DCIT-9(1)(2),MUMBAI, MUMBAI v. ARAMEX INDIA PVT LTD.,, MUMBAI

ITA 4157/MUM/2019 | 2011-2012
Pronouncement Date: 11-03-2021 | Result: Dismissed

Appeal Details

RSA Number 415719914 RSA 2019
Assessee PAN AACCA6756A
Bench Mumbai
Appeal Number ITA 4157/MUM/2019
Duration Of Justice 1 year(s) 9 month(s)
Appellant DCIT-9(1)(2),MUMBAI, MUMBAI
Respondent ARAMEX INDIA PVT LTD.,, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 11-03-2021
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 11-03-2021
Last Hearing Date 14-12-2020
First Hearing Date 14-12-2020
Assessment Year 2011-2012
Appeal Filed On 10-06-2019
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH MUMBAI BEFORE SHRI PRAMOD KUMAR VICE PRESIDENT & SHRI PAVAN KUMAR GADALE JUDICIAL MEMBER ITA NO. 4157/MUM/2019 ( ASSESSMENT YEARS: 2011-12 ) DCIT 9(1)(2) RNO. 210 2 ND FLOOR AAYAKAR BHAVAN MK ROAD MUMBAI. / VS. ARAMEX INDIA PVT LTD. 821 SOLITAIRE COOPERATE PARK ANDHERI GHATKOPER LINK ROAD ANDHERI (E) MUMBAI 400093. ./ ./ PAN/GIR NO. : AACCA6756A ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAJEEV HARIT CIT-DR / RESPONDENT BY : NONE / DATE OF HEARING 15/12/2020 !'# / DATE OF PRONOUNCEMENT 11/03/2021 / O R D E R PER PAVAN KUMAR GADALE - JM: THE REVENUE HAS FILED THE APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-16 MUMBAI PASSED U/S. 154 AND 250 OF THE INCOME TAX ACT 1961. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE CIT(A) ERRED IN ALLOWING THE ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 2 - DISALLOWANCE OF RS. 2 59 68 256/- U/S 40(A)(IA) ON ACCOUNT OF SHORT DEDUCTION OF TDS U/S 194C @ 1% INS TEAD OF @ 2%. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING T HE DISALLOWANCE OF RS. 5 86 44 465/- U/S 40(A)(IA) OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF TRANSPORTATIO N OF CARGO AND TIME SENSITIVE PACKAGES AND DOCUMENTS IN THE DOMESTIC AND INTERNATIONAL MARKET. THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE A .Y 2011-12 ON 28.11.2011 WITH TOTAL INCOME OF RS NIL AFTER CLAIMING CARRY FORWARD OF CURRENT YEAR LOSS O F RS.2 96 85 639/-.THE RETURN OF INCOME WAS PROCESSED U/SEC 143(1) OF THE ACT. THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSING OFFICER HAS PASSED THE ASSESSMENT ORDER UNDER SECTION 143(3) R.W.S144C (13 ) OF THE ACT DATED 26.10.2015 ACCEPTING THE TOTAL INCOME OF RS.NIL AND ALLOWED THE CARRY FORWARD OF L OSS OF RS. 2 96 85 639/. SUBSEQUENTLY AUDIT QUERY WAS RAISED AND THE A.O. ON PERUSAL OF THE ASSESSMENT RECORD FOUND THAT THE ASSESSEE HAS NOT DEDUCTED TD S U/S 194C OF THE ACT ON THE PAYMENTS MADE TO FOREIGN AIR LINES FURTHER THE CERTIFICATES ISSUED BY THE I NCOME ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 3 - TAX DEPARTMENT WERE NOT IN THE