Export commission to foreign agents outside India was not taxable in India, so no withholding tax obligation arose.

Export commission paid to non-resident foreign agents for securing orders abroad was not chargeable to tax in India because the agents had no permanent establishment in India and performed services wholly outside India. The timing of payment after receipt of sale proceeds did not change the character of the income. The commission was not income deemed to accrue or arise in India under section 9(1)(i), and it was not fees for technical services because it was consideration for procuring export orders, not managerial, technical, or consultancy services. As the sums were not taxable in the hands of the payees, no withholding obligation arose under section 195.

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Issues: Whether export commission paid to non-resident foreign agents for securing orders abroad was chargeable to tax in India so as to require deduction of tax at source under section 195 of the Income-tax Act, 1961, and whether such commission could be treated as income deemed to accrue or arise in India or as fees for technical services.

Analysis: The agents were non-residents having no permanent establishment in India and rendered services wholly outside India for procuring export orders. The commission was payable only after receipt of sale proceeds, but the timing of payment did not alter the character of the income. The deeming provisions in section 9(1)(i) could not apply because no part of the business operations of the commission agents was carried out in India, and the amounts paid were consideration for securing orders, not for rendering managerial, technical, or consultancy services. Since the sums were not chargeable to tax in India in the hands of the payees, the payer had no obligation to withhold tax under section 195.

Conclusion: The issue was decided in favour of the assessee. The export commission was not taxable in India and no tax was deductible at source.

Final Conclusion: The Revenue's appeals failed because the foreign commission payments did not attract withholding tax liability under the Act.

Ratio Decidendi: Section 195 is triggered only when the sum payable to a non-resident is chargeable to tax in India, and commission paid for procuring export orders abroad, without any business operations in India, is neither income deemed to accrue or arise in India nor fees for technical services.

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