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Tax Publishers Sanghvi Foods (P) Ltd. v. ITO [ITA Nos. 743 and 744/Ind/2018, dt. 3-6-2020] : 2020 TaxPub(DT) 2377 (Indore-Trib.) TDS Obligation on import of goods alleged thru a business connection of a non-resident *Facts:* Assessee imported spares/capital goods from a non-resident from Switzerland. Based on a survey by assessing officer to Indian subsidiary of non-resident yielded certain controverted evidences. Basing these it was alleged that assessee has dealt with Indian agent of non-resident who had created an agency Business Connection in India for the non-resident. Hence 10% of transaction was attributed as profit of non-resident and thus TDS under section 195 should have been done by assessee @ 41.2% plus cess on grossed up 10% value. Notice for non-deduction of TDS and interest was slapped on assessee under section 201/201(1A). Assessee canvassed before lower authorities that there is no TDS warranted for importation of goods and besides this could not prove tax residency of non-resident as no Form-10 (TRC) was produced either. The provisions of Income Tax Act, 1961, section 5/9(1) were read (in absence of TRC else would have been read thru Indo-Swiss DTAA). Lower authorities held against the assessee alleging them in default under section 201/201(1A). On assessee's higher appeal to ITAT. Held by the ITAT against the assessee that they were liable to do TDS on the transaction. The logic that the agency existence was unknown was ignored by ITAT due to survey evidences adduced by assessing officer/Commissioner (Appeals). That the Indian entity was not a dependent agent logic was also not accepted as they were associated enterprise of non-resident and were supposedly exclusive agent as well. *Editorial Note:* TDS is a vicarious liability. Fact of attribution of income is unknown and could have only got manifested in the non-resident's assessment thus no TDS obligation could have been perceived by assessee at the time of transaction was not impressed upon. Evidences worked against them as well. That the income component alone warrants TDS under section 195 also could not be used as a resort as what was claimed by department as TDS and interest was TDS @ 41.2% on 10% transaction value grossed up for Income as workings in the appeal indicate. That the BC met the tax obligations as well could not be proved by assessee. Existence of a PE/BC is most times unknown to a resident. All a resident payer can ensure is caution and be diligent to ask these points, questions prior to applying TDS or to refrain from the doing TDS under section 195. To extend it this far in this decision makes it a unique decision -- evidences gathered in survey went against assessee.

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Sanghvi Foods (P) Ltd. v. ITO [ITA Nos. 743 and 744/Ind/2018, dt. 3-6-2020] : 2020 TaxPub(DT) 2377 (Indore-Trib.)

TDS Obligation on import of goods alleged thru a business connection of a non-resident

Facts:

Assessee imported spares/capital goods from a non-resident from Switzerland. Based on a survey by assessing officer to Indian subsidiary of non-resident yielded certain controverted evidences. Basing these it was alleged that assessee has dealt with Indian agent of non-resident who had created an agency Business Connection in India for the non-resident. Hence 10% of transaction was attributed as profit of non-resident and thus TDS under section 195 should have been done by assessee @ 41.2% plus cess on grossed up 10% value. Notice for non-deduction of TDS and interest was slapped on assessee under section 201/201(1A).

Assessee canvassed before lower authorities that there is no TDS warranted for importation of goods and besides this could not prove tax residency of non-resident as no Form-10 (TRC) was produced either. The provisions of Income Tax Act, 1961, section 5/9(1) were read (in absence of TRC else would have been read thru Indo-Swiss DTAA). Lower authorities held against the assessee alleging them in default under section 201/201(1A). On assessee's higher appeal to ITAT.

Held by the ITAT against the assessee that they were liable to do TDS on the transaction. The logic that the agency existence was unknown was ignored by ITAT due to survey evidences adduced by assessing officer/Commissioner (Appeals). That the Indian entity was not a dependent agent logic was also not accepted as they were associated enterprise of non-resident and were supposedly exclusive agent as well.

Editorial Note: TDS is a vicarious liability. Fact of attribution of income is unknown and could have only got manifested in the non-resident's assessment thus no TDS obligation could have been perceived by assessee at the time of transaction was not impressed upon. Evidences worked against them as well. That the income component alone warrants TDS under section 195 also could not be used as a resort as what was claimed by department as TDS and interest was TDS @ 41.2% on 10% transaction value grossed up for Income as workings in the appeal indicate. That the BC met the tax obligations as well could not be proved by assessee. Existence of a PE/BC is most times unknown to a resident. All a resident payer can ensure is caution and be diligent to ask these points, questions prior to applying TDS or to refrain from the doing TDS under section 195. To extend it this far in this decision makes it a unique decision -- evidences gathered in survey went against assessee.