Foreign agent commission outside India not taxable in India, with no tax deduction required on overseas remittances.

Commission paid to non-resident foreign agents operating outside India was treated as not accruing or arising in India because the agents rendered services abroad and the amounts were remitted directly overseas. On that basis, no taxable income was found in India and no tax deduction at source was required on the commission payments. The analysis relied on CBDT Circular No. 23 of 1996 and Circular No. 786 of 2000, which state that commission paid to non-resident agents for services outside India is outside Indian tax charge. The disallowance was therefore deleted.

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Issues: Whether commission paid to non-resident foreign agents operating outside India was taxable in India and whether tax was required to be deducted at source on such payments.

Analysis: The Tribunal and the Court accepted that the foreign agents operated outside India, that the commission was remitted directly abroad, and that no material showed any taxable income arising in India. Reliance was placed on CBDT Circular No. 23 dated 23-07-1996 and CBDT Circular No. 786 dated 07-02-2000, which clarified that where a non-resident agent operates outside the country, no part of the income arises in India and no tax is required to be deducted from commission paid to such non-residents.

Conclusion: The commission payments were not taxable in India and no tax was required to be deducted at source; the disallowance was rightly deleted.

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