ACIT, CHENNAI V. M/s. M.M. Forgings Ltd., CHENNAI

ITA 103/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86267 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 10-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Section: 194C

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 103/MDS/2014 ( / ASSESSMENT YEAR:2005-06) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-IV(3), NUNGAMBAKKAM HIGH ROAD, CHENNAI-600 034. VS M/S. M.M.FORGINGS LTD., GUINDY HOUSE, 95, ANNA SALAI, CHENNAI-600 032. PAN: AAACM2164L ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. PHILIP GEORGE, ADVOCATE /DATE OF HEARING : 7 TH JANUARY, 2015 /DATE OF PRONOUNCEMENT : 30 TH JANUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-IV, CHENNA I DATED 30.08.2013 FOR THE ASSESSMENT YEAR 2005-06. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELE TING THE DISALLOWANCE MADE UNDER SECTION 40(A)(I) READ WITH SECTION 195 OF THE ACT IN RESPECT OF OVERSEAS COMMISSION PA ID BY THE ASSESSEE TO NON-RESIDENT AGENTS. 2 ITA NO. 103/MDS/2014 2. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THIS TRIBU NAL FOR THE ASSESSMENT YEAR 2010-11 WHICH IN TURN FOLLOWED THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSES SMENT YEARS 2005-06 TO 2007-08 INVOLVING SAME ISSUE HOLDI NG THAT OVERSEAS COMMISSION PAID BY THE ASSESSEE TO NON-RES IDENT AGENTS FOR PROCUREMENT OF ORDERS IS NOT LIABLE TO B E TAXED IN INDIA AND THEREFORE TDS NEED NOT BE DEDUCTED. COUNS EL FOR THE ASSESSEE ALSO PLACES RELIANCE ON THE DECISION O F THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. FA IZAN SHOES PVT.LTD. (367 ITR 155) (MAD). 3. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ORDER OF THE ASSESSING OFFICER. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISIONS RELIED ON. ON GOING THROUGH THE O RDERS OF LOWER AUTHORITIES, THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL AND THE JUDGEMENT OF THE JURISDICTIONAL HI GH COURT CITED ABOVE, WE FIND THAT THE ISSUE ON HAND HAS BEE N DECIDED 3 ITA NO. 103/MDS/2014 IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE F OR EARLIER ASSESSMENT YEAR AND SUBSEQUENT ASSESSMENT YEAR BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL. THE CO-ORDINATE BENCH WHILE DISMISSING THE REVENUES APPEAL OBSERVED AS U NDER:- 2. THE ASSESSEE IS A COMPANY WHICH MANUFACTURES STEEL FORGINGS. ON 24.9.2010, IT HAD FILED ITS RETURN DISCLOSING TOTAL INCOME OF ` 3,52,09,690/- WHICH WAS SUMMARILY PROCESSED. IN THE COURSE OF SCRUTINY, THE ASSESSING OFFICER NOT ICED THE ASSESSEE TO HAVE INCURRED OVERSEAS COMMISSION EXPENSES OF ` 161.61 LAKHS AND WAREHOUSING AND OTHER CHARGES INCURRED OF ` 110.09 LAKHS. IN HIS VIEW, THESE PAYMENTS OUGHT TO HAVE BEEN SUBJECTED TO TDS PROVISIONS AND FAILURE THEREOF WOULD ATTRACT DISALLOWANCE 40(A)(I) OF THE ACT. THEREAFTER, HE COMPLETED REGULAR ASSESSMENT VIDE ORDER DATED 12.3.2013 AND MADE DISALLOWANCE/ADDITION OF ` 2,71,70,000/- IN ASSESSEES INCOME ON THE GROUND THAT THE ASSESSEE HAD FAILED TO DEDUCT TDS ON THE ABOVE PAYMENTS. HE REPELLED THE CONTENTIONS OF THE ASSESSEE ABOUT NON-CHARGEABILITY OF TDS PROVISION B Y HOLDING THAT SOURCE OF INCOME IN QUESTION HAD EMANATED PRINCIPALLY ON ACCOUNT OF BUSINESS ACTIVIT Y CONDUCTED IN INDIA. 