Holcim Services Asia Ltd. v. Dy. CIT

INCOME TAX ACT, 1961

--Business disallowance under section 40(a)(i)--Payment to non-resident without TDSFees for technical services outside India--Assessee company had made payment to HGSL resident company of Switzerland on account of participation fees payable for HSSA's delegate of assessee company to various programmes organised by HGSL. In some cases assessee did not deduct TDS from payments which were on account of training conducted by Switzerland company outside India. AO made disallowance under section 40(a)(i). Assessee's contention was that since payment related to services rendered outside India by non-resident company, no TDS was to be made. It was also submitted that Explanation brought by Finance Act, 2010 with retrospective effect from 1-6-1976 could not be held to be applicable at the time of making payment. CIT(A) confirmed disallowance. Held: As per law laid down by Supreme Court if the services has not been rendered in India and such services were not utilized in India then there was no liability for deducting TDS. The amendment had been brought specifically to negate the decision of Hon'ble Supreme Court. At the time of making the payment, assessee could not have visualized to deduct TDS when there was no provision under the Act and in fact, there was already a prevailing law laid down by the Supreme Court, in such a case, no TDS was to be deducted, then obvious conclusion was that on such payment no disallowance under section 40(a)(i) could be made. Disallowance under section 40(a)(i) on account of any retrospective amendment was wholly vitiated and could not be sustained.