DCIT 14(1)(2), MUMBAI V. CHEMICAL PROCESS PIPING P.LTD, MUMBAI

ITA 1503/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5535 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 17-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH K V
• Assessee Lawyers: V CHANDRASEKHAR; ASHOK SUTAR
• Keywords: Deemed to accrue or arise in india; Retrospective amendment; Question of law; Non-deduction of tax
• Section: 194C; 90

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 1503 / MUM/20 16 ( ASSESSMENT YEAR : 2010 - 11 ) DCIT 14(1)(2) ROOM NO.470, 4 TH FLOOR AAYAKAR BHAVAN MAHARSHIKARVE ROAD MUMBAI 400 020 VS . M/S. CHEMICAL PROCESS PIPING PVT. LTD., CPE PLOTS, BSD MARG OFF. SION TROMBAY ROAD GOVANDI, MUMBAI 400 088 PAN/GIR NO. AACCC6212D APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI ASHISH K V ASSESSEE BY SHRI V. CHANDRASEKHAR & SH RI ASHOK SUTAR DATE OF HEARING 14 / 06 /201 8 DATE OF PRONOUNCEMENT 24 / 07 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 56, MUMBAI DATED 31/12/2015 FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENUE: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO OF RS.L,33,73,941/ - U/S. 40 (A)(IA) OF THE L.T. ACT, 1961.' 2. 'EVEN WITHOUT THE CLARIFICATORY AMENDMENT BY INSERTION OF EXPLANATION (II) BELOW SECTION 9(2) OF THE ACT, THE CONCERNED PAYMENT WOULD BE LIABLE TO TAX AS THE RELEVANT SOURCE OF INCOME OF THE NON - RESIDENT WAS LOCATED IN I NDIA.' ITA NO. 1503/MUM/2016 M/S. CHEMICAL PROCESS PIPING PVT. LTD., 2 3. 'THE APPELLANT CRAVES LEAVE TO ADD, AMEND, VARY, OMIT OR SUBSTITUTE ANY OF THE AFORESAID GROUNDS OF APPEAL AT ANY TIME BEFORE OR AT THE TIME OF HEARING OF APPEAL.' 4. 'THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET - ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED.' THERE IS A DELAY IN FILING THE APPEAL BY THE REVENUE. WE HAVE HEARD THE REASONS FOR DELAY, CONSIDERING THE SUBSTANTIAL INTEREST OF JUSTICE, WE CONDONE THE DELAY AND APPEAL IS HEARD ON MERIT. 3 . RIVAL CONTE NTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND CARRIES ON BUSINESS OF DESIGN, MANUFACTURE AND EXPORTS AND INSTALLATION OF PROCESS PIPING SUCH AS PIPES, FITTINGS, DUCTING DAMPERS, HOODS FROM FIBRE GLASS REINFORCED PLASTIC (FRP), THERMOPLASTIC LINES FRP THERMOSETS AND METALS. 4 . DURING THE COURSE OF ASSESSMENT, AO MADE DISALLOWANCE U/S.40(A)(I) OF THE ACT ON THE GROUND THAT INCOME TAX WAS NOT DEDUCTED AT SOURCE AS REQUIRED U/S.195 OF THE ACT ON THE PAYMENT MADE TO ( A ) EEF ENGINEERING PTE LTD., SINGAPORE RS.95,72,445/ - ( B ) THERMO & PLAST SLOVANIA RS.30,59,670/ - AND ( C ) TUV SUD INDUSTRIES GMBH, GERMANY RS.741,826/ - . 