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TMI Blog2020 (4) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-2011 dated 20.03.2019 may be recalled, as the Tribunal had failed to adjudicate the following grounds of appeal and additional grounds of appeal filed before the Tribunal. ITA No.689/CHNY/2012 for assessment year 2009-2010 ''3. The Commissioner of Income tax (Appeals), LTU erred in confirming the disallowance of Rs. 6 1,23,06,054/- u/s 40(a)(i) as the appellant had not deducted TDS from the payments made to Hardy Exploration and Production India Inc (HEPI) u/s 195. 3.1 The Commissioner of Income tax (Appeals), LTU ought to have appreciated that payment made to HEPI was for the purchase of crude oil and hence payment is not subject to tax in India. 3.2 The Commissioner of Income tax (Appeals), LTU ought to have appreciated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... io of the decision of the Apex Court in the case of G.E.Technology Centre P Ltd v CIT 327 ITR 456 and the clarification issued by the CBDT vide Instruction No.02/2014 dated 26.02.2014 read with CBDT Circular No.3/2015 dt 12.02.2015 the Assessing Officer has to first determine the income chargeable to tax under the Indian Income Tax Act 1961 on which tax has to be deducted and then compute the amount to be disallowed, if any, u/s 40(a)(i). As the Assessing Officer has not done so, even though the assessment of the recipient was available, the CIT(A) should have set aside the disallowance u/s 40(a)(i). 3. The CIT(A) ought to have held that, when the recipient M/s. Hardy Exploration and Production India Inc has paid the requisite tax taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wnship Pvt Ltd read with Article 26(3) of the DTAA between India and USA, no disallowance can be made in the hands of the payer as the recipient has paid the Tax. 7. In any event, the Tribunal erred in law in not directed that disallowance u/s.40(a) (i) should be restricted to the amount of income which is found to be chargeable to tax in the hands of the recipient''. ITA No.495/CHNY/2014 for assessment year 2010-2011 ''5. The Commissioner of Income tax (Appeals), LTU erred in confirming the disallowance of Rs. 24,71 ,39,263/- u/s 40(a)(i)for non-deduction TDS from the payments made to Hardy Exploration and Production India Inc (HEPI) u/s 195. 5.1 The Commissioner of Income tax (Appeals), LTU ought to have appreciated that payment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot subject to tax in India. 6.2 The Commissioner of Income tax (Appeals), LTU ought to have appreciated that Section 195 requires that tax is to be deducted at source from payment to a non-resident only if the amount is chargeable to tax. 6.3 The Hon'ble Supreme Court in G.E.Technology Center vs. CIT (327 ITR 256) has held that that if there is no income chargeable to tax in India then there is no requirement for deducting tax at source under the Income Tax Act, 1961. 6.4 Without prejudice, under the DTAA between Japan and India only the profit accruing to MIs. NIKO (Neco) Ltd on production and sale of crude to the Appellant is taxable in India. Hence the entire payment cannot be disallowed u/s 40(a)(i). 6.5 Without prejudice disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isen in the accounting year that are to be discharged at a future date. The appellant is certain of incurrence of the liability and the estimation made with reasonable certainty. Having met these requirements, the provision created by the appellant should be allowed as ascertained liability. Further the following additional grounds were filed before the Tribunal 1. The CIT(A) erred in confirming disallowance u/s.40(a)(i) of the Act, for non-deduction of tax under section 195(1) of the Act, the total Gross Payments made for purchase of crude oil from the Indian PE of the non-resident MIs.Hardy Exploration and Production India Inc (HEPI) and not the profit chargeable to tax. 2. The CIT(A) ought to have appreciated as per the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the taxable income of the Indian payer as if such payments have been made to an Indian resident. As payments to an Indian Resident for purchase of oil does not require deduction of tax, payment to HEPI cannot be disallowed for non deduction of tax as per Article 26(3) of the DTAA. 6. The CIT(A) ought to have appreciated that as per article 26 (3) of the DTAA between India and USA which provides that allowability, in the hands of the resident Payer, of the amount paid to a Resident USA should be on the same conditions as if the payment was made to an Indian resident. Consequently the CIT(A) ought to have held that as per Proviso to section 40 (a) (ia) read with Proviso to sec 201(1) and in the light of the decision of the Delhi High C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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