3. AGGRIEVED THE ASSESSEE PREFERRED APPEAL. THE CIT(A) HAS FOLLOWED ORDER OF THE 'TRIBUNAL' IN ASSESSEES OWN CASE FOR ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08 INVOLVING SAME ISSUE AND DELETED THE IMPUGNED DISALLOWANCE AS FOLLOWS: 6. DURING THE COURSE OF APPELLATE PROCEEDINGS, TH E AR HAS PRODUCED ITAT RULING IN ITS OWN CASE FOR THE AY 2005-06, 2006-07 AND 2007-08 WHEREIN THE SAME ISSUE HAS BEEN DISPOSED OF BY THE HON'BLE ITAT IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE 4 ITA NO. 103/MDS/2014 OF GE INDIA TECHNOLOGY CENTRE P. LTD. REPORTED IN 327 ITR 456, THE OPERATIONAL PART OF WHICH IS REPRODUCED HEREUNDER: 9. ONE MORE ASPECT NEEDS TO BE HIGHLIGHTED. SECTION 195 FALLS IN CHAPTER XVII WHICH DEALS WITH COLLECTION AND RECOVERY. CHAPTER XVII-B DEALS WITH DEDUCTION AT SOURCE BY THE PAYER. ON ANALYSIS OF VARIOUS PROVISIONS OF CHAPTER XVII ONE FINDS USE OF DIFFERENT EXPRESSIONS, HOWEVER, THE EXPRESSION 'SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT' IS USED ONLY IN SECTION 195. FOR EXAMPLE, SECTION 194C CASTS AN OBLIGATION TO DEDUCT TAS IN RESPECT OF 'ANY SUM PAID TO ANY RESIDENT'. SIMILARLY, SECTIONS 194EE AND 194F INTER ALIA PROVIDE FOR DEDUCTION OF TAX IN RESPECT OF 'ANY AMOUNT' REFERRED TO IN THE SPECIFIED PROVISIONS. IN NONE OF THE PROVISIONS WE FIND THE EXPRESSION 'SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT', WHICH AS STATED ABOVE, IS AN EXPRESSION USED ONLY IN SECTION 195(1). THEREFORE, THIS COURT IS REQUIRED TO GIVE MEANING AND EFFECT TO THE SAID EXPRESSION. IT FOLLOWS, THEREFORE, THAT THE OBLIGATION TO DEDUCT TAS ARISES ONLY WHEN THERE IS A SUM CHARGEABLE UNDER THE ACT. SECTION 195(2) IS NOT MERELY A PROVISION TO PROVIDE INFORMATION TO THE INCOME-TAX OFFICER(TDS). IT IS A PROVISION REQUIRING TAX TO BE DEDUCTED AT SOURCE TO BE PAID TO THE REVENUE BY THE PAYER WHO MAKES PAYMENT TO A NON- RESIDENT. THEREFORE, SECTION 195 HAS TO BE READ IN CONFORMITY WITH THE CHARGING PROVISIONS, I.E., SECTIONS 4, 5 AND 9. THIS REASONING FLOWS FROM THE WORDS 'SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT' IN SECTION 195(1). THE FACT THAT THE REVENUE HAS NOT OBTAINED ANY INFORMATION PER SE CANNOT BE A GROUND TO CONSTRUE SECTION 195 WIDELY SO AS TO REQUIRE DEDUCTION OF TAS EVEN IN A CASE WHERE AN AMOUNT PAID IS NOT CHARGEABLE TO TAX IN INDIA AT ALL. WE CANNOT READ SECTION 195, AS SUGGESTED BY THE DEPARTMENT, NAMELY, THAT THE MOMENT THERE IS REMITTANCE THE OBLIGATION TO DEDUCT TAS ARISES. IF WE WERE TO ACCEPT SUCH A 5 ITA NO. 103/MDS/2014 CONTENTION IT WOULD MEAN THAT ON MERE PAYMENT INCOME WOULD BE SAID TO ARISE OR ACCRUE IN INDIA. THEREFORE, AS