Circular No. 7 dt. 22/10/2009

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dev (Querist)
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29 October 2009 According to Circular no. 7 dt. 22/10/2009, CBDT had withdrawn Circular No. 23 dt. 23/07/1969. Is withdrawl of Circular No. 23 applicable from immediate effect? Kindly let me know that if any indian company pays commission on exports to a foreign agent, does the liability of TDS arises on the Indian Company as per the circular as the liability of same was not there earlier as per Section 9 of the i.T.Act.

CA. Bikash Bogi

CA. Bikash Bogi (Expert)
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30 October 2009 Yes wittdrawn is from immediate effect.

here are the extract of circular.
Circular No. 7/2009 [F. No. 500/135/2007-FTD-I], dated 22-10-2009

The Central Board of Direct Taxes had issued Circular No. 23 (hereinafter called â€œthe Circularâ€) on 23rd July 1969 regarding taxability of income accruing or arising through, or from, business connection in India to a non-resident, under section 9 of the Income-tax Act, 1961.
2. It is noticed that interpretation of the Circular by some of the taxpayers to claim relief is not in accordance with the provisions of section 9 of the Income-tax Act, 1961 or the intention behind the issuance of the Circular.
3. Accordingly, the Central Board of Direct Taxes withdraws Circular No 23 dated 23rd July, 1969 with immediate effect.
4. Even when the Circular was in force, the Income-tax Department has argued in appeals, references and petitions that-
(i) the Circular does not actually apply to a particular case, or
(ii) that the Circular can not be interpreted to allow relief to the taxpayer which is not in accordance with the provisions of section 9 of the Income-tax Act or with the intention behind the issue of the Circular.
It is clarified that {the withdrawal of the Circular will in no way prejudice the aforesaid arguments which the Income-tax Department has taken, or may take, in any appeal, reference or petition.
5. The Central Board of Direct Taxes also withdraws Circulars No. 163 dated 29th May, 1975 and No. 786 dated 7th February, 2000 which provided clarification in respect of certain provisions of Circular No 23 dated 23rd July, 1969.
Kamlesh C. Varshney,
Secretary,
Central Board of Direct Taxes

Nikhil Kumar

Nikhil Kumar (Expert)
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08 December 2009 In my view, if the liability does not arise as per sec 9, then there is no need to deduct TDS.
The circular is withdrawn, as it was being wrongly interpreted by some users which was not in accordance with prov of IT Act.

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