Section 195 of the Income Tax Act has no application once the nature of payment determined as salary and TDS has been made under Section 192, the Delhi High Court upheld the order of ITAT in deleting the addition under Section 192 read with section 195 of the Income Tax Act,1961.
The appellant revenue challenged the order dated 17th August 2020 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No.9765/Del/2019 for the Assessment Year 2015-16.
Mr Sanjay Kumar counsel for the appellant states that ITAT has erred in allowing the appeal of the assessee on the ground that the draft order framed under Section 144C(1) of the Income Tax Act, 1961 (‘the Act’) was issued in the name of a non-existing company and was accordingly void ab-initio making all subsequent proceedings non-est ignoring the fact that initial jurisdictional notice dated 16th March 2016 under Section 143(2) of the Act had been issued to the correct entity and the final assessment order dated 29th October 2019 had been passed in the name of the new entity as per the Directions of the Dispute Resolution Panel (DRP).
In the case of disallowance under Section 40(a)(ia) of the Act, the Coram of Justice Manmohan and Justice Manmeet Pritam Singh Arora found that the assesseehas deducted tax at source under Section 192 of the Act and upheld the opinion of the ITAT that Section 195 of the Act has no application once the nature of payment is determined as salary and deduction has been made under Section 192 of the Act.
It was observed that salaries paid to such personnel asMr Laser are taxable in India and they cannot be considered to be fees for technical services. Further, even as per Section 9 of the Act, the payment cannot be treated as fees for technical service. Explanation 2 to Section 9(1)(vii) gives the meaning of the expression “fees for technical services” as per which, inter alia, any consideration which would be the income of the recipient chargeable under the head “salaries”, then such payment will not be considered as fees for technical services. Thus, even as per the provisions of the Act, the payment in question cannot be treated as fees for technical services. Moreover, since it is paid as salary to Mr Laser, tax has been deducted under Section 192 of the Act.”
The Court viewed that “the issues of ‘receivables’ as well as ‘disallowance’ under Section 40(a)(ia) of the Act are essentially questions of fact, which give rise to no substantial questions of law especially when the findings of the ITAT are not perverse. The present appeal is dismissed.
Ms Sachit Jolly with Mr Rohit Garg, Ms Disha Jham and Mr Sphum Dua, Advocates appeared for the respondent.
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