STATED EARLIER, IF THE CONTENTION OF THE DEPARTMENT WAS ACCEPTED IT WOULD MEAN OBLITERATION OF THE EXPRESSION 'SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT' FROM SECTION 195(1). WHILE INTERPRETING A SECTION ONE HAS TO GIVE WEIGHTAGE TO EVERY WORD USED IN THAT SECTION. WHILE INTERPRETING THE PROVISIONS OF THE INCOME TAX ACT ONE CANNOT READ THE CHARGING SECTIONS OF THAT ACT DE HORS THE MACHINERY SECTIONS. THE ACT IS TO BE READ AS AN INTEGRATED CODE. SECTION 195 APPEARS IN CHAPTER XVII WHICH DEALS WITH COLLECTION AND RECOVERY. AS HELD IN THE CASE OF C.I.T. VS. ELI LILLY & CO. (INDIA) (P.) LTD. (2009) [312 ITR 225] THE PROVISIONS FOR DEDUCTION OF TAS WHICH IS IN CHAPTER XVII DEALING WITH COLLECTION OF TAXES AND THE CHARGING PROVISIONS OF THE I.T. ACT FORM ONE SINGLE INTEGRAL, INSEPARABLE CODE AND, THEREFORE, THE PROVISIONS RELATING TO TDS APPLIES ONLY TO THOSE SUMS WHICH ARE 'CHARGEABLE TO TAX' UNDER THE INCOME-TAX ACT. IT IS TRUE THAT THE JUDGMENT IN ELI LILLY (2009) 312 ITR 25 WAS CONFINED TO SECTION 192 OF THE INCOME-TAX ACT. HOWEVER, THERE IS SOME SIMILARITY BETWEEN THE TWO. IF ONE LOOKS AT SECTION 192 ONE FINDS THAT IT IMPOSES STATUTORY OBLIGATION ON THE PAYER TO DEDUCT TAS WHEN HE PAYS ANY INCOME 'CHARGEABLE UNDER THE HEAD SALARIES'. SIMILARLY, SECTION 195 IMPOSES A STATUTORY OBLIGATION ON ANY PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDENT ANY SUM 'CHARGEABLE UNDER THE PROVISIONS OF THE ACT', WHICH EXPRESSION, AS STATED ABOVE, DO NOT FIND PLACE IN OTHER SECTIONS OF CHAPTER XVII. IT IS IN THIS SENSE THAT WE HOLD THAT THE I.T. ACT CONSTITUTES ONE SINGLE INTEGRAL INSEPARABLE CODE. HENCE, THE PROVISIONS RELATING TO TDS APPLIES ONLY TO THOSE SUMS WHICH ARE CHARGEABLE TO TAX UNDER THE INCOME-TAX ACT. IF THE CONTENTION OF THE DEPARTMENT THAT ANY PERSON MAKING PAYMENT TO A NON-RESIDENT IS NECESSARILY REQUIRED TO DEDUCT TAS THEN THE CONSEQUENCE WOULD BE THAT THE DEPARTMENT 6 ITA NO. 103/MDS/2014 WOULD BE ENTITLED TO APPROPRIATE THE MONEYS DEPOSITED BY THE PAYER EVEN IF THE SUM PAID IS NOT CHARGEABLE TO TAX BECAUSE THERE IS NO PROVISION IN THE INCOME-TAX ACT BY WHICH A PAYER CAN OBTAIN REFUND. SECTION 237 READ WITH SECTION 199 IMPLIES THAT ONLY THE RECIPIENT OF THE SUM, I.E., THE PAYEE COULD SEEK A REFUND. IT MUST THEREFORE FOLLOW, IF THE DEPARTMENT IS RIGHT, THAT THE LAW REQUIRES TAX TO BE DEDUCTED ON ALL PAYMENTS. THE PAYER, THEREFORE, HAS TO DEDUCT AND PAY TAX, EVEN IF THE SO-CALLED DEDUCTION COMES OUT OF HIS OWN POCKET AND HE HAS NO REMEDY WHATSOEVER, EVEN WHERE THE SUM PAID BY HIM IS NOT A SUM CHARGEABLE UNDER THE ACT. THE INTERPRETATION OF THE DEPARTMENT, THEREFORE, NOT ONLY REQUIRES THE WORDS 'CHARGEABLE UNDER THE PROVISIONS OF THE ACT' TO BE OMITTED, IT ALSO LEADS TO AN ABSURD CONSEQUENCE. THE INTERPRETATION PLACED BY THE DEPARTMENT WOULD RESULT IN A SITUATION WHERE EVEN WHEN THE INCOME HAS NO TERRITORIAL NEXUS WITH INDIA OR IS NOT CHARGEABLE IN