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On examination the Ld AO, confirmed in his Order that Section 195 is not applicable while making remittances against the imported purchases and hence applicability of Sec 40 (a) (i) is not tenable. Copy of the De-novo assessment order u/s 143(3)/ 263 of I.T. Act for the AY 2006-07 is enclosed and marked as Annexure-2 for your kind reference.

It may be mentioned here that the Ld. CIT set aside the assessment order for the AY 2007-08 by invoking Section 263 of the Act and directed the AO to do denovo assessment by adding/disallowing an amount of Rs 1344.63 Crore u/s 40 (a) (i) towards import purchases. Being aggrieved with the aforesaid Order, PPL filed an appeal before the Hon'ble ITAT and the Hon'bie ITAT vide Order dtd 13th June, 2013 quashed the direction of CIT for disallowing Rs 1344.63 Crore by referring the landmark decision rendered by the Hon'ble Supreme Court in the matter of GE India Technology Centre P. Ltd v CIT (327ITR 456). Copy of the Order passed by the Hon'ble ITAT is enclosed and marked as Annexure-3 for your kind reference.

It has already been decided in the matter of GE Technology that the provisions of section 195 are applicable to any payments to non residents only when they are chargeable to tax in India. The Supreme Court in case of GE Technology (supra) has already settled the matter wherein, it was held that any sum remitted to the non resident which is not taxable under the provisions of the Act does not require the payer to withhold tax at source. The said case was also relied on by us in our submissions before the AO, however, the AO has completely disregarded the submissions and has plainly resorted to disallowing the import payments on the premise that PPL should have applied for a withholding tax order for determining the tax rate of such withholding before making payment. In doing so, he has completely disregarded the fact that these payments are not chargeable to tax in India and there was no obligation on PPL to withhold any taxes or apply for a lower or NIL withholding tax order on such payments. There has been no attempt from the AO to substantiate that the import transactions are chargeable under the Act or distinguish the contentions of PPL.

By the above findings of Hon'ble Supreme Court, it is clear that provisions of section Sec. 195 are applicable where assessee enters into a contract with non- resident. In this very case, no contract was made by the assessee. Trading transaction was covered under the Sale of Goods Act not under Contract Act."

ITA No. 289/CT K/ 2014 ITA No. 264/CT K/ 2015 Asse ssment Year : 20 10- 201 1 3.2.3 Under similar circumstances, the Hon'ble IT AT, Cuttack Bench in case of the appellant for AY 2007-08 has quashed the order of CTT, Bhubaneswar u/s. 263 on the ground that the CTT did not consider the direction of Hon'ble Apex Court in GE India Technology case which has been reproduced earlier in the submission of the appellant. Accordingly, in view of the detailed submission of the appellant, the decision of the Hon'ble Supreme Court in the case of GE India Technology which have been referred by the TTAT in appellant's own case for the AY 2007-08 and by the AO for AY 2006-07, it is clear that no tax is deductible u/s,195(l) in respect of remittance made by the appellant for purchase of raw materials amounting to Rs.4491,86,39,189/-

3.2.4 The case of the appellant is squarely covered by the judgment of e Hon'ble Supreme Court in the case of GE India Technology Cen. (P) |&/. v. CIT (2010) 327 ITR 456 (SC) which has been quoted by the appellant in its submissions. The Hon'ble Supreme Court in GE India technology Cen. (P) Ltd. has also considered the judgment in the case of Transmission Corporation of AP Ltd. (supra), support of which was taken 'by the AO in holding that assessee was required to deduct tax u/s. 195(1). The Hon'ble Supreme Court has observed that every remittance would not result in deduction of tax but only in respect of the amount taxable under the provisions of the Income Tax Act. The application u/s. 195(2) is required only when the remitter has no doubt that tax is deductible but not sure of the amount of tax to be deducted. In case no tax is deductible on the remittance, no application u/s. 195(2) or no certificate u/s. 197 is necessary. The Hon'ble Supreme Court In GE India Technology Cen. (P) Ltd. v. CTT (supra), observed as under: