My client was held to be an assessee in default for not deducting tax at thirty per cent on a remittance to a Cyprus company. Cyprus has since been removed from the notified list — does that help for a past year?
The Chennai Tribunal set aside the orders and remitted both cases for de novo consideration in the light of CBDT Circular No. 15 of 2017 dated 21 April 2017, which clarifies that Notification No. 86/2013 notifying Cyprus was rescinded with effect from the date of its issue, thereby removing Cyprus as a notified jurisdictional area with retrospective effect from 1 November 2013. The Commissioner (Appeals) had held that the rescinding notifications of 14 and 16 December 2016 carried no retrospective effect and had sustained the section 201(1) demands; the circular, which post-dated his order, answered that.
Decided by the ITAT (N.R.S. Ganesan, Judicial Member and A. Mohan Alankamony, Accountant Member) on 2017-07-04, reported as I.T.A. Nos. 1021 & 1022/Mds/2017 with Stay Petition Nos. 152 & 153/Mds/2017 (Assessment Year 2015-16), Income Tax Appellate Tribunal, 'A' Bench, Chennai; heard 2 May 2017, pronounced 4 July 2017. It bears on section 94A, section 94A(5), section 195, section 201(1), section 201(1A), section 4, section 90 of the Income Tax Act 1961, in TDS Defaults and How Tax Law Is Read matters.
This is the only order the library carries on the practical operation of section 94A(5), and it is useful for two reasons. The first is the retrospectivity point itself: the rescinding notification of 14 December 2016 is worded 'with effect from the date of publication of this notification', and on that wording the Commissioner (Appeals) refused retrospective relief; Circular No. 15 of 2017 was issued precisely because income-tax authorities were taking that view, and it clarifies that the rescission runs from the date of issue of Notification No. 86/2013 itself, that is, from 1 November 2013. Anyone with an open section 94A demand relating to Cyprus for any year should be citing that circular. The second is the shape of the underlying dispute, which is instructive on section 94A(5) generally: the assessees argued that the remittances were for purchase of shares and had produced a capital loss, not income, so with nothing chargeable to tax there was no obligation to deduct under section 195 on the GE India Technology line; the Assessing Officer answered that section 94A is a self-contained anti-avoidance code whose sub-section (5) overrides the rest of the Act including the charge under section 4, so that any payment attracts deduction. The Tribunal did not resolve that contest — the remand was on the circular alone — so the question whether section 94A(5) requires deduction where nothing is chargeable to tax remains open on this authority.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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Both appellants were FDI-compliant Indian companies carrying on construction and development. On 8 January 2015 Inno Real Private Limited remitted Rs 53,51,120 to IIROF 4 Artemis Limited and Inno Estates Private Limited remitted Rs 93,03,890 to Innovative India Realty Opportunity Fund Limited and Rs 5,71,45,130 to IIROF 4 Poseidon Limited, in each case for the purchase of shares, deducting no tax at source. The Assessing Officer held that because Cyprus had been specified as a notified jurisdictional area by Notification No. SO 3307(E) [No. 86/2013] dated 1 November 2013, section 94A(5) required deduction at thirty per cent, that section 94A is a self-contained anti-avoidance code overriding other provisions including the charge under section 4, and that the companies were therefore assessees in default under section 201(1); he computed tax of Rs 16,53,496 and Rs 2,05,32,747 respectively, with interest under section 201(1A). The assessees had contended that the remittances were for purchase of shares which produced a long-term capital loss on account of rupee erosion, so that with no income chargeable to tax there was no obligation to deduct, relying on GE India Technology Centre P. Ltd. v. CIT and Transmission Corporation of A.P. Ltd. v. CIT, and that under the India-Cyprus treaty capital gains on such a sale were not taxable in India. The Commissioner (Appeals) confirmed the orders, noting that the assessees had produced Notification No. SO 4033(E) [No. 114/2016] dated 14 December 2016 rescinding the 2013 notification and Notification No. SO 4082(E) [No. 119/2016] dated 16 December 2016, but holding that neither mentioned retrospective effect and that the transactions had taken place when Cyprus was a notified area. Before the Tribunal the assessees produced CBDT Circular No. 15 of 2017 dated 21 April 2017.
Both appeals were allowed for statistical purposes and both stay petitions dismissed as infructuous. Finding merit in the assessees' submission on Circular No. 15 of 2017, and the circular not having been before the Assessing Officer when he passed his order, the Tribunal remitted both matters to the Assessing Officer for de novo consideration in the light of that circular.