INDIA, THE GOVERNMENT WOULD NONETHELESS COLLECT TAX. IN OUR VIEW, SECTION 195(2) PROVIDES A REMEDY BY WHICH A PERSON MAY SEEK A DETERMINATION OF THE 'APPROPRIATE PROPORTION OF SUCH SUM SO CHARGEABLE' WHERE A PROPORTION OF THE SUM SO CHARGEABLE IS LIABLE TO TAX. THE ENTIRE BASIS OF THE DEPARTMENT'S CONTENTION IS BASED ON ADMINISTRATIVE CONVENIENCE IN SUPPORT OF ITS INTERPRETATION. ACCORDING TO THE DEPARTMENT HUGE SEEPAGE OF REVENUE CAN TAKE PLACE IF PERSONS MAKING PAYMENTS TO NON-RESIDENTS ARE FREE TO DEDUCT TAS OR NOT TO DEDUCT TAS. IT IS THE CASE OF THE DEPARTMENT THAT SECTION 195(2), AS INTERPRETED BY THE HIGH COURT, WOULD PLUG THE LOOPHOLE AS THE SAID INTERPRETATION REQUIRES THE PAYER TO MAKE A DECLARATION BEFORE THE INCOME-TAX OFFICER(TDS) OF PAYMENTS MADE TO NON-RESIDENTS. IN OTHER WORDS, ACCORDING TO THE DEPARTMENT SECTION 195(2) IS A PROVISION BY WHICH PAYER IS REQUIRED TO INFORM THE DEPARTMENT OF THE REMITTANCES HE MAKES TO THE NON- RESIDENTS BY WHICH THE DEPARTMENT IS ABLE TO KEEP TRACK OF THE REMITTANCES BEING MADE TO NON- 7 ITA NO. 103/MDS/2014 RESIDENTS OUTSIDE INDIA. WE FIND NO MERIT IN THESE CONTENTIONS. AS STATED HEREINABOVE, SECTION 195(1) USES THE EXPRESSION 'SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT.' WE NEED TO GIVE WEIGHTAGE TO THOSE WORDS. FURTHER, SECTION 195 USES THE WORD `PAYER' AND NOT THE WORD 'ASSESSEE'. THE PAYER IS NOT AN ASSESSEE. THE PAYER BECOMES AN ASSESSEE-IN-DEFAULT ONLY WHEN HE FAILS TO FULFILL THE STATUTORY OBLIGATION UNDER SECTION 195(1). IF THE PAYMENT DOES NOT CONTAIN THE ELEMENT OF INCOME THE PAYER CANNOT BE MADE LIABLE. HE CANNOT BE DECLARED TO BE AN ASSESSEE-IN-DEFAULT. THE ABOVEMENTIONED CONTENTION OF THE DEPARTMENT IS BASED ON AN APPREHENSION WHICH IS ILL FOUNDED. THE PAYER IS ALSO AN ASSESSEE UNDER THE ORDINARY PROVISIONS OF THE INCOME-TAX ACT. WHEN THE PAYER REMITS AN AMOUNT TO A NON-RESIDENT OUT OF INDIA HE CLAIMS DEDUCTION OR ALLOWANCES UNDER THE INCOME TAX ACT FOR THE SAID SUM AS AN 'EXPENDITURE'. UNDER SECTION 40(A)(I), INSERTED VIDE FINANCE ACT, 1988 WITH EFFECT FROM APRIL 1, 1989, PAYMENT IN RESPECT OF ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUMS CHARGEABLE UNDER THE INCOME TAX ACT WOULD NOT GET THE BENEFIT OF DEDUCTION IF THE ASSESSEE FAILS TO DEDUCT TAS IN RESPECT OF PAYMENTS OUTSIDE INDIA WHICH ARE CHARGEABLE UNDER THE INCOME-TAX ACT. THIS PROVISION ENSURES EFFECTIVE COMPLIANCE OF SECTION 195 OF THE INCOME-TAX ACT RELATING TO TAX DEDUCTION AT SOURCE IN RESPECT OF PAYMENTS OUTSIDE INDIA IN RESPECT OF ROYALTIES, FEES OR OTHER SUMS CHARGEABLE UNDER THE INCOME-TAX ACT. IN A GIVEN CASE WHERE THE PAYER IS AN ASSESSEE HE WILL DEFINITELY CLAIM DEDUCTION UNDER THE INCOME-TAX ACT FOR SUCH REMITTANCE AND ON INQUIRY IF THE AO FINDS THAT THE SUMS REMITTED OUTSIDE INDIA COMES WITHIN THE DEFINITION OF ROYALTY OR FEES FOR TECHNICAL SERVICE OR OTHER SUMS CHARGEABLE UNDER THE INCOME-TAX ACT THEN IT WOULD BE OPEN TO