CA Certificate has no decisive impact on taxability of non-residents income

DCIT Vs Rediff.com India Limited (ITAT Mumbai) – Certificate issued by a Chartered Accountant has no decisive impact on tax ability of income in the hands of a non-resident but it is only prima-facie evidence about the tax ability. In order to disallow the payments under Section 40(a)(i) of the Act, the AO needs to examine whether the recipient has a tax liability in India and that aspect can be examined only when all the relevant details were duly furnished by the taxpayer. However, a certificate issued by a CA could not be considered as a conclusive document while determining tax liability of a non-resident. Accordingly, such a certificate is not a substitute for determining the tax liability of a nonresident.

The Tribunal observed that even when the remittance has been made on the basis of the CA certificate, the taxpayer runs a risk of consequences of short deduction or non-deduction of tax at source. However, the taxpayer has to give an undertaking to that effect. Therefore, the CA certificate is not a conclusive document in deciding the tax liability.

The certificate issued by the CA has no decisive impact on tax ability of income in the hands of a non-resident recipient but it was only a prima facie evidence about the tax ability status. Its acceptability by the tax department was confined to permitting the remittance on the basis of tax ability status certified by the CA. The certificate could not substitute for adjudication on tax ability in the hands of non-resident by the AO, nor could it be used as a shield by the taxpayer to prevent any probe of the matter by the tax authorities.

The Tribunal did not adjudicate on the tax ability of the payments in the hands of the taxpayer and remitted the matter to the lower authorities for examining the tax ability of the said payments.