5. BY THE IMPUGNED ORDER, CIT(A) DELETED DISALLOWANCE AFTER OBSERVING AS UNDER: - 4 .5. THE AO'S DECISION WAS BASED ON THE FINDING THAT AS PER THE RETROSPECTIVE AMENDMENT TO SECTION 9(2) BY INSERTION OF EXPLANATION (II) IN THE SECTION VIDE FINANCE.ACT 2010, W.E.F. 1.4.1962, ALL PAYMENTS MA DE TO NON - RESIDENT OUTSIDE INDIA SHALL BE TAXABL E, IN INDIA REGARDLESS OF THE FACT THAT WHETHER THE SERVICES HAVE BEEN RENDERED IN INDIA OR NOT. BASED ON THIS THE AO HELD THAT THE INCOME OF THE NON - RESIDENT IS TAXABLE IN INDIA AND ARE LIABLE FOR DEDUCTION OF INCOME TAX AT SOURCE UNDER SECTION 195 OF THE ACT AND SINCE THE APPELLANT DID NOT DEDUCT INCOME TAX AT SOURCE THE EXPENDITURE TO THAT EXTENT HAD BEEN DISALLOWED UNDER SICTUM40(A)(I)OF THE ACT . ITA NO. 1503/MUM/2016 M/S. CHEMICAL PROCESS PIPING PVT. LTD., 3 4.6 THE APPELLANT HAD PLACED FEW MAIN & FEW ALTERNATE SUBMISSIONS AND THEY ARE DEALT WITH AS FOLLOWS: I) THE APPELLANT STATED THAT SECTION 9(L)(VII) (B) OF THE ACT PROVIDES AN EXCEPTION TO THE GENERAL SOURCE RULE BY PROVIDING THAT WHERE THE SERVICES RENDERED BY THE NON - RESIDENT SERVICE PROVIDER (RECIPIENT OF INCOME) ARE UTILIZED BY THE RESIDENT PAYER FOR PURPOSE OF EARNING INCOME FROM ANY SOURCE OUTSIDE INDIA, THEN, IN THAT SITUATION, SUCH FEES WOULD NOT BE DEEMED TO ACCRUE OR ARISE IN INDIA. SINCE THE APPELLANT HAD EXPORTED ITS GOODS, THE INCOME IS SOURCED OUTSIDE INDIA. RELIANCE WAS PLACED ON DECISIONS IN CASE OF AKTIENGESELLSCHAFT KUBULE KOPP & KAUSCH W. GERMANY BY BHEL, 2003 262 ITR 513 (MAD) & CVK INDUSTRIES LTD VS ITO 371 ITR 453 & LUFTHANSA CARGO INDIA (20I5) TS - 209 - HC DATED 27 MAY 2015 . THIS CONTENTION OF THE APPELLANT IS BASED ON THE LATER PART OF EXCEPTION PROVIDED IN THE SECTION 9(L)(VII)(B), IE. '9(L)(VII) INCOME BY WAY OF FEES FOR TECHNICAL SERVICES PAYABLE BY (A).. (B) A PERSON WHO IS A RESIDENT, EXCEPT WHERE THE FEES ARE PAYABLE IN RESPECT OF SERVICES UTILISED IN A BUSINESS OR PROFESSI ON CARRIED ON B Y SUCH PERSON OUTSIDE INDIA OR FOR THE PURPOSES OF MAKING OR EARNING AN Y INCOME FROM ANY SOURCE OUTSIDE INDIA; OR , , THE CONTENTION OF THE APPELLANT THAT THE 'EXPORT OF GOODS FROM INDIA' SHOULD BE COVERED IN THE EXCEPTION PROVIDED A S 'FOR THE PURPOSES OF MAKING OR EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA' AND HENCE THE PAYMENT OF FEES FOR & IN RELATION TO EXPORT OF GOODS FROM INDIA, ARE NOT LIABLE TO TAX IN INDIA. THE APPELLANT HAD CITED AND' RELIED ON FEW DECISIONS TO SUB STANTIATE ITS CLAIM. THIS CONTENTION OF THE APPELLANT IS REJECTED AND NOT ACCEPTABLE, AS THERE IS SPECIFIC DECISION OF THE DELHI HIGH COURT AGAINST THE ASSESSEE/ WHEREIN IT IS : DECIDED THAT THE 'EXPORT OF GOODS' IS NOT CONSIDERED AS 'INCOME SOURCE D FROM OUTSIDE INDIA'. THE DELHI HIGH COURT (HIGH COURT) IN THE CASE OF CIT V. HAVELLS' ; ' INDIA LTD (ITA NO 55/2012 AND ITA NO 57/2012) HELD THAT THE FEES FOR TESTING AND CERTIFICATION OF EXPORTED PRODUCTS PAID TO A US COMPANY ARE TREATED AS FEE FOR TEC HNICAL SERVICES' (FTS) UN DER THE INCOME - TAX ACT, 1961 ( THE ACT ) . THE HIGH COURT OVERRULED THE DELHI INCOME - TAX APPELLATE T RIBUNAL'S (THE TRIBUNAL) DECISION AND RELYING ON THE DECISION OF ANGLO FRENCH TEXTILES LTD CIT V. ANGLO (FRENCH T EXT IL ES LTD [1993] 19 9 1TR 785 (MAD) HELD T H AT THE EXPORT ACTIVITY HAVING TAKEN PLA CE OR HAVING BEEN FULFILLED IN INDIA, THE SOURCE OF INCOME WAS LOCATED IN INDIA AND NOT OUTSIDE. IT ALSO HELD THAT MERE EXP ORT PROCEEDS EMANATED FROM PERSONS ITA NO. 1503/MUM/2016 M/S. CHEMICAL PROCESS PIPING PVT. LTD., 4 LOCAT ED OUT S IDE INDIA DID NOT CONSTI TUTE THEM AS TH E SOURCE OF INCOME. FURTHER, THE HIGH COURT REMANDED THE MATTER BACK TO THE TRIBUNAL FOR EXAMINING. FLEXI BILI T Y OF FEES UNDER THE INDIA - USA TAX TREATY (THE TAX TREATY ). (II) THE APPELLANT HAD PLACED ALTERNATE SUBMISSION, THAT SINCE THERE WA S NO AM OUNT 'PAYABLE' AT THE END OF YEAR, AS ENTIRE AMOUNT WHICH WAS DISALLOWED U/ S 40(A)(IA), WAS FULL PAID DURING THE YEAR, THE DISALLOWANCE U/S 40(A)(IA) IS TO BE DELETED. THE APPELLANT RELIED ON VARIOUS DECISIONS AS CITED. THIS CONTENTION OF THE APPE LLANT IS NOT ACCEPTED, FOLLOWING SPECIFIC DECISION IN CASE OF PMS DIESELS V CI T (1TA NO. 716 OR 2009 DATED APRIL 2015) WHEREIN PUNJAB AND HARIYANA HC, HELD AS UNDER: I. THE ARGUMENT THAT SECTION 40(A)(IA) APPLIES ONLY TO AMOUNTS WHICH ARE 'PAYABLE' AND NO T TO AMOUNTS THAT ARE ALREADY 'PAID' IS ALSO NOT ACCEPTABLE (COMMISSIONER OF INCOME TAX VS. CRESCENT EXPORT SYNDICATE (2013) 2'J6 TAXMAN 258 (CAL) AND COMMISSIONER OF INCOME .TAX VS. SIKANDAR KHAN N. TUNWAR (2013) 357 ITR 312 (GUJ) FOLLOWED) II. THOUG H IN COMMISSIONER OF INCOME TAX VS. M/S VECTOR SHIPPING SERVICES PVT. LTD (2013)262 CTR (ALL) 545, 357 ITR 642 IT WAS HELD THAT NO DISALLOWANCE COULD BE MADE U/S 40(A)(IA) AS NO AMOUNT REMAINED PAYABLE AT THE YEAR END AND THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN MERILYN SHIPPING & TRANSPORTS, 136 ITD 23 (SB) (VISHAKHAPATNAM) WAS NOTED, THIS CANNOT BE AGREED WITH AS THERE IS NO REASONING FOR THE FINDING. THE DISMISSAL OF THE DEPARTMENT'S PETITION FOR SPECIAL LEAVE TO - APPEAL (SLP) WAS IN LIMINE. THE DISM ISSAL OF THE SLP, THEREFORE, DOES NOT CONFIRM THE VIEW OF THE ALLAHABAD HIGH COURT. AS HELD BY THE SUPREME COURT IN V.M, SALGAOCAR & BROS. (P) LTD., ETC. VS. COMMISSIONER OF INCOME TAX, ETC. (2000) 243 ITR 383 (SC) AND IN S UPREME COURT EMPLOYEES WELFARE ASSOCIATION VS. UNION OF INDIA (1989) 4 SCC 187, WHEN AN SLP IS SUMMARILY DISMISSED UNDER . ARTICLE 136 OF