THE AO TO DISALLOW SUCH CLAIM FOR DEDUCTION. SIMILARLY, VIDE FINANCE ACT, 2008, WITH EFFECT FROM APRIL 1,1989 SUB-SECTION (6) HAS BEEN INSERTED IN SECTION 195 WHICH REQUIRES 8 ITA NO. 103/MDS/2014 THE PAYER TO FURNISH INFORMATION RELATING TO PAYMENT OF ANY SUM IN SUCH FORM AND MANNER AS MAY BE PRESCRIBED BY THE BOARD. THIS PROVISION IS BROUGHT INTO FORCE ONLY FROM APRIL 1, 2008. IT WILL NOT APPLY FOR THE PERIOD WITH WHICH WE ARE CONCERNED IN THESE CASES BEFORE US. THEREFORE, IN OUR VIEW, THERE ARE ADEQUATE SAFEGUARDS IN THE ACT WHICH WOULD PREVENT REVENUE LEAKAGE. APPLICABILITY OF THE JUDGMENT IN THE CASE OF TRANSMISSION CORPORATION (SUPRA) 10. IN TRANSMISSION CORPORATION CASE (SUPRA) A NON- RESIDENT HAD ENTERED INTO A COMPOSITE CONTRACT WITH THE RESIDENT PARTY MAKING THE PAYMENTS. THE SAID COMPOSITE CONTRACT NOT ONLY COMPRISED SUPPLY OF PLANT, MACHINERY AND EQUIPMENT IN INDIA, BUT ALSO COMPRISED THE INSTALLATION AND COMMISSIONING OF THE SAME IN INDIA. IT WAS ADMITTED THAT THE ERECTION AND COMMISSIONING OF PLANT AND MACHINERY IN INDIA GAVE RISE TO INCOME TAXABLE IN INDIA. IT WAS, THEREFORE, CLEAR EVEN TO THE PAYER THAT PAYMENTS REQUIRED TO BE MADE BY HIM TO THE NON-RESIDENT INCLUDED AN ELEMENT OF INCOME WHICH WAS EXIGIBLE TO TAX IN INDIA. THE ONLY ISSUE RAISED IN THAT CASE WAS WHETHER TDS WAS APPLICABLE ONLY TO PURE INCOME PAYMENTS AND NOT TO COMPOSITE PAYMENTS WHICH HAD AN ELEMENT OF INCOME EMBEDDED OR INCORPORATED IN THEM. THE CONTROVERSY BEFORE US IN THIS BATCH OF CASES IS, THEREFORE, QUITE DIFFERENT. IN TRANSMISSION CORPORATION CASE (1999) 239 ITR 587 (SC) IT WAS HELD THAT TAS WAS LIABLE TO BE DEDUCTED BY THE PAYER ON THE GROSS AMOUNT IF SUCH PAYMENT INCLUDED IN IT AN AMOUNT WHICH WAS EXIGIBLE TO TAX IN INDIA. IT WAS HELD THAT IF THE PAYER WANTED TO DEDUCT TAS NOT ON THE GROSS AMOUNT BUT ON THE LESSER AMOUNT, ON THE FOOTING THAT ONLY A PORTION OF THE PAYMENT MADE REPRESENTED 'INCOME CHARGEABLE TO TAX IN INDIA', THEN IT WAS NECESSARY FOR HIM TO MAKE AN APPLICATION UNDER SECTION 195(2) OF THE ACT TO THE INCOME-TAX OFFICER (TDS) AND OBTAIN 9 ITA NO. 103/MDS/2014 HIS PERMISSION FOR DEDUCTING TAS AT LESSER AMOUNT. THUS, IT WAS HELD BY THIS COURT THAT IF THE PAYER HAD A DOUBT AS TO THE AMOUNT TO BE DEDUCTED AS TAS HE COULD APPROACH THE INCOME-TAX OFFICER (TDS) TO COMPUTE THE AMOUNT WHICH WAS LIABLE TO BE DEDUCTED AT SOURCE. IN OUR VIEW, SECTION 195(2) IS BASED ON THE 'PRINCIPLE OF PROPORTIONALITY'. THE SAID SUB-SECTION GETS ATTRACTED ONLY IN CASES WHERE THE PAYMENT MADE IS A COMPOSITE PAYMENT IN WHICH A CERTAIN PROPORTION OF PAYMENT HAS AN ELEMENT OF 'INCOME' CHARGEABLE TO TAX IN INDIA. IT IS IN THIS CONTEXT THAT THE SUPREME COURT STATED, 'IF NO SUCH APPLICATION IS FILED, INCOME-TAX ON SUCH SUM IS TO BE DEDUCTED AND IT IS THE STATUTORY OBLIGATION OF THE PERSON RESPONSIBLE FOR PAYING SUCH `SUM' TO DEDUCT TAX THEREON BEFORE MAKING PAYMENT. HE HAS TO DISCHARGE THE OBLIGATION TO