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TMI Blog2022 (3) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Income Tax (Appeals) -1, Chennai dated 19.03.2019 in ITA 20/CIT (A)-1/2018-19 for the above mentioned Assessment Year in so far as the issues raised in this appeal is contrary to law, facts, and in the circumstances of the case. 2. The CIT (Appeals)-1 erred in sustaining the disallowance of Rs. 5,77,575/- paid towards Internet Private Line Charges (IPLC) to M/s. Tata Communications (America) Inc for non-deduction of tax at source u/s 195 of the Act without assigning proper reasons and justification. 3. The CIT (Appeals)-1 ought to have appreciated that the payment towards Internet Private Line Charges (IPLC) would not fall within the ambit of the term 'Royalty' and went wrong in placing reliance on the judgment in the case of Veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first appellate authority, but could not succeed. The learned CIT(A) sustained additions made by the Assessing Officer towards disallowance of expenses u/s.40(a)(ia) of the Act. The assessee carried the matter in further appeal before the Tribunal and the Tribunal vide its order in ITA No.138/Mds/2017 dated 28.12.2017 set aside the issue to the file of the Assessing Officer and directed the Assessing Officer to reexamine claim of the assessee in light of material that may be filed by the assessee and also Double Taxation Avoidance Agreement between India & USA. Accordingly, the Assessing Officer has taken up case for fresh examination on applicability of TDS and consequent disallowances of payment made to certain non-residents u/s.40(a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deleted additions made by the Assessing Officer towards payment made to M/s. Cinenet Communications and M/s. Novatel Ltd. by holding that services rendered by two non-residents does not fall within the definition of royalty as per Article 12 of the DTAA between India and USA and also under section 9(1)(vi) / 9(1)(vii) of the Act. However, in respect of payment made to M/s.Tata communications (America) Inc. payments were made for internet private line charges and such services has been rendered by the nonresident service provider through equipment in USA and such service is coming within the definition of royalty and thus, sustained additions made by the Assessing Officer towards disallowance of payment made for internet private line charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee are held to be coming within the ambit of definition of royalty and thus, even before amendment, the assessee was required to deduct TDS on payment made to non-residents. Since, the assessee failed to deduct TDS, the Assessing Officer has rightly disallowed payment made to non-residents u/s.40(a)(ia) of the Income Tax Act, 1961, and the learned CIT(A), after considering relevant facts has rightly held that same is liable for TDS u/s.195 of the Act, and for non-deduction of TDS, the Assessing Officer has rightly disallowed payment made to non-residents u/s.40(a)(ia) of the Act. 7. We have heard both the parties, perused material available on record and gone through orders of the authorities below. The assessee has made certain paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alty and consequently, withholding tax is applicable as per provisions of section 195 of the Act. In the present case, payment made by the assessee to non-residents was prior to amended definition of royalty by the Finance Act, 2012. Further, at the time of payment made by the assessee to non-residents, there was an ambiguity in the definition of royalty and because of this the assessee could not deduct TDS as per provisions of section 195 of the Act. Although, the definition has been amended by the Finance Act, 2012, with retrospective effect, but because there was an ambiguity in the definition, the assessee cannot do impossible things by foreseeing an amendment to the definition of royalty and deduct TDS on payment made to non-residents. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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