TDS: Assessee in default: Section 195(2). A.Y. 1987-88: Assessee entered into technical assistance agreement with a Japanese company: The assessee was granted no objection certificate u/s.195(2) permitting it to make payments without deduction of tax at source: The assessee could not be treated as assessee in default for not deducting tax at source.

The assessee entered into a technical assistance agreement with a Japanese company. The assessee had filed an application u/s.195(2) and the requisite no objection certificate was granted permitting nondeduction of tax at source. However, the Assessing Officer held that the payments attracted provisions for deduction of tax at source and treated the assessee as assessee in default u/s.201(1) of the Act, for not deducting tax at source. The CIT(A) and the Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Punjab and Haryana High Court upheld the decision of the Tribunal and held as under:

“(i) The Tribunal has recorded a clear finding that the certificate granted u/s.195(2) was never cancelled u/s.195(4), in absence of which the assessee was not required to deduct tax at source and could not be treated as assessee in default. On the said finding, no question of law has been claimed or referred.

(ii) If the assessee was not required to deduct tax at source and could not be declared as assessee in default, question of whether the payment was in nature of fee for technical services or in nature of reimbursement for expenses incurred or whether DTAA overrides the provisions of the Act, need not be gone into.”