TDS'. IF ONE READS THE OBSERVATION OF THE SUPREME COURT, THE WORDS 'SUCH SUM' CLEARLY INDICATE THAT THE OBSERVATION REFERS TO A CASE OF COMPOSITE PAYMENT WHERE THE PAYER HAS A DOUBT REGARDING THE INCLUSION OF AN AMOUNT IN SUCH PAYMENT WHICH IS EXIGIBLE TO TAX IN INDIA. IN OUR VIEW, THE ABOVE OBSERVATIONS OF THIS COURT IN TRANSMISSION CORPORATION CASE (1999) 239 ITR 587 (SC) WHICH ARE PUT IN ITALICS HAVE BEEN COMPLETELY, WITH RESPECT, MISUNDERSTOOD BY THE KARNATAKA HIGH COURT TO MEAN THAT IT IS NOT OPEN FOR THE PAYER TO CONTEND THAT IF THE AMOUNT PAID BY HIM TO THE NON-RESIDENT IS NOT AT ALL 'CHARGEABLE TO TAX IN INDIA', THEN NO TAS IS REQUIRED TO BE DEDUCTED FROM SUCH PAYMENT. THIS INTERPRETATION OF THE HIGH COURT COMPLETELY LOSES SIGHT OF THE PLAIN WORDS OF SECTION 195(1) WHICH IN CLEAR TERMS LAYS DOWN THAT TAX AT SOURCE IS DEDUCTIBLE ONLY FROM 'SUMS CHARGEABLE' UNDER THE PROVISIONS OF THE INCOME-TAX ACT, I.E., CHARGEABLE UNDER SECTIONS 4, 5 AND 9 OF THE INCOME-TAX ACT. 10 ITA NO. 103/MDS/2014 7. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING TH E HON'BLE ITAT JUDGMENT IN THE ASSESSEES OWN CASE, WHICH IN TURN HAD RELIED ON THE PRINCIPLES LA ID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE(P) LTD. REFERRED TO SUPRA, AS IT IS NOTICED THAT THE FOREIGN AGENT TO WHOM THE ASSESSEE HAD PAID COMMISSION DOES NOT HAVE ANY INCOME LIABLE FOR TAX IN INDIA AND AS IT IS ALSO NOTICED THAT THE AGENT IS NOT GIVING ANY SERVICES TO THE ASSESSEE IN INDIA FOR WHICH THE SAID COMMISSION HAS BEEN PAID, THE DISALLOWANCE MADE OF ` 2,71,70,000/- U/S 40A(I) BEING LEGALLY UNTENABLE, THE AO IS DIRECTED TO DELETE THE SAME. THEREFORE, THE REVENUE IS IN APPEAL. 4. WE HAVE HEARD BOTH PARTIES AND GONE THROUGH THE CASE FILE. AS ALREADY STATED HEREINABOVE, THE CIT(A), WHILST DELETING THE IMPUGNED ADDITION U/S 40(A)(I) PERTAINING TO OVERSEAS PAYMENTS MADE BY THE ASSESSEE ON ACCOUNT OF COMMISSION, WAREHOUSING AND OTHER CHARGES, HAS FOLLOWED ORDER OF THE 'TRIBUNAL'(SUPRA) QUA THE VERY ISSUE. ON BE ING GRANTED OPPORTUNITY, THE REVENUE HAS FAILED TO PROVE THAT THESE EXPENSES ARE LIABLE TO BE TAXED IN INDIA AS INCOME IN THE HANDS OF CONCERNED PAYEES OR ANY SERVICES HAD BEEN RENDERED IN INDIA. THE REVENUE SUBMITS THAT THE 'TRIBUNAL'S ORDER HAS N OT BEEN BECOME FINAL AND ITS APPEAL IS PENDING BEFORE THE HON'BLE HIGH COURT. IN OUR CONSIDERED OPINION, MERE PENDENCY OF AN APPEAL INVOLVING THE SAME ISSUE AGAINST THE ORDER OF THE 'TRIBUNAL' IS NO GR OUND TO ADOPT A DIFFERENT APPROACH IN THE IMPUGNED ASSESSMENT YEAR. THUS, WE AGREE WITH THE FINDINGS OF THE CIT(A) UNDER CHALLENGE AND REJECT GROUNDS RAISED BY THE REVENUE. 11 ITA NO. 103/MDS/2014 RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJ ECT THE GROUNDS RAISED BY THE REVENUE. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 30 TH DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH JANUARY, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .