Scorpios Apparels Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 741/DEL/2013

• Counselvise Citation: 74120114 RSA 2013
• Duration Of Justice: 1 year(s) 11 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 07-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 06-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH SENIOR
• Assessee Lawyers: SUNIL BAKSHI
• Keywords: Recovery proceedings; Business income; Services rendered outside India; Permanent establishment
• Section: 5(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.741/DEL./2013 (ASSESSMENT YEAR : 2005-06) M/S. SCORPIOS APPARELS PRIVATE LTD., VS. ACIT, CIR CLE 7 (1), C 30, OKHLA INDUSTRIAL AREA, PHASE I, NEW DELH I. NEW DELHI. (PAN : AAECS4442H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUNIL BAKSHI, CA REVENUE BY : SHRI SATPAL SINGH, SENIOR DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE EMANATES FROM TH E ORDER OF THE CIT (APPEALS)-X, NEW DELHI DATED 04.12.2012. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND EXPORT OF HIGH FASHIONED READYMADE GARMENTS. T HE ASSESSING OFFICER MADE CERTAIN ADDITIONS WHICH HAVE BEEN CONFIRMED BY THE CIT (A). NOW, THE ASSESSEE IS IN APPEAL BY TAKING THE FOLLOWING G ROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED CIT (A) IS BAD BOTH IN THE EYE OF LAW A ND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ACTION OF THE AO BY SUSTAINING ADDITION OF RS.85,342/- BEING THE DIFFER ENCE IN THE VALUE OF JOB WORK EFFECTED IN THE TDS CERTIFICATE AND THE AMOUNT REFLECTED IN THE ITA NO.741/DEL./2013 2 PROFIT AND LOSS ACCOUNT ON THE GROUND THAT THE ARGU MENTS MADE BY THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDING S WERE NOT SUPPORTED WITH ANY CONCRETE DOCUMENTS AND CONVINCING EXPLANAT IONS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING AN AMOUNT OF RS.9,84,206/- ON ACCOUNT O F COMMISSION INVOKING THE PROVISION OF SECTION 40(A)(I) OF THE A CT. 4. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL. 3. GROUND NOS.1 & 4 ARE GENERAL IN NATURE AND DO NO T REQUIRE ANY ADJUDICATION. 4. IN THE GROUND NO.2, THE ISSUE INVOLVED IS SUSTAI NING THE ADDITION OF RS.85,342/- WHICH WAS THE DIFFERENCE IN THE VALUE O F JOB WORK EFFECTED IN THE TDS CERTIFICATE AND THE AMOUNT REFLECTED IN THE PROFIT & LOSS ACCOUNT. THE CIT (A) HAS CONFIRMED THIS ADDITION BY HOLDING THAT THE ARGUMENTS OF THE ASSESSEE DURING THE APPELLATE PROCEEDINGS WERE NOT SUPPORTED WITH ANY CONCRETE DOCUMENTS AND CONVINCING EXPLANATIONS. 5. WE FIND THAT THE ASSESSEE HAS ISSUED TWO CREDIT NOTES AMOUNTING TO RS.85,342/- AND DETAILS OF THE SAME WERE FILED BEFO RE THE AUTHORITIES BELOW AND THE REVENUE HAS NOT POINTED OUT ANY DISCREPANCY IN THE ISSUING OF THE CREDIT NOTES TO M/S. GAURAV INTERNATIONAL. CONSIDE RING ALL THESE FACTS, WE ALLOW THIS GROUND OF ASSESSEES APPEAL. 