THE CONSTITUTION, THE COURT DOES NOT LAY DOWN ANY LAW AND THAT THE DISMISSAL OF AN SLP IN LIMINE BY A NON SP EAKING ORDER DOES ' NOT JUSTIFY ANY INFERENCE THAT THE CONTENTIONS RAISED ON THE MERITS OF THE CASE HAVE BEEN REJECTED. III) THE APPELLANT'S ANOTHER ALTERNATE CLAIM WAS THAT THE CBDT HAS ISSUED CIRCULAR NO. 3/ - 2015 DATED 12.02.2015 AND ISS UED A C LARIFICATION REGARDING THE EXPRESSION 'AMOUNTS NOT DEDUCTIBLE' UNDER SECTION 40(A)(I) OF THE INCOME - TAX ACT, 1961. THE CBDT 'HAS REFERRED TO ITS EARLIER INSTRUCTION NO. 02/20:14 DATED. 26.02.2014 AND CLARIFIED THAT FOR THE PURPOSE OF MAKING DISALLOWANCE O F 'OTHER SUM CHARGEABLE' UNDER SECTION 40(A)(I) OF THE ACT, THE APPROPRIATE PORTION OF THE SUM WHICH IS CHARGEABLE TO TAX UNDER THE ACT SHALL FORM THE BASIS OF SUCH ITA NO. 1503/MUM/2016 M/S. CHEMICAL PROCESS PIPING PVT. LTD., 5 DISALLOWANCE AND SHALL BE THE SAME AS DETERMINED BY THE AO HAVING JURISDICTION FOR THE PURP OSE OF SECTION 195(1) OF THE ACT. FURTHER, WHERE DETERMINATION OF 'OTHER SUM CHARGEABLE' HAS BEEN MADE UNDER SUB - SECTIONS (2), (3) OR (7) OF SECTION 195 OF THE ACT, SUCH A DETERMINATION WILL FORM THE BASIS FOR DISALLOWANCE, IF ANY, UNDER SECTION 40(A)(I) O F THE ACT. THIS CONTENTION OF THE APPELLANT IS NOT ACCEPTED, AS THE SAID CIRCULAR WAS NOT APPLICABLE NOR AVAILABLE TO THE APPELLANT FOR THE ASSESSMENT YEAR OF THIS APPEAL. (IV) THE APPELLANT ALSO CONTENDED THAT THE RETROSPECTIVE AMENDMENT WAS VIDE THE FINANCE ACT, 2010, WHICH WAS PRESENTED IN LOK SABHA ON 26 FEB 2010 AND RECEIVED ASSENT FROM THE PRESIDENT ON 6 TH MAY 2010. BEFORE THE AMENDMENT THE CONDITIONS OF RENDERING SERVICES OUTSIDE WOULD BE CONSIDERED AS DEEMED TO ACCRUE OR ARISE IN INDIA WAS NOT IN EXISTENCE. IF THE SERVICES ARE RENDERED OUTSIDE INDIA BEFORE THE AMENDMENT TO EXPLANATION TO SECTION 9(2) THEN SUCH PAYMENT WAS NOT LIABLE TO TAX UNDER THE PROVISION OF SECTION 9 (L)(VII) IN RESPECT OF FTS. RELIANCE WAS PLACED ON DECISIONS IN CASE O F M/S UNITED H E LICHARTERS PVT. LTD VS ACIT (2013) 37 TAXMANN.COM 343 (MUM) & CHANNEL GUIDE INDIA LTD VS ACIT (T 'S 062 IT AT 2012) MUM. IN STERLING ABRASIVE LTD VS ACIT 44 SO T 652 DATED 23 - 12 - 2010 AHM I TAT SIMILAR ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE RELYING ON HONOURABLE SUPRE ME COURT IN THE CASE OF KRISHNA SWAMY S. PD AND ANOTHER V. UOI AND OTHER (2006) 281 ITR 305 WHERE IN THE S AID LEGAL MAXIM WAS ACCEPTED BY THE HON OURABLE APEX COURT, AS UNDER: - 'THE MAXIMUM OF EQUITY, NAMELY, ACTUS C URIAE NE MINEM GRAVABIT - AN ACT OF COURT SHALL 'PREJUDICE NO MAN, IS FOUNDED UPON JUSTICE AND GOOD SENSE WHICH SERVES .A SAFE AND CERTAIN GUIDE FOR THE ADMINISTRATION OF LAW. THE OTHER RELEVANT MAXIM IS, LEX NON