The Tribunal's route was short. The Commissioner (Appeals) had rested his order on the absence of any statement of retrospective effect in the rescinding notifications, the rescinding notification itself reading, in the words reproduced in the order, 'the Central Government hereby rescinds the notification of the Government of India in the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, number 86 of 2013 published in the Gazette of India, Part II, section 3, sub-section (ii) vide S.O. 3307(E) dated 1st November 2013, except as respects things done or omitted to be done before such rescission, with effect from the date of publication of this notification in the Official Gazette'. Circular No. 15 of 2017 was issued to meet exactly that reading, recording that in some cases income-tax authorities had taken the view that the rescission of Notification No. 86/2013 was not with retrospective effect from 1 November 2013, and clarifying 'for removal of doubts' that the notification 'has been rescinded with effect from the date of issue of the said notification, thereby, removing Cyprus as a notified jurisdictional area with retrospective effect from 01.11.2013'. Since the circular post-dated the assessment orders and the Departmental Representative could not controvert its effect but asked for a remand, the Tribunal remitted rather than deciding the appeals itself, and did not reach the assessees' independent argument that section 94A(5) cannot operate where no sum chargeable to tax is involved.
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Handle my notice → Ask a CA on WhatsAppThe Chennai Tribunal set aside the orders and remitted both cases for de novo consideration in the light of CBDT Circular No. 15 of 2017 dated 21 April 2017, which clarifies that Notification No. 86/2013 notifying Cyprus was rescinded with effect from the date of its issue, thereby removing Cyprus as a notified jurisdictional area with retrospective effect from 1 November 2013. The Commissioner (Appeals) had held that the rescinding notifications of 14 and 16 December 2016 carried no retrospective effect and had sustained the section 201(1) demands; the circular, which post-dated his order, answered that. This was decided by the ITAT (N.R.S. Ganesan, Judicial Member and A. Mohan Alankamony, Accountant Member) and bears on section 94A, section 94A(5), section 195, section 201(1), section 201(1A), section 4, section 90 of the Income Tax Act 1961. It is reported as I.T.A. Nos. 1021 & 1022/Mds/2017 with Stay Petition Nos. 152 & 153/Mds/2017 (Assessment Year 2015-16), Income Tax Appellate Tribunal, 'A' Bench, Chennai; heard 2 May 2017, pronounced 4 July 2017. This is the only order the library carries on the practical operation of section 94A(5), and it is useful for two reasons. The first is the retrospectivity point itself: the rescinding notification of 14 December 2016 is worded 'with effect from the date of publication of this notification', and on that wording the Commissioner (Appeals) refused retrospective relief; Circular No. 15 of 2017 was issued precisely because income-tax authorities were taking that view, and it clarifies that the rescission runs from the date of issue of Notification No. 86/2013 itself, that is, from 1 November 2013. Anyone with an open section 94A demand relating to Cyprus for any year should be citing that circular. The second is the shape of the underlying dispute, which is instructive on section 94A(5) generally: the assessees argued that the remittances were for purchase of shares and had produced a capital loss, not income, so with nothing chargeable to tax there was no obligation to deduct under section 195 on the GE India Technology line; the Assessing Officer answered that section 94A is a self-contained anti-avoidance code whose sub-section (5) overrides the rest of the Act including the charge under section 4, so that any payment attracts deduction. The Tribunal did not resolve that contest — the remand was on the circular alone — so the question whether section 94A(5) requires deduction where nothing is chargeable to tax remains open on this authority. If it applies to you, the first step is this: For any Cyprus-related section 94A demand for a year from 1 November 2013 onwards, cite CBDT Circular No. 15 of 2017 dated 21 April 2017 (F. No. 500/002/2015-FT&TR-III(1)), which states that Notification No. 86/2013 was rescinded with effect from the date of its issue, removing Cyprus as a notified jurisdictional area with retrospective effect from 1 November 2013.