NAME OF THE ASSESSEE BEING THE DEDUCTOR AND SUCH CERTIFICATES ARE NOT VA LID. FURTHER THE ASSESSEE HAS DEDUCTED TAX UNDER SECTION 194C OF THE ACT @ 1% INSTEAD OF@ 2% RATE APPLICABLE ON CONTRACTUAL PAYMENTS OF GOODS CARRIERS. THE A.O. DEALT ON THE PROVISIONS OF TDS AND OF THE VIEW THAT THE NON DEDUCTION OF TAX OR LOWER DEDUCTION OF TAX IS PERMISSIBLE SUBJECT TO CONDITIONS AND THE CERTIFICA TE SHALL BE ISSUED TO THE PERSON WHO IS RESPONSIBLE FOR DEDUCTING THE TAX. THE A.O IS OF THE OPINION THAT SUCH CLAIM OF EXPENDITURE HAS TO BE DISALLOWED APPLYING THE PROVISIONS OF SEC. 40(A)(IA) OF THE AC T. WHEREAS THE ASSESSEE HAS DEDUCTED TDS IN RESPECT O F SIX PARTIES @ 1% U/S 194C OF THE ACT THEREFORE NOTICE U/S 154 OF THE ACT FOR RECTIFYING THE MISTAK E APPARENT FROM RECORD IS ISSUED TO THE ASSESSEE ON 08.03.2017 AND THE ASSESSEE HAS FILED THE REPLY ON 15.06.2017.THE ASSESSEE SUBMITTED THAT THE PAYMENTS WERE MADE TO VARIOUS INDIVIDUAL RESIDENT CONTRACTORS WHO ARE GOODS CARRIAGE VENDORS AND TAX HAS TO DEDUCTED@ 1% U/S 194C OF THE ACT. AND IN CASES WHERE RS.NIL CERTIFICATES WERE OBTAINED FROM THE INCOME TAX DEPARTMENT NO TDS HAS BEEN MADE. BUT ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 4 - THE A.O WAS NOT SATISFIED WITH THE SUBMISSIONS AND CLARIFICATIONS. FURTHER THE A.O OBSERVED THAT THE CERTIFICATES WERE NOT ISSUED IN RESPECT OF PAYMENTS MADE BY THE ASSESSEE COMPANY; THEREFORE THERE IS FAILURE ON THE PART OF THE ASSESSEE IN NOT DEDUCTIN G THE TAX. THE A.O CONSIDERED THE FACTS THAT THE ASSESSEE HAS MADE PAYMENTS TO SIX AIR LINES AGENCIE S WITHOUT DEDUCTION OF TAX U/S 194C OF THE ACT THOUGH THE NIL DEDUCTION CERTIFICATES WERE OBTAINED BY THE SE AIRLINES AGGREGATING TO RS.5 86 44 465/- AND ALSO SHORT DEDUCTION OF TDS @ 1% ON CONTRACTORS PAYMENTS TO THE EXTENT OF RS. 2 59 68 256/- ARE DISALLOWED USEC40(A)(IA) OF THE ACT AGGREGATING TO RS. 8 46 12 721/-.THE A.O AFTER SET OFF OF THE CARRY FORWARD LOSSES HAS DETERMINED THE TOTAL INCOME OF RS. 15 21 980/- AND PASSED THE ORDER U/S 154 OF THE ACT DATED31.03.2018. AGGRIEVED BY THE ORDER THE ASSESS EE HAS FILED THE APPEAL WITH THE CIT(A). 3. IN THE APPELLATE PROCEEDINGS THE LD.CIT(A) CONSIDERED THE GROUNDS OF APPEAL FINDINGS OF THE A .O. AND THE WRITTEN SUBMISSIONS. ON THE FIRST DISPUTE D ISSUE OF DISALLOWANCE U/S 40(A)(IA) OF THE ACT TO T HE ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 5 - EXTENT OF RS. 2 59 68 256/- WHERE THE A.OS VIEW I S THAT THE RESIDENT INDIVIDUAL CONTRACTORS ARE SUBJE CT TO TDS @ 2% U/S 194C OF THE ACT. BUT THE ASSESSEE HAS DEDUCTED @1% THEREFORE THERE IS A SHORT DEDUCTION OF 1%. ON THE SECOND DISPUTED ISSUE OF NO N DEDUCTION OF TAX BY THE ASSESSEE FOR PAYMENTS MADE TO SIX FOREIGN AIR LINES FOR TRANSPORTATION OF GOOD