Held, liability to deduct at source arises only when the sum paid to the non-recipient is chargeable to tax. Once that is chargeable to tax, it is not for the assessee to find out how much amount of the receipts is chargeable to tax, but it is the obligation of the assessee to deduct the tax at source on the entire sum paid by the assessee to the recipient. But in this case the Court was not confronted with a situation where the amount paid was not chargeable to tax at the hands of non-residents at all. On plain reading of Section 195 it can be reasonably said that the obligation to deduct tax at source is attracted only when the payment is chargeable to tax in India. After analyzing the Scheme of Section 195 the Court holding determination of Assessing Officer being tentative stated that in case it is ultimately found in the assessment proceedings relating to the recipient that he was not liable to pay any tax on the sums received, the assessee cannot be treated in "default" inasmuch as Section 195(1) of the Act casts an obligation to deduct the tax at source on the sum 'chargeable under the provisions of this Act'.
