The Calcutta High Court held that the NRI liable for TDS deduction cannot be expected to apply the expanded definition of \u201croyalty\u201d when such Explanation was not actually, factually in the statute. The Tribunal held the addition to be erroneous and has considered in detail the nature and expenses in respect of which the assessee was sought to be penalized for not deducting the tax deducted at sources, holding that these expenses were in respect of the income accrued outside the territory for services rendered. With this finding the said question was rejected. The issue raised was whether persons liable to deduct TDS under Section 195 of the Act can be held liable to deduct such sums, at a time when Explanation 4 was factually not on the statute book, all deductions liable to be made and the assessment years in question (in the said case) being prior to 2012. The division bench of Justice T.S. Sivagnanam and Justice Hirannmay Bhatacharya took into consideration the Supreme Court decision in the case of Arjun Panditrao Khotar vs. Kailash Kushanrao Gorantyal wherein applying two latin maxims namely, the law does not demand the impossible and when there is a disability that makes it impossible to obey the law, the alleged disobedience of law is excused. After noting the said decision which was a case arising under the provisions of the Evidence Act, 1872, the Hon\u2019ble Supreme Court took note of the decision arising under the Income Tax Act, in the case of CIT vs. NGC Network (India) Pvt. Ltd. and CIT vs. Western Coalfields Ltd. passed in ITA\/93\/2008, the High Court of Bombay held that the \u201cperson\u201d mentioned in Section 195 of the Act cannot be expected to do the impossible, namely, to apply the expanded definition of \u201croyalty\u201d inserted by Explanation 4 to Section 9(1)(vi) of the Act for the assessment years in question, at a time when such Explanation was not actually and factually in the statute. Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.