6. IN THE GROUND NO.3, THE ISSUE INVOLVED IS SUSTAI NING THE ADDITION OF RS.9,84,206/- ON ACCOUNT OF COMMISSION INVOKING THE PROVISIONS OF SECTION 40(A)(I) OF THE INCOME-TAX ACT, 1961. SINCE THE AS SESSEE HAD PAID OVERSEAS ITA NO.741/DEL./2013 3 COMMISSION TO M/S. NEW TIMES INTERNATIONAL LTD., TA IWAN WHERE NO TDS WAS DEDUCTED. AS PER REVENUE, WHOLE AMOUNT OF COMM ISSION IS TO BE DISALLOWED U/S 40(A)(I) OF THE ACT. AS PER ASSESSE E, IT HAS TAKEN HELP OF OVERSEAS AGENTS TO PROCURE EXPORT ORDERS. THE COMM ISSION PAID TO SUCH OVERSEAS AGENT. AT THE OUTSET OF THE HEARING, LD. AR SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AS, ON S IMILAR FACTS INVOLVED, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY HO NBLE DELHI HIGH COURT IN THE CASE OF CIT VS. EON TECHNOLOGY (P) LTD. REPO RTED IN 246 CTR (DELHI) 40 AND ALSO BY THE DECISION OF HONBLE MADR AS HIGH COURT IN THE CASE OF CIT VS. FAIZAN SHOES (P) LTD REPORTED IN (2 014) 48 TAXMANN.COM 48 (MADRAS). 7. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. AFTE R HEARING BOTH THE SIDES AND GOING THROUGH THE AFORESAID DECISIONS OF HONBLE HIGH COURT IN THE CASE OF CIT VS. EON TECHNOLOGY (P) LTD., WE FIN D THAT THE FACTS OF THE ASSESSEES CASE ARE SIMILAR TO THE CASE OF CIT VS. EON TECHNOLOGY (P) LTD., WHERE, IN SIMILAR CIRCUMSTANCES, THE HONBLE HIGH COURT HAS HELD THAT NO TDS LIABILITY ARISES ON THE ASSESSEE. THE RELEV ANT PART OF THE ORDER IS REPRODUCED AS UNDER :- 10. FOR THE SAID PROVISION TO APPLY, THE ASSESSING OFFICER WAS REQUIRED TO EXAMINE WHETHER THE SAID COMMISSION INC OME IS ACCRUING OR ARISING DIRECTLY OR INDIRECTLY FROM ANY BUSINESS CO NNECTION IN INDIA. THE ASSESSING OFFICER HAS NOT DEALT WITH OR EXAMINED TH E SAID ASPECT BUT HAS MERELY RECORDED THAT THE PAYMENT MADE TO ETUK WAS T AXABLE IN INDIA BECAUSE OF ITS BUSINESS CONNECTION. THE ASSESSING OFFICER DID NOT ELABORATE OR HAS NOT DISCUSSED ON WHAT BASIS HE HAD COME TO THE CONCLUSION THAT BUSINESS CONNECTION AS ENVISAGED UNDER SECTION ITA NO.741/DEL./2013 4 9(1)(I) EXISTED. ON THIS ASPECT, WE MAY NOTE THAT T HE RESPONDENT ASSESSEE HAD SUBMITTED THAT ETUK WAS A NON RESIDENT COMPANY AND DID NOT HAVE ANY PERMANENT ESTABLISHMENT IN INDIA. ETUK WAS NOT RENDERING ANY SERVICE OR PERFORMING ANY ACTIVITY IN INDIA ITSELF. THESE FACTS ARE NOT AND CANNOT BE DISPUTED. EXPLANATION 2 HAS NOT BEEN INVO KED OR RELIED UPON BY THE REVENUE. FACTUAL MATRIX IN RESPECT OF EXPLAN ATION 2 HAS NOT BEEN REFERRED TO OR EXAMINED BY THE ASSESSING OFFICER AN D IS NOT ON RECORD. 