Case Law Details
Brief of the Case
Bombay High Court held In the case of M/s. Sesa Resources Ltd. vs. DCIT/Union of India that in the Judgment of the Division Bench in the case of Gujarat Reclaim & Rubber Products Ltd. Income Tax Appeal No.169/2014 dated 08.12.2015, it was held that before effecting deduction at source one of the aspects to be examined is whether such income is taxable in terms of the Income Tax Act. This aspect has not been considered by Tribunal while concluding that the Appellant has committed a default in not deducting the tax at source. As the said Division Bench Judgment was not available while passing the order by the learned Tribunal, we find it appropriate, in the interest of justice, to quash and set aside the impugned order of the Tribunal to the extent it holds that the Appellant has defaulted in not deducting tax at source and remand the matter to the Tribunal to examine the said aspect afresh in the light of the judgment of this Court.
Facts of the Case
The following substantial question of law was raised –
- Whether on the facts and in the circumstances of the case and in law, the ITAT was justified in upholding disallowance u/s 40(a) (ia) in respect of non-deduction of tax at source on payments of commission to non-resident sales agents, when it was clear from the provisions of the Act as also Circulars issued by the CBDT that the relevant amounts were not chargeable to tax under the Income Tax Act, 1961, in the hands of the non-resident recipients?
Contention of Assessee
The ld counsel of the assessee submitted that the learned Tribunal has misconstrued the Explanation 2 to Section 195 of the Finance Act, 2012 inter alia, while coming to the conclusion that even in case in which the income of the non- resident is not chargeable to tax in India, the deduction at source would have to be made by the Appellant. The learned Counsel further points out that the CIT (A) has rightly come to the conclusion that such commission was not to be deducted at source.
Further, in support to his contention, he has relied upon the Judgment of Division Bench of this Court passed in Income Tax Appeal No.169/2014 dated 08.12.2015 in the case of Commissioner of Income Tax-10 v/s. Gujarat Reclaim & Rubber Products Ltd.. Learned Counsel further pointed out that as far as interest, the grievance is that, though the learned Tribunal has remanded the matter to the Assessing Officer to examine whether the subject transaction is speculative or not, the contentions of the Appellant on all counts had to be kept open. Learned Counsel further points out that in any event this issue stands concluded by the judgment of the CIT (A) and as such according to him, there was no case for remanding the matter to the Assessing Officer.
Contention of the Respondents
The ld counsel of the respondents submitted that the impugned order passed by the learned Tribunal is based on the decision passed by the co-ordinate Bench of the Tribunal and as such, according to her, there was no error committed by the Tribunal in remanding the matter to the Assessing Officer. Learned
Counsel further pointed out that in view of the judgment of the Division Bench of this Court, no fault can be found in the impugned order as contended by the learned Counsel appearing for the Appellant.
Learned Counsel further submits that the learned Tribunal has rightly come to the conclusion that irrespective of the fact that a non-resident is not liable to tax, such deduction has to be effected in respect of payments of commission in terms of Section 195. Learned Counsel, as such, submits that there is no error committed while coming to this conclusion. Learned Counsel appearing for the Respondents submits that as the matter has been remanded to the Assessing Officer and the Appellant can always have liberty to raise this contention, on this count there is no substantial question of law.
Held by High Court
High Court held that the with regard to the grievance raised by the learned Counsel appearing for the Appellant with regard to the directions to the Assessing Officer to examine whether the subject transaction is speculative, we accept the contention of the learned Counsel for the Respondents that on this count there can be no substantial question of law. All contentions of the Appellant on merits on that count are kept open.
With regard to substantial question of law with regard to non deduction of TDS, we find that in the Judgment of the learned Division Bench in the case of Gujarat Reclaim & Rubber Products Ltd. Income Tax Appeal No.169/2014 dated 08.12.2015 it has been, inter alia, held that before effecting deduction at source one of the aspects to be examined is whether such income is taxable in terms of the Income Tax Act. This aspect has not been considered by learned Tribunal while concluding that the Appellant has committed a default in not deducting the tax at source. As the said learned Division Bench Judgment was not available while passing the impugned order by the learned Tribunal, we find it appropriate, in the interest of justice, to quash and set aside the impugned order of the learned Tribunal to the extent it holds that the Appellant has defaulted in not deducting tax at source and remand the matter to the learned Tribunal to examine the said aspect afresh in the light of the judgment of this Court after hearing the parties in accordance with law.
Accordingly, appeal of the assessee partly allowed.
