Where assessee had purchased software much prior to insertion of Explanation 4 to section 9(1)(vi)

IT/ILT: Where assessee had made payments for sales promotion activities, in foreign currency and tax authorities had failed to show that payment received by non-resident was liable to tax in India either in terms of Indian Income tax Act or in terms of Indo-US DTAA, assessee was not liable to deduct TDS on such payments made to a foreign resident
IT/ILT: Where assessee had purchased software much prior to insertion of Explanation 4 to section 9(1)(vi), disallowance could not be made under section 40(a)(ia) on basis of subsequent amendment brought into Act with retrospective effect
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[2014] 49 taxmann.com 531 (Mumbai - Trib.)
IN THE ITAT MUMBAI BENCH 'D'
Rich Graviss Products (P.) Ltd.
v.
Additional Commissioner of Income-tax -7(2), Mumbai*
B.R. BASKARAN, ACCOUNTANT MEMBER
AND SANJAY GARG, JUDICIAL MEMBER
IT APPEAL NO. 7772 (MUM.) OF 2011
[ASSESSMENT YEAR 2007-08]
AUGUST  28, 2014
I. Section 9, read with sections 195 & 40(a)(i), of the Income-tax Act, 1961 and article 7 of the
Double Taxation Avoidance Agreement between India and USA - Income - Deemed to accrue or arise in India (Business profits) - Assessment year 2007-08 - Assessee had paid consultancy services fee to a US company for exploring export market without making any TDS on payment - Assessing Officer held that since assessee did not deduct TDS, expenditure was not allowable under section 40(a)(i) - Whether since payment was made in foreign currency and tax authorities had failed to show that payment received by non-resident was liable to tax in India either in terms of Indian Income tax Act or in terms of Indo-US DTAA, assessee was not liable to deduct TDS on such payments made to a foreign resident - Held, yes [Paras 7 & 8] [In favour of assessee]
II. Section 9, read with section 40(a)(i), of the Income-tax Act, 1961 and article 12 of the Double Taxation Avoidance Agreement between India and USA - Income - Deemed to accrue or arise in India (Royalties/Fees for technical services) - Whether where assessee had made payments for purchase of software during period from 1-4-2006 to 31-3-2007, tax authorities were not justified in disallowing same under section 40(a)(ia) on basis of a restrospective amendment brought into section 9(1)(iv) after 31-3-2007 - Held, yes [Para 17] [In favour of assessee]