TDS not deductible on Internet connectivity charges & specialised line rental

ACIT Vs SDV International Logistics Ltd. (ITAT Kolkata)

it is observed that the assessee company was held to be liable to deduct tax at source by the A.O. from the payment of internet connectivity charges and specialised line rental u/s 194J of the Act being in the nature of royalty by relying on Explanations 4, 5 and 6 to section 9(1)(vi) inserted by the Finance Act, 2012 with retrospective effect. The Ld. CIT(A) however did not approve this view of the Assessing Officer by holding that the liability to deduct tax at source was governed by section 9(1)(vi) as it existed before the Finance Act, 2012. As rightly pointed out by the learned counsel for the assessee before us, this view taken by the Ld. CIT(A) is supported by various judicial pronouncements including the decision of Mumbai Bench of this Tribunal in the case of Channel Guide India Ltd. vs ACIT 25 taxmann.com 25 wherein it was held that the assessee cannot be held to be liable to deduct tax at source by relying on the subsequent amendments made in the relevant provision with retrospective effect. As held by the Tribunal in the said case, it was impossible for the assessee to deduct tax in the F.Y. 2003-04 when as per the legal position prevalent in the said F.Y., the obligation to deduct tax was not on the assessee. The Tribunal based its decision on the legal Maxim lex non cogit ad impossiblia meaning thereby that the law cannot be possibly compel a person to do something which is impossible to perform. Respectfully following the said decision of Mumbai Bench of this Tribunal, we uphold the impugned order of the Ld. CIT(A) holding that the assessee was not liable to deduct tax at source from the amount in question paid towards internet connectivity charges and specialised line rental u/s 194J and dismiss Ground No. 1 of the Reveuue’s appeal.

FULL TEXT OF THE ITAT JUDGMENT

Out of these three appeals, two appeals being ITA No. 708/K/2016 (Revenue’s Appeal) and ITA No. 510/K/2016 (Assessee’s Appeal), are cross-appeals which are directed against the order of Ld. CIT(A) – 24, Kolkata dated 29.01.20 16 and the same are being disposed of along with ITA No. 712/K/2016 which involves a consequential issue relating to penalty u/s 271C of the Income Tax Act, 1961.

2. The relevant facts of the case giving rise to these appeals are as follows. The assessee in the present case is a company. A survey u/s 133A of the Act was carried out in the case of the assessee. On the basis of documents found during the course of survey, the A.O. was of the view that the assessee company had not complied with the TDS provisions properly in the following cases:

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