S IN INTERNATIONAL TRAFFIC THE ASSESSEE RELIED ON RS NI L DEDUCTION CERTIFICATE ISSUED BY THE INCOME TAX DEPARTMENT. THE LD.CIT(A) CONSIDERED THE WRITTEN SUBMISSIONS REFERRED AT PAGE 10 PARA 5 OF THE ORDER . THE LD.CIT(A) FOUND THE PAN NUMBERS OF THE CONTRACTORS ARE INDIVIDUAL AND HUF AND THE ASSESSE E HAS DEDUCTED THE TAX U/S 194C @ 1% CONSIDERING THE PROPRIETORS AND INDIVIDUALS AND THE LD.CIT(A) OBSERVED THAT ONLY 1% TDS RATE IS APPLICABLE AND ALLOWED THE GROUND OF APPEAL OF THE ASSESSEE. 3.1 THE SECOND DISPUTED ISSUE WITH RESPECT TO DISALLOWANCE U/S 40(A)(IA) OF THE ACT FOR THE PAYME NTS MADE TO THE FOREIGN AIR LINES. THE CIT(A) FOUND TH AT THE ASSESSEE HAS NOT DEDUCTED TAX AS RS NIL DEDUCTION CERTIFICATES WERE OBTAINED BY THE SERVICE ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 6 - PROVIDERS U/S 197 OF THE ACT OR AS PER THE DTAA PREVAILING BETWEEN THE RELEVANT COUNTRIES. THE A.O HAS DISALLOWED THE CLAIM ONLY ON THE SOLE OBJECTION THAT THE RS.NIL DEDUCTION CERTIFICATES DOES NOT MENTION THE NAME OF THE ASSESSEE. THE LD.CIT(A) FURTHER OBSERVED THAT THE INCOME TAX DEPARTMENT HAS ISSUED RS. NIL OR LOWER DEDUCTION CERTIFICATES IN RESPECT OF THE FOREIGN AIR LINES AFTER SATISFYING W ITH THE EXISTING TAX LIABILITY AND ESTIMATED TAX LIABILITY OF THE ASSESSEE. FURTHER LD.CIT(A) OBSERVES THAT WHERE THERE EXISTS A DTAA WITH A COUNTRY THE SAME SHAL L OVERRIDE THE INCOME TAX ACT AND THE TERMS OF DTAA SHALL OVERRULE. WHILE THE PAYMENTS ARE MADE WITHOUT DEDUCTION OF TDS IN RESPECT OF AIR LINES WHERE CERTIFICATE U/S 197 WITH RS NIL DEDUCTION WAS OBTAINED. WHEREAS IN RESPECT OF OTHER PARTIES DUE T O DTAA AGREEMENT WITH INDIA RS NIL TDS WAS MADE AS THE INCOME OF SUCH RECIPIENT PARTIES ARE TAXABLE IN THE RESPECTIVE COUNTRIES. THEREFORE THE ASSESSEE COMPAN Y IS JUSTIFIED IN NON DEDUCTION OF TDS AND ALLOWED TH E GROUND OF APPEAL OF THE ASSESSEE AND PARTLY ALLOW ED THE ASSESSEE APPEAL. AGGRIEVED BY THE CIT(A) ORDER ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 7 - THE REVENUE HAS FILED AN APPEAL WITH THE HONBLE TRIBUNAL. 4.AT THE TIME OF HEARING NONE APPEARED ON BEHALF OF THE ASSESSEE WE CONSIDERED THE SUBMISSIONS OF THE LD. DR AND THE MATERIAL AVAILABLE ON RECORD. THE F IRST DISPUTED ISSUE THE LD. DR SUBMITTED THAT THE A.O WA S CORRECT IN MAKING THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT FOR SHORT DEDUCTION OF TAX. WE FIND THAT THE CI T(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND THE PROVISIONS OF LAW AND OBSERVED AT PAGE 18 PARA 6.2 TO PARA 6.2.3 OF THE ORDER AS UNDER: 6.2 GROUNDS 3 TO 6: THE APPELLANT IS AGITATED AGAI NST DISALLOWANCE OF RS. 2 59 68 256/- U/S 40(A)(IA) OF THE ACT MADE BY THE A.O. 6.2.1. I HAVE CAREFULLY GONE THROUGH THE SUBMISSIO N AND DOCUMENT ON RECORD. IT HAS BEEN SEEN THAT APPELLAN T HAS MADE PAYMENT TO INDIVIDUAL TRANSPORTERS ON WHICH T DS AT THE RATE OF 1% HAS BEEN DEDUCTED AS PER 194C O F THE ACT. SUCH EXPENSES AMOUNTING TO RS. 2 59 68 256/-. THE LD. AO HAS DISALLOWED SUCH EXPENSE AS THE AO CONTEN DS THAT THE TDS SHOULD BE DEDUCTED AT THE RATE OF 2%. 