, fees for technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue is in further appeal before us. 5. We have considered the rival contentions, gone through the orders of the authorities below and found from the record that assessee has paid commission and brokerage to the non-resident travel agents outside India in respect of services rendered outside India. As no tax was deducted at source on such payment, by invoking provisions of section 40(a)(i), the AO disallowed the deduction. As per our considered view, under the provisions of section 195 tax has to be deducted at source from any payment made to non-resident which is chargeable to tax under this Act. If no such tax has been deducted by the assessee, an exemption certificate u/s 195(2) is required to be obtained, only if provisions of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y invoking the provisions of Section 40(a)(i) of the Act. There is no finding by the AO with regard to taxability of such commission in India. ITAT Delhi Bench in the case of A.B.Hotels (supra) in identical facts held that commission paid by the assessee to non-resident agents for booking hotels for its customers outside India, could not be regarded as income accrued or arise in India as non-resident agents have no permanent establishment or business connection in India, hence not liable to deduction at source in India and consequently no disallowance u/s 40(a)(i) can be made. Recently, Hon'ble Delhi High Court in the case of Van Oord ACZ India (supra) held that obligation to deduct tax at source u/s 195 arises only when the payment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable where the payer is in no doubt that tax is payable in respect of some part of the remittance but is not sure as to what is the taxable portion. In that situation, he is required to make an application to the ITO(TDS) for determining the amount. Section 195(2) and 195(3) are safeguards and not of practical importance. It was categorically observed by the Hon'ble Supreme Court that department s apprehension that if tax is not deducted on all payments, there will be seepage of revenue, is ill-founded because there are adequate safeguards in the act to prevent the payer from wrongly not deducting tax at source such as Section 40(a)(i) which disallowed deduction for the expenditure. 6. In view of the above, we do not find any i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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