COGIT AD IMPOSSIBIITA - THE LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM. THE LAW ITSELF AND ITS ADMINISTRATION IS UNDERSTOOD TO DISCLAIM AS IT DOES IN ITS GENERAL APHORISMS, ALL INTENTION OF COMPELLING IMPOSSIBILITIES, AND THE ADMINISTRATION OF LAW MUST ADOPT THAT GENERAL EXCEPTION IN THE CONSIDERATION OF PARTICULAR CASES, (SEE U.P.S.R.T.C. V. IMTIAZ HUSSAIN [2006] 1 SCC 380, SHAIKH SALIM HAJI ABDUL KHAGUMSAB V. KUMAR [2006] 1 SCC 46, MOHAMMAD GAZI V. STATE OF MP [2000] 4 SCC 342 AND GURSHARAN SINGH V. NEW DELHI MUNICIPAL COMMITTEE [ 19 96] 2 SCC 459.' THE CONTENTION OF THE APPELLANT IS ACCEPTED BY RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF JURISDICTIONAL HON. ITAT, WHICH IS BASED ON THE LEGAL MAXIM OF 'THE LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM' AS HELD BY HON. SUPREME COURT (SUPRA). IT IS EVIDENT ITA NO. 1503/MUM/2016 M/S. CHEMICAL PROCESS PIPING PVT. LTD., 6 FROM THE RECORDS SUBMITTED, THAT THE PAYMENTS OF FEES WERE MADE TO NON - RESIDENTS FOR THE SERVICES PERFORMED OUTSIDE INDIA FOR THE EXPORT JOBS OF THE APPELLANT AND HENCE NOT LIABLE TO TAX IN INDIA, PRIOR TO THE AMENDMENT, WHEREIN THE EXPLANATION (II) TO SECTION 9(2) WAS INSERTED. THE AO IS DIRECTED TO DELETE ENTIRE DISALLOWANCE OF RS.1,33,73,941/ - U/S 40(A)(IA) AS THESE AMOUNTS PERTAINS TO PERIOD PRIOR TO 31.3.2010 AND THE AMENDMENT, .THOUGH WITH RETROSPECTI VE EFFECT/ WAS SUBSEQUENT TO THESE PAYMENTS. V) THE APPELLANT HAD ALSO CONTENDED THAT AS PER PROVISION OF SECTION 90 OF. THE ACT, THE PROVISION OF THE INCOME TAX ACT OR THE DOUBLE TAXATION AVOIDANCE AGREEMENT (DTAA) WHICHEVER IS BENEFICIAL TO THE ASSESSEE SHOULD BE CONSIDERED,, AND HAD EXPLAINED THE DETAILS OF APPLICABLE ARTICLES UNDER THE D TAT WITH THE RESPECTIVE COUNTRIES. SINCE THE ISSUE IS DECIDED IN FAVOUR OF THE APPELLANT AS PER PRECEDING PARA, THIS ISSUE IS NOT DISCUSSED FOR ADJUDICATION, AS SAME IS CONSIDERED IN FRUCTUOUS FOR THIS ASSESSMENT YEAR. THUS, THIS GROUND OF THE APPELLANT IS ALLOWED. 6. LEARNED AR RELIED ON THE DECISION OF CO - ORDINATE BENCH IN CASE OF BSR & CO., ITA NO.1917/MUM/2013 ORDER DATED 06/05/2016, WHEREIN TRIBUNAL OBSERVED AS UN DER: - 5.5 APART THEREFROM, EVEN IF WE WERE TO ACCEPT, FOR THE SAKE OF ARGUMENT, THAT THE SERVICES BY THE AFORESAID ENTITIES ARE IN THE NATURE OF TECHNICAL SERVICES AND ARE RENDERED AND UTILIZED IN INDIA SO AS TO BE TAXABLE IN TERMS OF SECTION 9(1)(VII) OF THE ACT, EVEN THEN THE DISALLOWANCE IS NOT WARRANTED AS THE FOLLOWING DISCUSSION WOULD SHOW. OSTENSIBLY, THE REQUIREMENT OF RENDERING SERVICES IN INDIA IN ORDER TO ATTRACT SECTION 9(1)(VII) OF THE ACT WAS REMOVED BY INSERTION OF EXPLANATION BY THE FINANCE ACT , 2010 WITH RETROSPECTIVE EFFECT