Export procurement commission held outside fees for technical services, so tax deduction under section 194J did not apply.

A payment to a foreign trading intermediary was treated as commission for export procurement under a principal-agent arrangement, not fees for technical services. The intermediary's role was confined to transferring letters of credit and facilitating execution of the export contract, so the services were commercial in nature and did not amount to managerial, technical, consultancy or similar services. On that construction, section 194J did not apply and no tax deduction at source was required; the assessee was therefore not treated as in default under section 201(1).

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Issues: Whether the payment made to the foreign-trading intermediary was commission for export procurement or fees for technical services, and consequently whether tax was deductible at source under Section 194J of the Income-tax Act, 1961 with liability under Section 201(1) of the Income-tax Act, 1961.

Analysis: The agreement showed that the intermediary transferred foreign buyers' letters of credit in favour of the assessee for execution of the export contract and charged a service commission linked to the export transaction. The arrangement was held to be one of principal and agent, and the services rendered were found to be in the nature of procurement and facilitation of export, not managerial, technical, consultancy, legal, medical, engineering, architectural, accountancy, interior decoration or advertising services. On that construction, the payment did not fall within the definition of fees for technical services and Section 194J was inapplicable.

Conclusion: The payment was not liable to tax deduction at source under Section 194J, and the assessee was not in default under Section 201(1).

Ratio Decidendi: A payment made as commission for export procurement under a principal-agent arrangement does not become fees for technical services merely because it is connected with commercial assistance in the execution of the contract.

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