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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’: NEW DELHI
Before: SHRI G.D. AGRAWAL, HON’BLE & SHRI KULDIP SINGH
“1. That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in sustaining the order under section 195 of the Act, passed by ITO TDS Ward - 11(2) Intl. Tax dated 30.03.2010.
2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate the basic fact that the payments made to M/s Eastern TV News and Mr. Asad Durani (both tax - residents of Pakistan) and M/s T2 Promotions FZE (tax - resident of UAE) were not chargeable to tax in India under section 5 (2) r.w.s. 9(1 )(i) of the Act and as such, there was no requirement to deduct TDS on the said payments, as had been held by learned ITO and wrongly upheld by learned CIT (A).
2.1 That further, the learned CIT (A) has failed to appreciate the fact that the said payments made to the non - residents were not in the nature of “technical services”, as had been held by learned ITO and as such, the said treatment accorded by learned ITO and so sustained by learned CIT (A) is misconceived and misplaced in facts and in law.
2.2 That in doing so, the learned Commissioner of Income Tax (Appeals) has failed in his onerous duty by not recording any finding on merits of the case, as the learned CIT (A) dismissed the appeal of the assessee - appellant on technical ground and that too without providing any opportunity of being heard, thereby, violating the principles of natural justice.
3. That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in dismissing the appeal of the assessee - appellant on technical ground i.e. non - deposit of TDS to the credit of Central Government and in doing so, the learned CIT (A) has failed to appreciate the basic fact that provisions of section 248 of the Act were not at all applicable on the facts of the assessee - appellant, as there was no agreement or arrangement between the assessee - appellant and the non - residents regarding liability to deduct tax.
3.1 That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in dismissing the appeal of the assessee - appellant and that too without giving any fair and proper opportunity of being heard to the appellant company. Thereby, violating the principles of natural justice.
3.2 That without prejudice to the above, the assessee - appellant had deposited the taxes due as per the order of learned 1TO under section 195 of the Act and as such, the conditions of section 248 of the Act have also been fulfilled by the assessee - appellant, thus, the appeal of the assessee - appellant be directed to be set - aside to the file of learned CIT (A), so that, the same may be decided on merits.”
. TV Today Networks Ltd., New Delhi.
Briefly stated the facts necessary for adjudication of the controversy at hand are: The assessee company is engaged in broadcasting of channels viz ‘Aaj Tak’, ‘Headlines Today’, ‘Dilli Aaj Tak’, and ‘Tej’. The assessee has engaged M/s EBS News Media Ltd. (‘EBS’) a tax resident of United Kingdom (in short ‘UK’) for converting input information i.e. programme name, day, time of telecast etc. sent by the assessee into a format that is desired by the platform directly in UK only. The assessee’s case is that EBS has done entire conversion job in UK and no part of work thereof has been done in India, so EBS does not have any business connection /business establishment in India within the meaning of Section 9(1)(i) of the Act / Article 5 of (Indo- UK DTAA) as such the payment is not in the nature of “FTS” as ‘make available’ clause of Article 13 of Indo-UK DTAA has not been satisfied. The assessee also claimed that the payment made to ‘EBS’ has not been chargeable to tax in India. Declining the contentions raised by the assessee, AO proceeded to hold that payment made to ‘EBS’ is in the nature of “fee for technical services” and hence tax needs to be withheld at 10.557%.
. TV Today Networks Ltd., New Delhi.
The assessee carried the matter before the Ld. CIT(A) by way of filing the appeal, who has summarily dismissed the appeal on maintainability. Feeling aggrieved, the assessee company has come up before the Tribunal by way of filing the present appeal.
We have heard the Ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and order passed by the revenue authorities below in the light of the facts and circumstances of the case.
The Ld. CIT(A) has dismissed the appeal filed by the assessee being non-maintainable by returning following findings:-
“ 5.1 I have carefully examined the issue in light of arguments made by the appellant, section 195(2) of the Act is reproduced as below:-
(2) Where the person responsible for paying any such sum chargeable under this Act (other than salary to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to determine, by general or special order, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable. 5.2 From perusal of this sub-section, it is clear that it is available to ‘prayer’ only when he is not sure whether whole of payment or a portion thereof is chargeable to tax in India. In that situation, payer can approach the AO for determining the portion of payment which shall be chargeable to tax in India and hence subject to withholding tax u/s . TV Today Networks Ltd., New Delhi.
195(1). This sub-section cannot be resorted to determine the rate (lower or nil) of withholding of tax.
5.3 Further, order u/s 195(2) can be appealed against u/s 248 only and not u/s 246 of the Act which is reproduced as below:
248 Appeal by person denying liability to deduct tax in certain cases. Where under an agreement or other arrangement, the tax deductible on any income, other than interest, under section 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the Central Government, claims that no tax was required to be deducted on such income, he may appeal to the Commissioner (Appeals) for a declaration that no tax was deductible on such income. 5.4 Perusal of this section shows that two pre-conditions need to be satisfied:
(i) Under an agreement tor arrangement, tax is to be borne by the payer i.e. payment shall be net of taxes; and (ii) Payer has actually deducted the tax and paid to credit of Central Govt. Hence, unless these two pre-conditions are fulfilled, appeal against order u/s 195(2) is not maintainable. 5.5 In the present case, the appellant was required to establish that above mentioned two pre-conditions have been satisfied. However, the appellant furnished only the copies of Form 15CB which do not establish anything. The appellant has not furnished evidence of deduction and payment of taxes and whether the taxes have been deducted after grossing up. In view of these facts, presents appeals are not maintainable u/s 248 of the Act and hence dismissed. No adjudication is being done on merits of the case as the appeals are not maintainable per se. “
In the face of the facts that EBS News Media Ltd. (EBS) is tax resident of UK as per Double Taxation Avoidance Act (in short
. TV Today Networks Ltd., New Delhi.
‘DTAA’) between India and UK; that EBS News does not have any permanent establishment in India as per DTAA between India and UK; that the entire conversion work has been completed by ‘EBS’ News in UK and no part of its work has been performed in India; that no part of this income is received or deemed to be received in India by EBS News nor any such income is accrued or arisen or deemed to accrue or arisen in India to the EBS, we are of the considered view that findings returning by Ld. CIT(A) as to non- maintainability of the appeal are not sustainable. Hence, impugned order passed by the Ld. CIT(A) is set aside to the file of the Ld. CIT(A) to disposed of on merit after providing an opportunity of being heard to the assessee. Consequently, appeal filed by the assessee is allowed.
Order pronounced in the open court on 07/6/2018