6.2.2 I AM OF THE VIEW THAT AS PER THIS GROUND RA ISED BY THE ASSESSEE SEC. 194C CLEARLY STATES THAT TDS @ 1% IS REQUIRED TO BE DEDUCTED WHEN CREDIT IS BEING GIVEN TO AN INDIVIDUAL OR HINDU UNDIVIDED FAMILY. ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 8 - SEC 194C OF THE ACT STATES AS UNDER: (1) ANY PERSON RESPONSIBLE FOR PAYING ANY SUM TO A NY RESIDENT FOR CARRYING OUT ANY WORK (INCLUDING SUPPL Y OF LABOUR FOR CARRYING OUT ANY WORK) IN PURSUANCE OF A CONTRACT BETWEEN THE CONTRACTOR AND A SPECIFIED PER SON SHALL AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER DEDUCT AN AMOUNT EQUAL TO- (I) ONE PER CENT WHERE THE PAYMENT IS BEING MADE O R CREDIT IS BEING GIVEN TO AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY. (II) TWO PER CENT WHERE THE PAYMENT IS BEING MADE OR CREDIT IS BEING GIVEN TO A PERSON OTHER THAN AN IND IVIDUAL OR A HINDU UNDIVIDED FAMILY OF SUCH SUM AS INCOME TAX ON INCOME COMPRISED THEREIN. 6.2.3 FROM THE AVAILABLE DOCUMENTS IT CAN BE SEEN THAT DESPITE TO THE NAMES OF THE SERVICES PROVIDERS APPE ARING TO BE AS OTHER THAN INDIVIDUAL AND HUF THEY ARE PROPRIETORSHIPS OF INDIVIDUALS AND HENCE ARE INDIVI DUALS HENCE TDS @ 1% IS REQUIRED TO BE DEDUCTED AND THE S AME HAS BEEN DONE ACCORDINGLY HENCE GROUND 3 TO 6 OF T HE ASSESSEE ARE ALLOWED. 4.1 ON THE SECOND DISPUTED ISSUE IN RESPECT OF NON DEDUCTION OF TDS ON PAYMENTS MADE TO SIX FOREIGN AI R LINES ON THE CARRIAGE OF GOODS IN THE INTERNATIONAL TRAFFIC. THE LD.CIT(A) DEALT ON THE FACTS PERTA INING TO THE AIR LINES AND THE DTAA AND IS OF THE OPINION ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 9 - THAT THE DTAA PROVISIONS SHALL OVER RULE THE INCOM E TAX ACT. THE CIT(A) HAS OBSERVED AT PAGE 19 PARA 6 .3 TO 6.3.5 OF THE ORDER AS UNDER: 6.3 GROUND 7 TO 9: THE APPELLANT IS AGITATED AGAIN ST DISALLOWANCE OF RS. 5 86 44 465/- U/S 40(A)(IA) OF HE ACT MADE BY THE A.O. 6.3.1 FURTHER IS HAS ALSO BEEN OBSERVED THAT THE APPELLANT HAS MADE PAYMENT TO SOME SERVICE PROVIDER S ON WHICH NO TDS HAS BEEN DEDUCTED AS NIL TDS DEDUCTION CERTIFICATES HAVE BEEN OBTAINED BY SUCH SERVICES PROVIDERS U/S 197 OF THE ACT OR AS PER DTA A PREVAILING BETWEEN THE RELEVANT COUNTRIES. SUCH EXP ENSE AMOUNTING TO RS. 5 86 44 465/-. THE LD.AO HAS DISALLOWED THIS EXPENSE ON THE GROUND THAT SUCH NI L TDS DEDUCTION CERTIFICATES DO NOT ANYWHERE MENTION THE NAME OF THE APPELLATE. 