Sec. 9 of Income Tax Act, 1961—Income—Income deemed to accrue or arise in India - Matter restored to the file of CIT (A) as CIT (Appeals) has not considered the exceptions to Section 9(1)(vii)(a) and 9(1)(vii)(b) and payments to non-residents are not deemed to accrue or arise in India.

Facts: Assessee made payments to non-residents after grossing up the invoice amount and deducted tax at source as per provisions of Section 195A whereas assessee made payment of TDS after grossing up out of own funds under protest and no TDS Certificate was issued and assessee has filed an appeal with CIT (Appeals) under Section 248 for the declaration that payment made to non-residents as per the details enclosed as Annexure I to Form 35 are not chargeable as per provisions of Income Tax Act, 1961 and DTAA and hence no tax was deductible under the provisions of Section 195. The payments are made to non-residents and the assessee seeks declaration under Section 248 under the provisions of Section 206AA, the rate of 25% is not applicable to assessee for the purpose of grossing up under Section 195A. Therefore, assessee has requested for declaration under Section 248 that assessee is entitled for a refund of TDS paid out of own funds after grossing up along with interest under Section 244A. In the appellate proceedings, CIT (A) considered the grounds of appeal and the written submissions filed by the assessee and has dealt on issues related to DTAA relied on judicial decisions and partly allowed the appeal. Aggrieved by the CIT (Appeals) order, the assessee has filed an appeal with the Tribunal.

Held, that Prima facie, the learned Authorised Representative made arguments on first ground of appeal emphasizing that the CIT (Appeals) has not considered the exceptions to Section 9(1)(vii)(a) and 9(1)(vii)(b) and payments to non-residents are not deemed to accrue or arise in India. On perusal of the order of CIT (Appeals), it was found that CIT (A) has dealt on the other grounds of appeal raised before him but there was no specific observation in particular to provisions and Section as envisaged by the learned Authorised Representative. There is no finding on this disputed issue as submitted by the learned Authorised Representative by appellate authority. Therefore, considering the submissions of Authorised Representative and findings of CIT (A) order, consider it appropriate to restore all the disputed issues raised by the assessee in the grounds of appeal to the file of CIT (A) and decided against the assessee, to adjudicate afresh and the assessee should be provided adequate opportunity of hearing to substantiate the case with evidence and shall co-operate in submitting the information for early disposal of appeal and allow the grounds of appeal of assessee for statistical purposes. - EDGEVERVE SYSTEMS LTD. V/s DY. ASSTT. - [2020] 182 ITD 526 (ITAT-BANGALORE)