The Bombay High Court has held that even the holding company is not liable to deduct tax at source under Section 195 of the Income Tax Act, 1961 if it did not make any payment to a non-resident under the transaction.
The Assessing Officer was of the view that that petitioner was required to deduct tax at source while making payment under Section 195 of the Act on alleged purchase of shares of a company incorporated in Bermuda and liable to pay tax it had defaulted to deduct while making payment as per Section 201(1) of the Act.
The petitioner contended they were not liable to deduct any tax because petitioner did not make any payment to anybody and, therefore, the petitioner cannot be considered to be in breach of the obligation under Section 195 of the Act and consequently, the notice under Section 201 and Section 201(1A) of the Act is not maintainable.
Justice K R Shriram observed that the fact is petitioner has not made any payment.
“The obligation under Section 195 of the Act is on a person responsible for paying to a non-resident any sum chargeable under the provisions of this Act and the said person, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, shall deduct Income Tax thereon at the rates in force. When the petitioner has not made any payment and it is not respondent’s case that petitioner had directly made any payment, the petitioner cannot be the person responsible for deduction of tax.”
“At the cost of repetition, as Section 195 is applicable only to a person who is responsible for paying to deduct tax at the time of credit to the account of the payee or at the time of payment and petitioner did not make any payment to THL, there is no obligation on the petitioner to deduct tax at source. Respondent’s arguments that the petitioner had made payment through IMAHI is also not acceptable because there is no evidence that the petitioner made any payment through IMAHI. The Section is applicable to a person who is responsible for paying,” the Court said.
Ingram Micro Inc. vs Income Tax Officer (Internation Taxation) TDS
CITATION: 2022 TAXSCAN (HC) 108
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