11. COMMISSIONER OF INCOME TAX (APPEALS) RELIED UPO N TWO CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAX ES BEING CIRCULAR NO. 23 DATED 23RD JULY, 1969 AND CIRCULAR NO. 786 D ATED 7TH FEBRUARY, 2000, REPORTED IN [2000] 241 ITR 132 (ST.). THE REL EVANT PORTION OF THE SAID CIRCULARS, FOR THE SAKE OF CONVENIENCE ARE QUO TED BELOW:- CIRCULAR NO.23 DATED 23.07.1969 FOREIGN AGENTS OF INDIA EXPORTS-WHERE A FOREIGN AG ENTS OF INDIA EXPORTER OPERATES IN HIS OWN COUNTRY AND HIS COMMIS SION IS USUALLY REMITTED DIRECTLY TO HIM AND IS, THEREFORE, NOT REC EIVED BY HIM OR ON HIS BEHALF IN INDIA. SUCH AN AGENT IS NOT LIABLE TO INC OME-TAX IN INDIA ON THE COMMISSION CIRCULAR NO.786 DATED 07.02.2000 AS CLARIFIED EARLIER IN CIRCULAR NO.23 DATED 23-7- 1969 (SEE UNDER SECTION (5) WHERE THE NON-RESIDENT AGENT OPERATES O UTSIDE THE COUNTRY, NO PART OF HIS INCOME ARISES IN INDIA, AND SINCE TH E PAYMENT IS USUALLY REMITTED DIRECTLY ABROAD, IT CANNOT BE HELD TO HAVE BEEN RECEIVED BY OR ON BEHALF OF AGENT IN INDIA. SUCH PAYMENTS WERE THE REFORE, HELD TO BE NOT TAXABLE IN INDIA. THIS CLARIFICATION STILL PREV AILS. IN VIEW OF THE FACT THAT THE RELEVANT SECTIONS [SECTION 5(2) AND SECTIO N 9] HAVE NOT UNDERGONE AND CHANGE IN THIS REGARD. NO TAX IS THER EFORE DEDUCTIBLE UNDER SECTION 195 FROM EXPORT COMMISSION AND OTHER RELATED CHARGES PAYABLE TO SUCH A NON-RESIDENT FOR SERVICES RENDERE D OUTSIDE INDIA. 12. ON THE SAID ASPECT WE MAY REFER TO THE DECISION OF THE SUPREME COURT IN C.I.T. VS. TOSHOKU LIMITED, (1980) 125 ITR 525 (SC). THIS CASE RELATES TO THE ASSESSMENT YEAR 1962-63. THE IN DIAN ASSESSEE HAD PAID COMMISSION TO TWO FOREIGN COMPANIES THROUGH WH OM THEY HAD PROCURED EXPORT ORDERS. QUESTIONS AROSE; WHAT WAS T HE EFFECT OF THE ENTRIES IN THE BOOKS OF ACCOUNTS OF THE INDIAN ASSE SSEE WHICH HAD RESULTED IN DEBIT AND CREDIT ENTRIES ON ACCOUNT OF COMMISSION AND SECONDLY, WHETHER PROCUREMENT OF EXPORT ORDERS BY T HE FOREIGN COMPANIES FOR THE INDIAN COMPANY HAD RESULTED IN A BUSINESS CONNECTION. TWO CONTENTIONS WERE REJECTED BY THE SU PREME COURT INTER- ALIA RECORDING AS UNDER:- IT CANNOT BE SAID THAT THE MAKING OF THE BOOK ENTR IES IN THE BOOKS OF THE STATUTORY AGENT AMOUNTED TO RECEIPT BY THE ASSESSEE S WHO WERE NON- RESIDENTS AS THE AMOUNTS SO CREDITED IN THEIR FAVOU R WERE NOT AT THEIR ITA NO.741/DEL./2013 5 DISPOSAL OR CONTROL. IT IS NOT POSSIBLE TO HOLD THA T THE NON-RESIDENT ASSESSEES IN THIS CASE EITHER RECEIVED OR CAN BE DE EMED TO HAVE RECEIVED THE SUMS IN QUESTION WHEN THEIR ACCOUNTS WITH THE S TATUTORY AGENT WERE CREDITED, SINCE A CREDIT BALANCE, WITHOUT MORE, ONL Y REPRESENTS A DEBT AND A MERE BOOK ENTRY IN THE DEBTOR'S OWN BOOKS DOE S NOT CONSTITUTE PAYMENT WHICH WILL SECURE DISCHARGE FROM THE DEBT. THEY CANNOT, THEREFORE, BE CHARGED TO TAX ON THE BASIS OF RECEIP T OF INCOME ACTUAL OR CONSTRUCTIVE IN THE TAXABLE TERRITORIES DURING THE RELEVANT ACCOUNTING PERIOD. . IN THE INSTANT CASE, THE NON-RESIDENT ASSESSEES DID NOT CARRY ON ANY BUSINESS OPERATIONS IN THE TAXABLE TERRITORIES. THE Y ACTED AS SELLING AGENTS OUTSIDE INDIA. THE