Both appellants were FDI-compliant Indian companies carrying on construction and development. On 8 January 2015 Inno Real Private Limited remitted Rs 53,51,120 to IIROF 4 Artemis Limited and Inno Estates Private Limited remitted Rs 93,03,890 to Innovative India Realty Opportunity Fund Limited and Rs 5,71,45,130 to IIROF 4 Poseidon Limited, in each case for the purchase of shares, deducting no tax at source. The Assessing Officer held that because Cyprus had been specified as a notified jurisdictional area by Notification No. SO 3307(E) [No. 86/2013] dated 1 November 2013, section 94A(5) required deduction at thirty per cent, that section 94A is a self-contained anti-avoidance code overriding other provisions including the charge under section 4, and that the companies were therefore assessees in default under section 201(1); he computed tax of Rs 16,53,496 and Rs 2,05,32,747 respectively, with interest under section 201(1A). The assessees had contended that the remittances were for purchase of shares which produced a long-term capital loss on account of rupee erosion, so that with no income chargeable to tax there was no obligation to deduct, relying on GE India Technology Centre P. Ltd. v. CIT and Transmission Corporation of A.P. Ltd. v. CIT, and that under the India-Cyprus treaty capital gains on such a sale were not taxable in India. The Commissioner (Appeals) confirmed the orders, noting that the assessees had produced Notification No. SO 4033(E) [No. 114/2016] dated 14 December 2016 rescinding the 2013 notification and Notification No. SO 4082(E) [No. 119/2016] dated 16 December 2016, but holding that neither mentioned retrospective effect and that the transactions had taken place when Cyprus was a notified area. Before the Tribunal the assessees produced CBDT Circular No. 15 of 2017 dated 21 April 2017. The matter was decided on 2017-07-04 by the ITAT (N.R.S. Ganesan, Judicial Member and A. Mohan Alankamony, Accountant Member). On those facts the ITAT held as follows. Both appeals were allowed for statistical purposes and both stay petitions dismissed as infructuous. Finding merit in the assessees' submission on Circular No. 15 of 2017, and the circular not having been before the Assessing Officer when he passed his order, the Tribunal remitted both matters to the Assessing Officer for de novo consideration in the light of that circular.
The Tribunal's route was short. The Commissioner (Appeals) had rested his order on the absence of any statement of retrospective effect in the rescinding notifications, the rescinding notification itself reading, in the words reproduced in the order, 'the Central Government hereby rescinds the notification of the Government of India in the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, number 86 of 2013 published in the Gazette of India, Part II, section 3, sub-section (ii) vide S.O. 3307(E) dated 1st November 2013, except as respects things done or omitted to be done before such rescission, with effect from the date of publication of this notification in the Official Gazette'. Circular No. 15 of 2017 was issued to meet exactly that reading, recording that in some cases income-tax authorities had taken the view that the rescission of Notification No. 86/2013 was not with retrospective effect from 1 November 2013, and clarifying 'for removal of doubts' that the notification 'has been rescinded with effect from the date of issue of the said notification, thereby, removing Cyprus as a notified jurisdictional area with retrospective effect from 01.11.2013'. Since the circular post-dated the assessment orders and the Departmental Representative could not controvert its effect but asked for a remand, the Tribunal remitted rather than deciding the appeals itself, and did not reach the assessees' independent argument that section 94A(5) cannot operate where no sum chargeable to tax is involved.
It was decided by the ITAT on 2017-07-04 and is reported as I.T.A. Nos. 1021 & 1022/Mds/2017 with Stay Petition Nos. 152 & 153/Mds/2017 (Assessment Year 2015-16), Income Tax Appellate Tribunal, 'A' Bench, Chennai; heard 2 May 2017, pronounced 4 July 2017. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 94A, section 94A(5), section 195, section 201(1), section 201(1A), section 4, section 90, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Both appeals were allowed for statistical purposes and both stay petitions dismissed as infructuous. Finding merit in the assessees' submission on Circular No. 15 of 2017, and the circular not having been before the Assessing Officer when he passed his order, the Tribunal remitted both matters to the Assessing Officer for de novo consideration in the light of that circular. It arises in TDS Defaults and How Tax Law Is Read matters, on section 94A, section 94A(5), section 195, section 201(1), section 201(1A), section 4, section 90 of the Income Tax Act 1961, and was decided by N.R.S. Ganesan, Judicial Member and A. Mohan Alankamony, Accountant Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Where an appellate authority has refused relief on the wording of Notification No. 114/2016 ('with effect from the date of publication'), point to the circular's own recital that it was issued precisely because that view was being taken, and to the corrigendum Notification No. 119/2016 dated 16 December 2016. Where the circular post-dates the order under appeal, ask for a remand rather than a decision on merits; that is what the Tribunal did here, remitting both appeals for de novo consideration. Preserve the independent argument that section 94A(5) is a machinery provision and cannot operate where no sum chargeable to tax is involved; the Tribunal did not decide it, so it remains available. Check whether the counterparty is 'located in' the notified area under section 94A(6) — residence, establishment for a non-individual, or a permanent establishment there — before conceding that the section applies at all.
