FSL PROJECTS LIMITED (FORMERLY FRONTLINE SOFT LIMITED),HYDERABAD vs. DCIT, CIRCLE 14(3) (TDS), HYDERABAD

At the outset, it is submitted by both the counsel that the facts of this appeal are identical to the facts involved in assessee’s own case for

On a perusal of record, we find that the assessee is engaged in the business of development of software and running a call centre. During the survey conducted on 11/12/2002 under section 133A of the Act, it was found that the assessee made payments to IGTL Solutions (USA) and True Dial Technologies INC, without deducting the tax at source under section 195 read with section 9(1)(vi) and (vii) of the Act. According to the learned Assessing Officer the assessee having not made any deduction of tax at source without making any application under section 192(2) of the Act before the learned Assessing Officer (TDS) and without ensuring that an application under section 195(3) of the Act was filed by the recipient to obtain necessary exemption, was liable to be treated as an assessee in default, in terms of the provisions of section 201(1) of the Act. Learned Assessing Officer also charged interest under section 201(1A) of the Act and passed the order dated 10/02/2003.

It could further be seen that assessee preferred appeal before the learned CIT(A) and pleaded that a certificate under section 195(3) of the Act was issued subsequently. Learned CIT(A), however, observed that subsequent grant of exemption under section 195(3) in the case of IGTL Solutions in February 2003 would not make any difference so far as the liability of the assessee was concerned.

Record further shows that the aggrieved assessee carried the matter to the Tribunal in ITA No. 1081/Hyd/2003 and the Tribunal by way of common order dated 03/08/2007 in ITA Nos. 1080 & 1081/Hyd/2003, dismissed the appeals and confirmed the findings of the learned CIT(A) on merits. Assessee, therefore, filed appeals before the Hon’ble High Court, and pleaded that the certificate was obtained from the Joint Director so far as the waiver of deduction of TDS in respect of remittance is made to M/s. IGTL Solutions (USA) has not been considered, discussed, referred to either by the Commissioner of Income Tax (Appeals) or by the Tribunal.

In the order dated 21/09/2023 in Income Tax Tribunal Appeal No. 53/2008, the Hon’ble High Court, on verification of the paper book observed that, in the paper book there is a certificate so issued under section 195(3) of the Act, granting exemption to M/s. IGTL Solutions (USA) so far as the selling of remittances without deduction of income tax at source. For the sake of completeness, we deem it just and necessary to refer to the relevant observations of the Hon’ble jurisdictional High Court hereunder,- “7. Today, when the matter is taken up for hearing, the entire paper book that was filed before the Tribunal was made available by the learned counsel for appellant and one such document therein is the certificate so issued under section 195(3) of the Act, granting

In these circumstances, a Co-ordinate Bench of the Tribunal in ITA No. 1080/Hyd/2003, dated 02/02/2024 directed the learned Assessing Officer to cause verification of the certificate and in the event the contents of the certificate issued in section 195(3) of the Act are found to be correct and genuine, then the consequences would be that the remittances that have been made to M/s. IGTL Solutions (USA) would be non-taxable so far as the TDS is concerned, since if the contents of such certificate are accepted, then the action on the part of the Revenue in carrying out a deduction at source on the remittances made to M/s. IGTL Solutions (USA) would be bad.

Hence, while respectfully following the order of the Hon’ble High Court referred to above, direct the learned Assessing Officer to cause verification of the certificate dated 10/02/2003, issued under section 195(3) of the Act and if it is found to be genuine, the consequence shall be that the entire remittances that were made to M/s. IGTL Solutions (USA)

In the result, subject to the above observations, appeal of the assessee is allowed. Order pronounced in the open court on this the 13th day of February, 2024.