Non-resident agent's commission not technical fee under Income Tax Act

The Tribunal upheld the CIT(A)'s decision that commission paid to a non-resident agent for export order procurement did not constitute fee for technical services under section 9(1)(vii) of the Income Tax Act, 1961, and was not subject to TDS under section 195. The Revenue's appeal was dismissed as the Tribunal found no reason to overturn the lower court's decision based on legal precedents and the nature of the payment for services rendered outside India.

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Issues:
Applicability of TDS u/s 195 on payments abroad of export commission to non-resident foreign agent and disallowance u/s 40(a)(i) of the Income Tax Act, 1961.

Analysis:

1. Applicability of TDS u/s 195:
The case involved a dispute regarding the treatment of commission paid on export sales as fee for technical services u/s 9(1)(vii). The assessee, a Hindu Undivided Family engaged in the business of exporting leather footwear, appointed a non-resident agent in France for assistance in procuring export orders. The commission paid to the foreign agent was for activities conducted outside India and was received by the agent in France through normal banking channels. The Assessing Officer disallowed the commission payment, citing it as liable to TDS u/s 195. However, the CIT(A) held that the commission paid to the foreign agent for procurement of export orders constituted business income and not fee for technical services, thus not subject to TDS. This decision was supported by legal precedents and documents submitted by the assessee.

2. Disallowance u/s 40(a)(i):
The Assessing Officer disallowed the commission payment under section 40(a)(i) for failure to deduct TDS. The CIT(A), after considering the submissions and legal position, concluded that the commission payment was not subject to TDS u/s 195. The Revenue challenged the CIT(A)'s order, arguing that it lacked an independent finding and merely echoed the assessee's contentions. However, the CIT(A) had considered relevant factors and legal precedents in reaching the decision. The Tribunal upheld the CIT(A)'s decision, citing precedents where similar commission payments were not treated as fee for technical services under section 9(1)(vii).

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision that the commission paid to the non-resident agent for procurement of export orders did not fall under the purview of fee for technical services u/s 9(1)(vii) and was not subject to TDS u/s 195. The Tribunal found no grounds to interfere with the findings of the CIT(A) based on the facts presented, legal provisions, and precedents. Therefore, the appeal of the Revenue was dismissed, and the decision was pronounced in open court on 27th March 2019.

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