RECEIPT IN INDIA OF THE S ALE PROCEEDS OF TOBACCO REMITTED OR CAUSED TO BE REMITTED BY THE PU RCHASERS FROM ABROAD DOES NOT AMOUNT TO AN OPERATION CARRIED OUT BY THE ASSESSEES IN INDIA AS CONTEMPLATED BY CL. (A) OF THE EXPLANATION TO S.9(1)(I) OF THE ACT. THE COMMISSION AMOUNTS WHICH WERE EARNED BY TH E NON-RESIDENT ASSESSEES FOR SERVICES RENDERED OUTSIDE INDIA CANNO T, THEREFORE, BE DEEMED TO BE INCOMES WHICH HAVE EITHER ACCRUED OR A RISEN IN INDIA. THE HIGH COURT WAS, THEREFORE, RIGHT IN ANSWERING THE Q UESTION AGAINST THE DEPARTMENT. 13. THE AFORESAID DECISION IS A COMPLETE ANSWER TO THE CONTENTION RAISED BY THE REVENUE AND AS MENTIONED IN THE ASSES SMENT ORDER THAT COMMISSION INCOME HAD ACCRUED AND ARISEN IN INDIA W HEN CREDIT ENTRIES WERE MADE IN THE BOOKS OF THE RESPONDENT ASSESSEE I N FAVOUR OF THE ETUK AND THE SAID INCOME TOWARDS COMMISSION WAS REC EIVED IN INDIA. AS NOTICED ABOVE, THE STAND OF THE REVENUE IS CONTR ARY TO THE TWO CIRCULARS ISSUED BY THE CBDT IN WHICH IT IS CLEARLY HELD THAT WHEN A NON-RESIDENT AGENT OPERATES OUTSIDE THE COUNTRY NO PART OF HIS INCOME ARISES IN INDIA, AND SINCE PAYMENT IS REMITTED DIRE CTLY ABROAD, AND MERELY BECAUSE AN ENTRY IN THE BOOKS OF ACCOUNTS IS MADE, IT DOES NOT MEAN THAT THE NON-RESIDENT HAS RECEIVED ANY PAYMENT IN INDIA. THIS FACT ALONE DOES NOT ESTABLISH BUSINESS CONNECTION. IN CI RCULAR NO.786 DATED 7TH FEBRUARY, 2000, IT HAS BEEN STATED THAT IN SUCH CASES, THE INDIAN ASSESSEE IS NOT LIABLE TO DEDUCT TDS UNDER SECTION 195 OF THE ACT FROM THE COMMISSION AND OTHER RELATED CHARGES PAYABLE TO SUCH A NON- RESIDENT HAVING RENDERED SERVICE OUTSIDE INDIA. 14. THE TERM BUSINESS CONNECTION HAS BEEN INTERPR ETED BY THE SUPREME COURT TO MEAN SOMETHING MORE THAN MERE BUSI NESS AND IS NOT EQUIVALENT TO CARRYING ON BUSINESS, BUT A RELATIONS HIP BETWEEN THE BUSINESS CARRIED ON BY A NON-RESIDENT, WHICH YIELDS PROFITS AND GAINS AND SOME ACTIVITIES IN INDIA, WHICH CONTRIBUTES DIR ECTLY OR INDIRECTLY TO THE EARNING OF THOSE PROFITS OR GAINS. IT PREDICATE S AN ELEMENT OF CONTINUITY BETWEEN THE BUSINESS OF THE NON-RESIDENT AND THE ACTIVITY IN INDIA [CIT VS. R.D. AGGARWAL AND COMPANY (1965) 56 ITR 20 (SC), CARBORANDUM & CO. VS. CIT (1977) 2 SCC 862 AND ISHI KAWAJMA- HARIMA HEAVY INDUSTRIES LTD. VS. DIRECTOR OF INCOME TAX, MUMBAI (2007) 3 SCC 481]. THE TEST WHICH IS TO BE APPLIED IS TO EXAMINE THE ITA NO.741/DEL./2013 6 ACTIVITIES IN INDIA AND WHETHER THE SAID ACTIVITIES HAVE CONTRIBUTED TO THE BUSINESS INCOME EARNED BY THE NON-RESIDENT, WHICH H AS ACCRUED, ARISEN OR RECEIVED OUTSIDE INDIA. THE BUSINESS CONNECTION MUST BE REAL AND INTIMATE FROM WHICH THE INCOME HAD ARISEN DIRECTLY OR INDIRECTLY. THE QUESTION OF BUSINESS CONNECTION, THEREFORE, HAS TO BE DECIDED ON FACTS FOUND BY ASSESSING OFFICER (OR IN THE APPELLATE PRO CEEDINGS). IN