6.3.2 I AM OF THE VIEW THAT INCOME TAX DEPARTMENT PROVIDES LOWERS / NIL TDS DEDUCTION CERTIFICATES U/ S 197 OF THE ACT WHICH ENABLES THE PERSON RESPONSIBLE FO R DEDUCTING TAX AT A LOWER RATE OR NIL RATE AS THE CA SE MAY BE. FURTHER SUCH CERTIFICATES ARE ISSUED BY ITD O NLY AFTER BEING SATISFIED THAT THE EXISTING TAX LIABILITY AND THE ESTIMATED TAX LIABILITY OF THE APPLICANT JUSTIFIES THE DEDUCTION AT LOWER RATE OR NIL RATE HENCE THE SAME ARE NOT QUESTIONABLE. ALSO SUCH CERTIFICATES ARE VALID FOR SUCH PREVIOUS YEAR AS MENTIONED IN THE CERTIFICATE UNLE SS IT IS CANCELLED BY AO BEFORE THE TIME OF EXPIRY. 6.3.3 FURTHER WHERE THERE EXISTS A DTAA WITH A CO UNTRY THE SAME SHALL OVERRIDE THE INCOME TAX ACT. ANT TH E TERMS OF DTAA SHALL PREVAIL. ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 10 - 6.3.4 THE PAYMENT MADE BY THE APPELLATE ARE MADE T O PARTIES WHO HAVE ALREADY OBTAINED CERTIFICATES FROM ITD U/S 197 OF THE ACT FOR NIL DEDUCTION OF TDS WHILE SOME PAYMENTS ARE MADE TO PARTIES WHO HAVE DTAA AGREEMEN T WITH INDIA FOR NIL DEDUCTION OF TAX AS INCOME OF SU CH PARTIES ARE TAXABLE IN THEIR RESPECTIVE COUNTRIES. 6.3.5 HENCE NIL DEDUCTION OF TDS BY THE ASSESSEE IS JUSTIFIABLE AND THE GROUND 7 TO 9 ALSO PREVAILS HEN CE APPEAL IS ALLOWED IN THE FAVOUR OF THE ASSESSEE. 4.2. WE FIND THAT THE DISPUTED ISSUE OF PAYMENTS MADE TO AGENTS OF FOREIGN AIRLINES WAS CONSIDERED BY THE HONBLE TRIBUNAL OF KOLKATA IN THE CASE OF M/ S TAJ LEATHER WORKS VS. ACIT (32 CCH 363) AS UNDER: 6. IT IS AN ADMITTED POSITION THAT SO FAR AS THE AI RFREIGHT IS CONCERNED IT IS PAID TO THE AGENTS ON THE ACTUAL B ASIS AND THAT THE BILLS AND AIRFREIGHT DOCUMENTS HAVE BEEN D IRECTLY ISSUED TO THE FOREIGN AIRLINES. PDP AND DHL WHILE ACCEPTING PAYMENTS FOR AIRFREIGHT COMPONENTS HAVE ACTED MERELY AS AGENTS OF THE RESPECTIVE AIRLINES AND HAV E NOT RECEIVED THE AIRFREIGHT PAYMENTS IN THEIR OWN RIGHT . IN COPIES OF AIRWAY BILLS WHICH HAVE BEEN FILED BEFOR E US IN THE PAPER BOOK THE NAME OF THESE AGENTS IS SHOWN A S 'ISSUING CARRIER'S AGENT AND THE CITY' AS ALSO THE AGENT'S CODE IS GIVEN AS 'AGENT'S IATA CODE'. THERE IS THUS ENOUGH MATERIAL TO DEMONSTRATE THAT THE PERSONS HAV ING RECEIVED MONEY FOR THE AIRFREIGHT HAVE RECEIVED THE SAME IN THEIR CAPACITY AS 'ISSUING CARRIER'S AGENT' I.E. AGENT OF THE AIRLINE CONCERNED. THE AIRFREIGHT PAYMENT IS TH US MADE TO THE FOREIGN AIRLINES NAMELY SIA EMIRATES ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 11 - BRITISH AIRWAY S AND LUFTHANSA - THOUGH THROUGH THE AGENT I.E. PDP AND DHL ETC. 7. IN VIEW OF THE ABOVE DISCUSSIONS IN OUR CONSIDE RED VIEW THE PAYMENTS CANNOT BE SAID TO HAVE BEEN MAD E TO A RESIDENT COMPANY AND ACCORDINGLY THE PROVISIO NS OF SECTION 194 C WHICH APPLY ONLY ON THE RESIDENT RECIPIENTS DO NOT COME INTO PLAY. 