Non-resident agent commission outside India not taxable in India; no withholding tax or disallowance applies.

Additional evidence under Rule 46A was properly admitted because the material was forwarded to the Assessing Officer, comments were invited, and the assessee had an opportunity to respond; the absence of separately recorded detailed reasons did not invalidate the admission. Commission paid to non-resident agents for marketing and procuring business abroad was not fee for technical services, as the agents were outside India, had no permanent establishment in India, and received payment abroad. The income did not accrue or arise in India, so no withholding obligation arose under section 195 and the related disallowance was deleted.

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Issues: (i) Whether the assessee's additional evidence was rightly admitted under Rule 46A of the Income-tax Rules, 1962; (ii) Whether commission paid to non-resident agents for procuring business abroad was chargeable to tax in India so as to attract deduction of tax at source and disallowance under the Act.

Issue (i): Whether the assessee's additional evidence was rightly admitted under Rule 46A of the Income-tax Rules, 1962.

Analysis: The assessee produced Form 15CA before the appellate authority in support of its explanation that the questionnaire during assessment did not specifically call for it. The additional evidence was forwarded to the Assessing Officer for comments, and the assessee was given opportunity to respond. The Tribunal held that the conditions permitting admission of additional evidence were satisfied and that the failure to separately record detailed reasons did not vitiate the admission when the Assessing Officer had been afforded opportunity to examine the material.

Conclusion: The admission of additional evidence was upheld in favour of the assessee.

Issue (ii): Whether commission paid to non-resident agents for procuring business abroad was chargeable to tax in India so as to attract deduction of tax at source and disallowance under the Act.

Analysis: The Tribunal found that the agents were residents of Australia, rendered marketing and procurement-related services outside India, had no permanent establishment in India, and the commission was received abroad in foreign currency. On these facts, the services did not amount to fee for technical services within Section 9(1)(vii) of the Income-tax Act, 1961, and the income was not shown to accrue or arise in India. Consequently, no obligation to deduct tax at source under Section 195 arose, and the alternative disallowance under Section 37(1) also did not survive.

Conclusion: The commission payments were held not taxable in India and the disallowance was deleted in favour of the assessee.

Final Conclusion: The Revenue's appeal and the assessee's cross-objection failed, and the deletion of the impugned disallowance was sustained.

Ratio Decidendi: Commission paid to non-resident agents for procuring business and rendering services outside India is not fee for technical services and, absent accrual of income in India or a permanent establishment, is not liable to tax in India or to withholding under Section 195.

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