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If Payee not assessed, no TDS liability on payer u/s 195



If Payee not assessed, no TDS liability on payer u/s 195 Crompton Creaves Ltd vs. DCIT (ITAT Mumbai)

Public issue of Global Depository Receipts (GDR) was made by the assessee for the same he engaged international lead managers and paid them management and underwriting commission of Rs. 7.68 crores without deducting TDS. The AO & CIT (A) held that the said commission which was paid by the assessee constituted “fees for technical services” and that the assessee ought to have deducted TDS u/s 195. The assessee was held to be in default u/s 201. Before the Tribunal, the assessee argued that as no action has been taken by the department against the payees and the time for taking such action had expired, no order u/s 195 & 201 could be passed. HELD by the Tribunal:

As reported by ITAT.ORG: No order u/s 201(l) or (1A) holding the payer to be in default can be passed where the Revenue has not taken any action against the payee and the time limit for taking action against the payee u/s 147 has expired. On facts, the admitted position is that no assessment has been made in the hands of the payee in respect of the sums received from the assessee in respect of GDR issues. Similarly no proceedings have been taken against it till date for assessing such income. The time limit for issuing notice u/s 148 has also come to an end. As the time limit for taking action against the payee u/s 147 is not available, and there is no course left to the Revenue for making the assessment of the non-resident, exconsequenti, no lawful order can be passed against the assessee either u/s 201(1) or (1A) (Mahindra & Mahindra 313 ITR 263 (Mum) (SB) (AT) followed).

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