THE PRESENT CASE, FACTS FOUND BY THE ASSESSING OFFICER DO NOT MAKE OUT A CASE OF BUSINESS CONNECTION AS STIPULATED IN SECTIO N 9(1) (I) OF THE ACT. THERE IS HARDLY ANY FACTUAL DISCUSSION ON THE SAID ASPECT BY THE ASSESSING OFFICER. HE HAS NOT MADE ANY FOUNDATION O R BASIS FOR HOLDING THAT THERE WAS BUSINESS CONNECTION AND, THEREFORE, SECTION 9(1)(I) OF THE ACT IS APPLICABLE. APPELLATE AUTHORITIES, ON THE BA SIS OF MATERIAL ON RECORD, HAVE RIGHTLY HELD THAT BUSINESS CONNECTION IS NOT ESTABLISHED. 15. THE SCOPE AND AMBIT OF SECTION 195 OF THE ACT H AS BEEN EXPLAINED BY THE SUPREME COURT IN GE INDIA TECHNOLO GY CENTRE (P) LTD. VS. CIT (2010) 327 ITR 456. IN THE SAID CASE T HE EXPRESSION ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THE AC T IN SECTION 195 OF THE ACT WAS ELUCIDATED AND EXPLAINED. IT WAS HELD T HAT IF PAYMENT IS MADE IN RESPECT OF THE AMOUNT WHICH IS NOT CHARGEAB LE TO TAX UNDER THE PROVISIONS OF ACT, TAX AT SOURCE (TDS, FOR SHORT) I S NOT LIABLE TO BE DEDUCTED. DECISION OF SUPREME COURT IN TRANSMISSION CORPORATION OF ANDHRA PRADESH VS. CIT, (1999) 239 ITR 587 (SC), OP ERATES AND IS APPLICABLE WHEN THE SUM OR PAYMENT IS CHARGEABLE TO TAX UNDER THE PROVISIONS OF THE ACT. IN SUCH CASES, TDS HAS TO BE DEDUCTED ON THE GROSS AMOUNT OF PAYMENT MADE AND NOT MERELY ON THE TAXABLE INCOME INCLUDED IN THE GROSS AMOUNT. THE SAID DECISION WOU LD NOT APPLY IN CASE PAYMENT IS MADE BUT THE SAID SUM IN ENTIRETY IS NOT CHARGEABLE OR EXIGIBLE TO TAX UNDER THE PROVISIONS OF THE ACT. TH E SAID DISTINCTION HAS BEEN RIGHTLY UNDERSTOOD BY THE FIRST APPELLATE AUTH ORITY AND THE ITAT AND CORRECTLY APPLIED BY THEM. 16. IT WILL BE APPROPRIATE TO REFER TO THE FOLLOWIN G OBSERVATIONS OF THE SUPREME COURT IN THE COMMISSIONER OF INCOME TAX , NEW DELHI VS. ELI LILLY AND COMPANY (INDIA) PRIVATE LTD., (2009) 15 SCC 1, WHEREIN IT HAS BEEN OBSERVED :- 60. UNDER THE 1961 ACT, TOTAL INCOME FOR THE PREVI OUS YEAR IS CHARGEABLE TO TAX UNDER SECTION 4. SECTION 4(2) INT ER ALIA PROVIDES THAT IN RESPECT OF INCOME CHARGEABLE UNDER SECTION 4(1), INCOME TAX SHALL BE DEDUCTED AT SOURCE WHERE IT IS SO DEDUCTIBLE UNDER ANY PROVISION OF THE 1961 ACT. SECTION 192(1) FALLS IN THE MACHINERY PRO VISIONS. IT DEALS WITH COLLECTION AND RECOVERY OF TAX. THAT PROVISION IS R EFERRED TO IN SECTION 4(2). THEREFORE, IF A SUM THAT IS TO BE PAID TO THE NON-RESIDENT IS CHARGEABLE TO TAX, TAX IS REQUIRED TO BE DEDUCTED. THE SUM WHICH IS TO BE PAID MAY BE INCOME OUT OF DIFFERENT HEADS OF INCOME MENTIONED IN SECTION 14, THAT IS TO SAY, INCOME FROM SALARIES, I NCOME FROM HOUSE PROPERTY, PROFITS AND GAINS OF BUSINESS, CAPITAL GA INS AND INCOME FROM OTHER SOURCES. ITA NO.741/DEL./2013 7 61. THE SCHEME OF THE TDS PROVISIONS APPLIES NOT ON LY TO THE AMOUNT PAID, WHICH BEARS THE CHARACTER OF INCOME SUCH AS SALARIES, DIVIDENDS, INTEREST ON SECURITIES, ETC. BUT THE SAI D PROVISIONS ALSO APPLY TO GROSS SUMS, THE WHOLE OF WHICH MAY NOT BE INCOME OR PROFITS IN THE HANDS OF THE RECIPIENT, SUCH AS PAYMENT TO CONTRACT ORS AND SUBCONTRACTORS. 