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TMI Blog2022 (12) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... d not be expected to deduct Tax at source on payment made to non-residents on the basis of subsequent amendment to the law with retrospective effect from earlier date because the assessee cannot foresee the amendment and deduct TDS. Therefore, the disallowance made u/s 40(a)(i) would be unwarranted. Similar is the situation before us. No contrary decision is on record. Therefore, following this decision, we confirm the stand of Ld. CIT(A). The corresponding grounds raised by the revenue stand dismissed. Disallowance u/s 14A - AOapplying Rule 8D(2)(iii), computed indirect expense disallowance - CIT(A) directed Ld. AO to consider those investments which actually yielded exempt income during the year - HELD THAT:- We find that the directions of Ld. CIT(A) are in accordance with the decision of Vireet Investment (P.) Ltd. [ 2017 (6) TMI 1124 - ITAT DELHI] - Therefore, the impugned order could not be faulted with. We order so. The corresponding grounds raised by revenue stand dismissed. - ITA No. 421/Chny/2019 - - - Dated:- 8-12-2022 - HON BLE SHRI MAHAVIR SINGH , VICE PRESIDENT AND HON BLE SHRI MANOJ KUMAR AGGARWAL , AM Assesseeby : Shri R. Vijayaraghavan ( Advocate ) - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Both the payees did not have any permanent establishment (PE) in India and therefore, the payments were not liable to TDS as per the decision of Hon ble Supreme Court in CIT vs. Toshuku Ltd. 125 ITR 525 and the decision of Hon ble Delhi High Court in CIT vs. EON Technology P. Ltd. 343 ITR 366. The assessee also relied on CBDT circular no. 23 dated 23.07.1969 which was in force in this year since the same was withdrawn only on 22.10.2009. 2.3 Concurring with assessee s submissions Ld. CIT(A) held as under: - 13. The facts and circumstances of the case have been examined vis- -vis the findings of the AO. The agreements entered into by the appellant with the non-residents have been examined. The prevailing judicial decisions pertaining to such cases have been noted. The services for procuring orders for the products sold by the assessees in India have been generally treated as instances which are not found to be technical service. Payments to agents for procuring export orders was an incident of export and in the nature of service was not technical and it was rendered abroad. The Hon ble Madras High Court in the case of CIT vs. Farida Leather Company [2016] 66 Taxmann.com 321 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S Electronics Ltd. v. ACIT in ITA No.949/Chny/2017 for the AY 2005-06 dated 24.09.2021, wherein, the Tribunal under identical facts held that the assessee cannot be fastened liability on the basis of subsequent amendment to the law with retrospective effect, because the assessee cannot be expected to do impossibility of performance and thus, for non-deduction of TDS u/s.195 of the Act, payment made to non-residents, cannot be disallowed u/s.40(a)(i) of the Act. 5. The Ld.DR, on the other hand, supporting the order of the Ld.CIT(A) submitted that, if at all, the assessee claims that it was not required to deduct TDS u/s.195 of the Act, then the proper course of action is to obtain a Certificate u/s.195(2) of the Act from the AO and unless, the assessee obtained a Certificate, it cannot be argued that payment made to non-residents are not liable to tax in India and consequently, no disallowances can be made u/s.40(a)(i) of the Act. Therefore, the Ld.DR further submitted that there is no error in the reasons given by the Ld.CIT(A) to sustain the additions made by the AO and his order should be upheld. 6. We have heard both the parties, perused the materials available on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly held that payment made to a non-resident for services rendered outside India cannot be brought to tax in India as fees for technical services in absence of place of business / permanent establishment in India. Since, there was clear law by the decision of Hon ble Supreme Court, the assessee has made payment without deducting tax at source. Therefore, liability towards TDS cannot be fastened on the assessee on the basis of subsequent amendment to law with retrospective effect, because it was impossible on the part of assessee to deduct tax on income of nonresident because the assessee cannot foresee the amendment and deduct TDS on said payments. This view is supported by various decisions of Tribunal including decision of ITAT, Mumbai Bench in the case of Channel Guide India Ltd., vs. ACIT and the Ahmadabad Tribunal in the case of Sterling Abrasive Ltd., vs. ACIT and Agra Bench in the case of Metro Metro vs. Addl.CIT, where the Tribunal by following the decision of Hon ble Supreme Court in the case of Ishikawajma-Harima Heavy Industries Ltd., vs. DIT, held that at the relevant point of time, it was impossible on the part of the assessee to deduct tax at source on income of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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