TaxTMI Login
AI Drafter - (New and Powerful) ✕
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
Just a moment...
AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: Whether commission paid to foreign sales agents for services rendered outside India was chargeable to tax in India and, consequently, whether the assessee was obliged to deduct tax at source under section 195 of the Income-tax Act, 1961 so as to justify disallowance under section 40(a)(i) of the Income-tax Act, 1961.
Analysis: The commission agents operated outside India and the services identified on record related to forwarding enquiries, obtaining quotes, processing purchase orders and similar sales support activities. The material did not establish that the payments represented managerial, technical or consultancy services, nor was there any showing that the agents had a permanent establishment in India. The later assessments for subsequent years also accepted the assessee's position that the payments were only sales commission and not fee for technical services. In this setting, the commission could not be treated as income accruing or deemed to accrue in India, and the obligation to deduct tax at source did not arise.
Conclusion: The disallowance under section 40(a)(i) was not sustainable and the issue was decided in favour of the assessee.
Final Conclusion: The appeals succeeded and the additions made on account of commission payments to the foreign agents were deleted.
Ratio Decidendi: Commission paid to non-resident agents for services rendered outside India, without proof of technical or managerial character or a permanent establishment in India, is not taxable in India and does not attract the withholding obligation under section 195 of the Income-tax Act, 1961.
TaxTMI 
