GOVERNMENT OF INDIA
\nMINISTRY OF FINANCE
\nDEPARTMENT OF REVENUE
\nCENTRAL BOARD OF DIRECT TAXES
\nNEW DELHI<\/strong> <\/p>\n

Circular
\nNo. 3\/2015, Dated: February 12, 2015<\/strong> <\/strong><\/p>\n

Subject:-
\nClarification regarding \u2018Amounts not deductible\u2019 under sub-clause (i) of clause
\n(a) of section 40 of Income-tax Act, 1961 (\u2018Act\u2019)-regarding.<\/strong><\/p>\n

 <\/p>\n

Section
\n40(a)(i) of the Act stipulates that
\nin computing the income chargeable under the head \u201cProfits or gains of business
\nor profession\u201d, any interest, royalty, fees for technical services or other sum
\nchargeable under this Act either payable in India to a non-resident (not being
\na company)\/a foreign company or payable outside India, shall not be allowed as
\na deducation, if there has been a failure in deduction or in payment of tax
\ndeducted in respect of such amounts under Chapter XVII-B of the Act.<\/p>\n

2.
\nDisallowance regarding \u2018other sum chargeable\u2019 under section 40(a)(i) is
\ntriggered when the deductor fails to withhold tax as per provisions of section 195 of the Act. Doubts have been raised
\nabout the interpretation of the term \u2018other sum chargeable\u2019 i.e. whether this
\nterm refers to the whole sum being remitted or only the portion representing
\nthe sum chargeable to income-tax under relevant provisions of the Act.<\/p>\n

3.
\nCentral Board of Direct Taxes has already issued Instruction No. 02\/2014 dated
\n26.02.2014 (F.No. 500\/33\/2013-FTD-I) regarding deduction of tax at source
\nunder sub-section (1) of section 195 read with section 201 of the Act relating
\nto payments made to non-residents in cases where no application is filed by the
\ndeductor for determining the sum so chargeable under sub-section (2) of section
\n195 of the Act. Vide this Instruction, Board has clarified that in cases where
\ntax is not deducted at source under section 195 of the Act, the Assessing
\nOfficer shall determine the appropriate portion of the sum chargeable to tax,
\nas mentioned in sub-section (1) of section 195, to ascertain the tax-liability
\non which the deductor shall be deemed to be an assessee in default under
\nsection 201 of the Act. It has been further clarified that such appropriate
\nportion of the said sum will depend on the facts and circumstances of each case
\ntaking into account the nature of remittances, income component therein or any
\nother fact relevant to determine such appropriate proportion.<\/p>\n

4.
\nAs disallowance of amount under section 40(a)(i) of the Act in case of a
\ndeductor is interlinked with the sum chargeable under the Act as mentioned in
\nsection 195 of the Act for the purposes of tax deduction at source, the Central
\nBoard of Direct Taxes, in exercise of powers conferred under section 119 of the
\nAct, hereby clarifies that for the purpose of making disallowance of \u2018other sum
\nchargeable\u2019 under section 40(a)(i) of the Act, the appropriate portion of the
\nsum which is chargeable to tax under the Act shall form the basis of such
\ndisallowance and shall be the same as determined by the Assessing Officer
\nhaving jurisdiction for the purpose of sub-section (1) of section 195 of the
\nAct as per Instruction No.02\/2014
\ndated 26.02.2014 of CBDT.
\nFurther, where determination of \u2018other sum chargeable\u2019 has been made under
\nsub-sections (2), (3) or (7) of section 195 of the Act, such a determination
\nwill form the basis for disallowance, if any, under section 40(a)(i) of the
\nAct.<\/p>\n

5. This may be
\nbrought to the notice of all concerned.<\/p>\n

6. Hindi version to
\nfollow.<\/p>\n

F.No.225\/201\/2014-ITA.II<\/p>\n

SD\/-<\/p>\n

(Rohit Garg)
\nDeputy Secretary to the Government of India<\/p>\n","protected":false},"excerpt":{"rendered":"

GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES NEW DELHI  Circular No. 3\/2015, Dated: February 12, 2015  Subject:- Clarification regarding \u2018Amounts not deductible\u2019 under sub-clause (i) of clause (a) of section 40 of Income-tax Act, 1961 (\u2018Act\u2019)-regarding.   Section 40(a)(i) of the Act stipulates that in computing the income chargeable … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_uag_custom_page_level_css":"","_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[4],"tags":[57],"class_list":["post-78","post","type-post","status-publish","format-standard","hentry","category-income-tax","tag-57"],"yoast_head":"\n