FROM 1/4/1976. THIS HAS BEEN UNDERSTOOD BY THE REVENUE TO S AY THAT INSPITE OF THE SERVICES HAVING BEEN RENDERED BY THE RECIPIENTS OUTSIDE INDIA, THE SAME IS TAXABLE IN INDIA BY APPLYING THE AFORESAID AMENDMENT. IN OUR VIEW, SUCH RETROSPECTIVE AMENDMENT WOULD BE DETERMINATIVE OF THE TAX LIABILITY IN THE HANDS OF TH E RECIPIENTS OF INCOME. SO HOWEVER, IN THE PRESENT CASE, WHAT IS HELD AGAINST THE ASSESSEE IS THE FAILURE TO DEDUCT TAX AT SOURCE AT THE TIME OF PAYMENT OF SUCH INCOME. OSTENSIBLY, DEHORS THE AFORESAID AMENDMENT, THE IMPUGNED INCOME WAS NOT SUBJECT TO TAX DEDUCTION AT SOURCE IN INDIA AS PER THE PREVAILING LEGAL POSITION. TAXABILITY OF A SUM IN THE HANDS OF RECIPIENT, ON ACCOUNT OF A SUBSEQUENT RETROSPECTIVE AMENDMENT WOULD NOT EXPOSE THE ASSESSEE - PAYER TO AN IMPOSSIBLE SITUATION OF REQUIRING DEDUCTION OF TA X AT SOURCE ITA NO. 1503/MUM/2016 M/S. CHEMICAL PROCESS PIPING PVT. LTD., 7 ON THE DATE OF PAYMENT. THEREFORE, ON THIS COUNT ALSO THE ASSESSEE CANNOT BE HELD TO BE IN DEFAULT IN NOT DEDUCTING TAX AT SOURCE SO AS TO TRIGGER THE DISALLOWANCE UNDER SECTION 40(A)(I) OF T HE ACT. LD. REPRESENTATIVE FOR THE ASSESSEE HAS RELIED UPON THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF CHANNEL GUIDE INDIA LTD. VS. ACIT, 25 TAXMANN.COM 25 (MUM.) IN SUPPORT OF THE ABOVE SAID PROPOSITION. IN THE ABSENCE OF ANY CONTRARY DECISION, THE SAID PLEA OF THE ASSESSEE IS ALSO LIABLE TO BE UPHELD AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION40(A)(I) OF THE ACT IS UNTENABLE. THE DISALLOWANCE HAS BEEN RIGHTLY DELETED BY THE CIT(APPEALS), WHICH WE HEREBY AFFIRM. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 7. FURTHER RELIANCE WAS PLACED ON THE DECISION OF BOMBAY HIGH COURT IN CASE OF NGC NETWORKS (INDIA) PVT. LTD., IN INCOME TAX APPEAL NO.397 OF 2015, ORDER DATED 29/01/2018, WHEREIN HONBLE HIGH COURT HEL D AS UNDER: - (D) WE FIND THAT VIEW TAKEN BY THE IMPUGNED ORDER DATED 9TH JULY, 2014 OF THE TRIBUNAL THAT A PARTY CANNOT BE CALLED UPON TO PERFORM AN IMPOSSIBLE ACT I.E. TO COMPLY WITH A PROVISION NOT IN FORCE AT THE RELEVANT TIME BUT INTRODUCED LATER BY RETROSPECTIVE AMENDMENT. THIS IS IN ACCORD WITH THE VIEW TAKEN BY THIS COURT IN CIT V/S. CELLO PLAST (2012) 209 TAXMANN 617 WHEREIN THIS COURT HAS APPLIED THE LEGAL MAXIM LEX NON COGIT AD IMPOSSIBILIA (LAW DOES NOT COMPEL A MAN TO DO WHAT HE CANNOT POSSIBLY PERFORM). (E) IN THE PRESENT FACTS, THE AMENDMENT BY INTRODUCTION OF EXPLANATION-6 TO SECTION 9(1)(VI) OF THE ACT TOOK PLACE IN THE YEAR 2012 WITH RETROSPECTIVE EFFECT FROM 1976. THIS COULD NOT BE HAVE BEEN CONTEMPLATED B Y THE RESPONDENT WHEN HE MADE THE PAYMENT WHICH WAS SUBJECT TO TAX DEDUCTION AT SOURCE UNDER SECTION 194C OF THE