62. THE PURPOSE OF TDS PROVISIONS IN CHAPTER XVII-B IS TO SEE THAT THE SUM WHICH IS CHARGEABLE UNDER SECTION 4 FOR LEV Y AND COLLECTION OF INCOME TAX, THE PAYER SHOULD DEDUCT TAX THEREON AT THE RATES IN FORCE, IF THE AMOUNT IS TO BE PAID TO A NON-RESIDENT. THE SAI D TDS PROVISIONS ARE MEANT FOR TENTATIVE DEDUCTION OF INCOME TAX SUBJECT TO REGULAR ASSESSMENT. (SEE TRANSMISSION CORPN. OF A.P. LTD. V . CIT, SCC PP. 273-74, PARA 10 : ITR PP. 594-95.) (EMPHASIS SUPPLIED) IT WAS THEREAFTER LUCIDLY CLARIFIED:- 73. ON THE QUESTION AS TO WHETHER THERE IS ANY INT ERLINKING OF THE CHARGING PROVISIONS AND THE MACHINERY PROVISIONS UN DER THE 1961 ACT, WE MAY, AT THE VERY OUTSET, POINT OUT THAT IN CIT V . B.C. SRINIVASA SETTY THIS COURT HAS HELD THAT : 10. THE CHARGING SECTION AND THE COMPUTATION PRO VISIONS TOGETHER CONSTITUTE AN INTEGRATED CODE. WHEN THERE IS A CASE TO WHICH THE COMPUTATION PROVISIONS CANNOT APPLY AT ALL, IT IS E VIDENT THAT SUCH A CASE WAS NOT INTENDED TO FALL WITHIN THE CHARGING SECTIO N. WE MAY ADD THAT, THE 1961 ACT IS AN INTEGRATED CODE AND, AS STATED HEREINABOVE, SECTION 9(1) INTEGRATES THE CHARGING S ECTION, THE COMPUTATION PROVISIONS AS WELL AS THE MACHINERY PRO VISIONS. (SEE SECTION 9(1)(I) READ WITH SECTIONS 160, 161, 162 AN D 163.) 74. IN THE PRESENT CASE, IT HAS BEEN VEHEMENTLY URG ED THAT TDS PROVISIONS BEING MACHINERY PROVISIONS ARE INDEPENDE NT OF THE CHARGING PROVISIONS WHEREAS AS HELD BY THIS COURT IN B.C. SR INIVASA SETTY, THE 1961 ACT IS AN INTEGRATED CODE. 75. TO ANSWER THE CONTENTION HEREIN WE NEED TO EXAM INE BRIEFLY THE SCHEME OF THE 1961 ACT. SECTION 4 IS THE CHARGING S ECTION. UNDER SECTION 4(1), TOTAL INCOME FOR THE PREVIOUS YEAR IS CHARGEABLE TO TAX. SECTION 4(2) INTER ALIA PROVIDES THAT IN RESPECT OF INCOME CHARGEABLE UNDER SUBSECTION (1), INCOME TAX SHALL BE DEDUCTED AT SOURCE WHETHER IT IS SO DEDUCTIBLE UNDER ANY PROVISION OF THE 1961 AC T WHICH INTER ALIA BRINGS IN THE TDS PROVISIONS CONTAINED IN CHAPTER X VII-B. IN FACT, IF A PARTICULAR INCOME FALLS OUTSIDE SECTION 4(1) THEN T DS PROVISIONS CANNOT COME IN. ITA NO.741/DEL./2013 8 76. UNDER SECTION 5, ALL RESIDENTS AND NON-RESIDENT S ARE CHARGEABLE IN RESPECT OF INCOME WHICH ACCRUES OR IS DEEMED TO ACCRUE IN INDIA OR IS RECEIVED IN INDIA. NONRESIDENTS WHO ARE NOT ASSESSA BLE IN RESPECT OF INCOME ACCRUING AND RECEIVED ABROAD ARE RENDERED CH ARGEABLE UNDER SECTION 5(2)(B) IN RESPECT OF INCOME DEEMED BY SECT ION 9 TO ACCRUE IN INDIA. (EMPHASIS SUPPLIED) 17. AFTER REFERRING TO ELI LILLY (SUPRA) IN GE INDI A TECHNOLOGY CENTRE PRIVATE LIMITED (SUPRA), IT HAS BEEN HELD : 17. SECTION 195 APPEARS IN CHAPTER XVII WHICH DEAL S WITH COLLECTION AND RECOVERY. AS HELD IN CIT V. ELI LILL Y & CO. (INDIA) (P) LTD. THE PROVISIONS FOR DEDUCTION OF TAS WHICH IS I N CHAPTER XVII DEALING WITH COLLECTION OF TAXES AND THE CHARGING P ROVISIONS OF THE IT ACT FORM ONE SINGLE INTEGRAL, INSEPARABLE CODE AND, THEREFORE, THE PROVISIONS RELATING TO TDS APPLIES ONLY TO THOSE SU MS WHICH ARE CHARGEABLE TO TAX UNDER THE IT ACT. IT IS TRUE TH AT THE JUDGMENT IN ELI LILLY WAS CONFINED TO SECTION 192 OF THE IT ACT. HO WEVER, 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 RE SPONSIBLE FOR PAYING TO A NON-RESIDENT ANY SUM CHARGEABLE UNDER THE PRO VISIONS OF THE ACT, WHICH EXPRESSION, AS STATED ABOVE, DOES NOT FIND PL ACE IN OTHER SECTIONS OF CHAPTER XVII. IT IS IN THIS SENSE THAT WE HOLD T HAT THE IT ACT CONSTITUTES ONE SINGLE INTEGRAL INSEPARABLE CODE. H ENCE, THE PROVISIONS RELATING TO TDS APPLIES ONLY TO THOSE SUMS WHICH AR E CHARGEABLE TO TAX UNDER THE IT ACT. 18. IF THE CONTENTION OF THE DEPARTMENT THAT ANY PE RSON MAKING PAYMENT TO A NON-RESIDENT IS NECESSARILY REQUIRED T O DEDUCT TAS THEN THE CONSEQUENCE WOULD BE THAT THE DEPARTMENT WOULD BE ENTITLED TO APPROPRIATE THE MONIES DEPOSITED BY THE PAYER EVEN IF THE SUM PAID IS NOT CHARGEABLE TO TAX BECAUSE THERE IS NO PROVISION IN THE IT ACT BY WHICH A PAYER CAN OBTAIN REFUND. SECTION 237 READ W ITH 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 PA YER, 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 WH ERE THE SUM PAID BY HIM IS NOT A SUM CHARGEABLE UNDER THE ACT. THE I NTERPRETATION OF THE DEPARTMENT, THEREFORE, NOT ONLY REQUIRES THE WORDS CHARGEABLE UNDER THE PROVISIONS OF THE ACT TO BE OMITTED, IT ALSO L EADS TO AN ABSURD CONSEQUENCE. THE INTERPRETATION PLACED BY THE DEPAR TMENT WOULD RESULT IN A SITUATION WHERE EVEN WHEN THE INCOME HAS NO TE RRITORIAL 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 ITA NO.741/DEL./2013 9 SEEK A DETERMINATION OF THE APPROPRIATE PROPORTION OF SUCH SUM SO CHARGEABLE WHERE A PROPORTION OF THE SUM SO CHARGE ABLE IS LIABLE TO TAX. 18. IN VIEW OF THE AFORESAID DISCUSSIONS, IT HAS TO BE HELD THAT THERE IS NO ERROR IN THE FINDINGS RECORDED BY THE COMMISS IONER OF INCOME TAX (APPEALS) WHICH HAVE BEEN UPHELD IN THE IMPUGNED OR DER BY THE ITAT. WE DO NOT FIND ANY MERIT IN THE PRESENT APPEAL AND THE SAME IS DISMISSED. NO COSTS. FACTS REMAIN THE SAME, RESPECTFULLY FOLLOWING THE A FORESAID ORDER, WE ALLOW THIS GROUND OF ASSESSEES APPEAL. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 9 TH DAY OF JANUARY, 2015. SD/- SD/- (DIVA SINGH) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 9 TH DAY OF JANUARY, 2014 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-X, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.