Export commission to non-resident agents is not fees for technical services and may not trigger withholding tax in India.

Commission paid to non-resident agents for procuring export orders abroad was treated as commission simpliciter, not managerial, technical or consultancy fees. Because the agents rendered services outside India, carried on no activity in India, and had no permanent establishment in India, no income accrued or arose in India and the withholding obligation under section 195 did not arise. On that basis, disallowance under section 40(a)(i) was not attracted. The note also states that an advance ruling binds only within the limits of section 245S and cannot override contrary binding High Court authority.

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Issues: Whether commission paid to non-resident agents for procuring export orders was liable to disallowance under section 40(a)(i) for alleged failure to deduct tax at source under section 195, on the footing that the payment was for managerial, technical or consultancy services taxable in India.

Analysis: The payment was for procuring export orders abroad and the non-resident agents did not carry on any activity in India or have any permanent establishment in India. The cited Madras High Court decision held that such export commission is commission simpliciter and does not fall within the expression "fees for technical services" under section 9(1)(vii). It further held that, where the services are rendered outside India and no income accrues or arises in India under section 9, the obligation to deduct tax under section 195 does not arise. The Tribunal also noted that an advance ruling is binding only within the limits of section 245S and cannot prevail over contrary binding High Court authority.

Conclusion: The commission was not liable to disallowance under section 40(a)(i), no tax deduction obligation arose under section 195, and the relief granted by the Commissioner (Appeals) was correctly upheld.

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