8. AS FOR THE STAND THAT THE ASSESSEE SHOULD HAVE M OVED THE APPLICATION UNDER SECTION 195(2) IN CASE OF PAYMENTS TO NON RESIDENTS AND ASSESSEE'S FAILURE TO DO SO IS TO BE VISITED WITH CONSEQUENCES FOR NON DEDUCTION AT SOUR CE THE LAW IS NOW SETTLED BY HON'BLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PVT LTD VS CIT ( 327 ITR 456) WHEREIN THEIR LORDSHIPS HAVE CATEGORICALLY HELD THAT ' WHERE A PERSON RESPONSIBLE FOR DEDUCTION IS FAIRLY CERTAIN THEN HE CAN MAKE HIS OWN DETERMINATION AS TO WHETHER THE TAX WAS DEDUCTIBLE AT SOURCE AND IF SO WHAT SHOULD BE THE AMOUNT THEREOF '. THE PLEA OF THE REV ENUE AUTHORITIES TO THE EFFECT THAT WHERE THE ASSESSEE D OES NOT MOVE AN APPLICATION UNDER SECTION 195(2) AND MAKES THE REMITTANCE WITHOUT DEDUCTION OF TAX AT SOURCE THE ASSESSEE SHOULD BE VISITED WITH CONSEQUENCES FOR NO N DEDUCTION OF TAX AT SOURCE WHICH WAS ACCEPTED BY HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS SAMSUNG ELECTRONIC CO LTD ( 320 ITR 209) WAS CATEGORICALLY REJECTED BY THEIR LORDSHIPS AND THEI R LORDSHIPS OBSERVED AS FOLLOWS: IN OUR VIEW SECTION 195(2) IS BASED ON THE 'PRINCIPLE OF PROPORTIONALITY'. THE SAID SUB -SECTION GETS ATTRAC TED ONLY IN CASES WHERE THE PAYMENT MA DE IS A COMPOSITE PAYMENT IN WHICH A CERTAIN PROPORTION OF PAYMENT HA S AN ELEMENT OF 'INCOME' CHARGEABLE TO TAX IN INDIA. IT IS IN THIS CONTEXT THAT THE SUPREME COURT STATED 'IF NO SUCH APPLICATION IS FILED INCOME -TAX ON SUCH SUM IS TO BE ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 12 - DEDUCTED AND IT IS THE STATUTORY OBLIGATION OF THE PERSON RESPONSIBLE FOR PAYING SUCH 'SUM' TO DEDUCT TAX THE REON BEFORE MAKING PAYMENT. HE HAS TO DISCHARGE THE OBLIGATION TO TDS'. IF ONE READS THE OBSERVATION OF THE SUPREME COURT THE WORDS 'SUCH SUM' CLEARLY INDICAT E T HAT THE OBSERVATION REFERS TO A CASE OF COMPOSITE P AYMENT WHERE THE PAYER HAS A DOUBT REGARDING THE INCLUSION OF AN AMOUNT IN SUCH PAYMENT WHICH IS ELIGIBLE TO TAX IN INDIA. IN OUR VIEW THE ABOVE OBSERVATIONS OF THIS COURT I N TRANSMISSION CORPN. OF A.P. LTD CASE (SUPRA) WHICH IS PUT IN ITALICS HAS BEEN COMPLETELY WITH RESPECT MISUNDERSTOOD BY THE KARNATAKA HIGH COURT TO MEAN T HAT IT IS NOT OPEN FOR THE PAYER TO CONTEND THAT IF THE AMOUNT PAID BY HIM TO THE NON-RESIDENT IS NOT AT ALL 'CHAR GEABLE TO TAX IN INDIA' THEN NO TAS IS REQUIRED TO BE DED UCTED FROM SUCH PAYMENT. THIS INTERPRETATION OF THE HIGH COURT COMPLETELY LOSES SIGHT OF THE PLAIN WORDS OF SECTION 195(1) WHICH IN CLEAR TERMS LAYS DOWN THAT TAX AT SOURCE IS DEDUCTIBLE ONLY FROM 'SUMS CHARGEABLE' UNDER THE PROVISIONS OF THE INCOME -TAX ACT I.E. CHARGEABLE UNDER SECTIONS 4 5 AND 9 OF THE INCOME -TAX ACT. 9. WE HAVE ALSO NOTED THAT IT IS NOT EVEN THE REVEN UE'S CASE THAT