Searched for later treatment; none was found. That is not the same as a source affirming it. No later decision citing this order has been found, whether on section 94A(5) or on the rescission of the Cyprus notification, and no appeal from it to the Madras High Court has been traced. A search on both company names turns up only this order and an unrelated Madras High Court criminal matter in which the two companies are named. Read that silence with the nature of the order in mind. This is a remand for de novo consideration, allowed for statistical purposes; it decides no question of law and there is little in it for a later Bench to follow. Its practical force comes almost entirely from the document it applied — CBDT Circular No. 15 of 2017 dated 21 April 2017 — which clarifies that Notification No. 86/2013 was rescinded with effect from the date of its issue, removing Cyprus as a notified jurisdictional area with retrospective effect from 1 November 2013. That circular binds the Department, and anyone with an open section 94A demand relating to Cyprus for any year should be citing the circular first and this order only as an illustration of how a Bench dealt with it. Two things remain unsettled and cannot be answered from this entry. Whether section 94A(5) requires deduction at thirty per cent where the remittance carries no sum chargeable to tax was argued and expressly not reached. And what became of these two matters on remand is not on record here, so the entry establishes the route taken and not the outcome. The section itself should also be read for the year in hand, since section 94A and the notified jurisdictional area machinery have been worked on since 2017. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
No key quotation is offered for this order, and the reason is worth stating. The rendering available carries repeated paragraph numbering — '6.1' and '8' each appear twice — so no sentence can be safely attributed to a stated paragraph, and a locator taken from it would be unreliable. The most quotable passage in the order is in any event the text of Circular No. 15 of 2017 reproduced inside it, which is a quoted document and not the Tribunal's own words; quoting it as the Tribunal's holding would misdescribe a remand order as a decision. Circular No. 15 of 2017 itself is not available here in its official form, and its text is stated only as reproduced in this order, so the wording should be checked against the Board's own copy before it is quoted in a proceeding. The same applies to the rescinding notification of 14 December 2016, whose operative words are likewise taken from the order. What the order is and is not. It concerns two connected appeals, I.T.A. Nos. 1021 and 1022/Mds/2017, and two stay petitions; both appeals were allowed for statistical purposes and both stay petitions dismissed as infructuous. It therefore decides nothing. The matters went back to the Assessing Officer for de novo consideration in the light of the circular, and the Tribunal expressly did not reach the assessees' independent argument — that section 94A(5) cannot require deduction where no sum chargeable to tax is involved, on the reasoning in GE India Technology Centre P. Ltd. v. CIT and Transmission Corporation of A.P. Ltd. v. CIT. That argument, and the Assessing Officer's answer to it that section 94A is a self-contained anti-avoidance code whose sub-section (5) overrides even the charge in section 4, remain open on this authority. Two dates to keep straight when the entry is used: the remittances were made on 8 January 2015, when Cyprus was a notified jurisdictional area on the face of Notification No. 86/2013 of 1 November 2013; the rescinding notifications came on 14 and 16 December 2016; and the circular that gave the rescission retrospective effect to 1 November 2013 came on 21 April 2017, after the Commissioner (Appeals)'s order. One more point on the shape of the entry: it is carried as the only illustration here of section 94A(5) in operation, and the favours field records the outcome as mixed because a remand is not a win. The demands under section 201(1) and the interest under section 201(1A) were not set aside; they were sent back to be looked at again in the light of the circular. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Both appeals were allowed for statistical purposes and both stay petitions dismissed as infructuous. Finding merit in the assessees' submission on Circular No. 15 of 2017, and the circular not having been before the Assessing Officer when he passed his order, the Tribunal remitted both matters to the Assessing Officer for de novo consideration in the light of that circular.
TaxSphere, “Inno Real Private Limited and Inno Estates Private Limited v Deputy Commissioner of Income Tax”, https://taxnotice.vittsphere.com/caselaw/case/inno-real-v-dcit-cyprus-de-notified-circular-15-of-2017/ (validity last checked 2026-09-08)
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Can Parliament override a tax treaty by notifying the other country as a notified jurisdictional area, and is section 94A constitutionally valid?
My client is remitting money to a company in a low-tax jurisdiction. Does section 94A apply, and is any country actually notified as a notified jurisdictional area at the moment?
In March 2026 I remitted a fee to a company outside India without deducting anything, because I did not think any part of it was taxable here. The Assessing Officer now says section 195 obliged me to deduct on the whole remittance, or at least to apply to him before paying. Does section 195 say that — and since the new Act has come in, which Act governs my payment at all?
I pay a non-resident in kind, not in cash. Do I still have to deduct tax at source under section 195?