ACT DURING THE SUBJECT ASSESSMENT YEAR, WOULD REQUIRE DEDUCTION UNDER SECTION 194J OF THE ACT DUE TO SOME FUTURE AMENDMENT WITH RET ROSPECTIVE EFFECT. (F) FURTHER, WE ALSO NOTICE THAT UNDER SECTION 40(A)(I) OF THE ACT, UNDER WHICH THE EXPENDITURE HAS BEEN DISALLOWED BY THE REVENUE, MEANING OF ROYALTY AS DEFINED THEREIN, IS THAT AS PROVIDED IN EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT AND NOT EXPLANATION 6 ITA NO. 1503/MUM/2016 M/S. CHEMICAL PROCESS PIPING PVT. LTD., 8 TO SECTION 9(1)(VI) OF THE ACT. THUS, THE DISALLOWANCE OF EXPENDITURE UNDER SECTION 40(A)(I) OF THE ACT CAN ONLY BE IF THE PAYMENT IS 'ROYALTY' IN TERMS OF EXPLANATION 2 TO SECTION 9 (1)(VI) OF THE ACT. UNDISPUTEDLY, THE PA YMENT MADE FOR CHANNEL PLACEMENT AS A FEE, IS NOT ROYALTY IN TERMS OF EXPLANATION 2 TO SECTION 9(1)(VI) OF THE ACT. THEREFORE, NO DISALLOWANCE OF EXPENDITURE UNDER SECTION 40(A)(VI) OF THE ACT, CAN BE MADE IN THE PRESENT FACTS. (G) IN THE ABOVE VIEW, A S IT IS A SELF EVIDENT POSITION FROM THE READING SECTION 40(A)(I) OF THE ACT, NO SUBSTANTIAL QUESTION OF LAW. THUS, QUESTION (A) NOT ENTERTAINED . 8. ON THE OTHER HAND LEARNED DR RELIED ON THE DECISION OF AAR IN CASE OF SYED SHAH MOHAMMED QUADRI DATED 03/ 07/2006. 9. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FROM THE RECORD WE FIND THAT THE ASSESSEE CARRIES ON BUSINESS OF DESIGN, MANUFACTURE AND EXPORT. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS MADE VARIOUS PAYMENTS TO NRIS ON WHICH N O TAX WAS DEDUCTED AT SOURCE, THEREFORE, THE AO INVOKED PROVISIONS OF SECTION 40(A)(I) OF THE ACT AND DISALLOWED THE SAME. THE CIT(A) DEALT WITH THE MATTER ELABORATELY AND DELETED THE DISALLOWANCE AFTER FOLLOWING THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF NGC NETWORKS (INDIA) PVT. LTD. WE FIND THAT THE YEAR UNDER CONSIDERATION IS 2010 - 11 RELEVANT TO F.Y. 2009 - 10 WHEREAS THE EXPLANATION 2 IS SECTION 9(2) WAS INTRODUCED VIDE FINANCE ACT, 2008. EVEN THOUGH THIS INTRODUCTION WAS WITH R ETROSPECTIVE EFFECT BUT THE HON'BLE HIGH COURT HAS HELD THAT THE ASSESSEE CANNOT BE COMPELLED TO DO IMPOSSIBLE THINGS IN SO FAR AS DURING THE YEAR UNDER CONSIDERATION HE WAS NOT AWARE OF THE AMENDMENT WHICH ITA NO. 1503/MUM/2016 M/S. CHEMICAL PROCESS PIPING PVT. LTD., 9 CAME ONLY AFTER THE CLOSE OF THE FINANCIAL YEAR U NDER CONSIDERATION. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE MADE UNDER SECTION 40(A)(I) OF THE ACT ON THE PLEA OF NON - DEDUCTION OF TAX AT SOURCE UNDER SECTION 195. 10 . IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 24 / 07 /201 8 SD/ - ( RAM LAL NEGI ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 24 / 07 / 201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//