THE AMOUNTS PAID TO FOREIGN AIRLINES ON ACCOUNT OF AIRFREIGHT PAYMENTS ARE TAXABLE IN INDIA AND Q UITE RIGHTLY SO BECAUSE AS THE PROVISIONS OF ALL THE R ESPECTIVE TAX TREATIES CLEARLY PROVIDE THE PROFITS FROM OPE RATIONS OF SHIPS AND AIRCRAFTS IN THE INTERNATIONAL TRAFFIC AR E TAXABLE ONLY IN THE STATE IN WHICH THE RESPECTIVE ENTERPRIS E ARE FISCALLY DOMICILED AND NOT IN THE SOURCE STATE. THI S RULE HOWSOEVER DEVOID OF PARADIGM JUSTIFICATION AS IT MA Y APPEAR TO MANY OF US IS ONE OF THE FUNDAMENTAL RUL ES FOLLOWED IN ALMOST ALL THE TAX TREATIES AND OUR TAX TREATIES WITH UK UAE SINGAPORE AND GERMANY ARE NO EXCEPTIO N TO THIS GENERAL RULE. IT IS ONLY ELEMENTARY THAT A TAX DEDUCTION AT SOURCE UNDER SECTION 195 IS ONLY A VICARIOUS ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 13 - LIABILITY INASMUCH AS WHEN RECIPIENT S OF INCOME I .E. THE AIRLINES CONCERNED HAVE NO PRIMARY LIABILITY TO PA Y TAX THERE CANNOT BE ANY VICARIOUS LIABILITY TO DEDUCT T AX FROM PAYMENTS IN WHICH SUCH INCOME IS EMBEDDED. 10. IN VIEW OF THE ABOVE DISCUSSIONS AS ALSO BEARIN G IN MIND ENTIRETY OF THE CASE WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE DID NOT HA VE ANY OBLIGATIONS TO DEDUCT TAX AT SOURCE - WHETHER UNDER SECTION 194 C OR UNDER SECTION 195 - FROM PAYMENTS MADE TO THE FOREIGN AIRLINES FOR AIRFREIGHT. IN THIS VIEW OF THE MATTER THE IMPUGNED DISALLOWANCES UNDER SECTION 40(A)(IA) ARE DEVOID OF ANY MERI TS NOR CAN THESE DISALLOWANCES BE MADE UNDER SECTION 40(A)(I) EITHER - AS ALTERNATIVELY SUGGESTED BY THE AUTHORITIES BELOW. WE ACCORDINGLY DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCES. THE ASSESSEE GETS THE RELIEF ACCORDI NGLY. 4.3 WE FOUND THE FACTS OF THE PRESENT CASE ON PAYMENTS TO FOREIGN AIRLINES ARE SIMILAR TO THE DECISION OF THE HONBLE TRIBUNAL. WHEREAS THE HONBLE TRIBUNAL AFTER CONSIDERING THE PROVISIONS O F LAW FACTS AND JUDICIAL DECISIONS HAS GRANTED THE RELIEF. FURTHER IN THE PRESENT CASE THE LD. DR COU LD NOT CONTROVERT THE OBSERVATIONS OR FINDINGS OF THE CIT(A) WITH ANY COGENT EVIDENCE OR NEW INFORMATION BUT ONLY RELIED ON THE ORDER OF THE A.O. ACCORDINGL Y WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) WHO HAS CONSIDERED THE PROVISIONS OF LAW ITA NO . 4157 /MUM/2019 M/S. ARAMEX INDIA PVT LTD MUMBAI. - 14 - FACTS AND DTAA AND PASSED A REASONED AND LOGICAL ORDER AND WE UPHOLD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 5. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.03.2021 SD/- SD/- (PRAMOD KUMAR) (PAVAN KUMAR GADALE ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI DATED 11 /03/2021 KRK PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. -. //'( '(# & / DR ITAT MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' # ITAT MUMBAI