Foreign agent commission not taxable as fees for technical services; disallowance deleted, but interest for late filing upheld.

Commission paid to non-resident foreign agents for procuring export orders and related commercial support was not disallowable under section 40(a)(i) read with section 195 because the services were neither managerial, technical nor consultancy in nature, and no technical knowledge, skill, experience or know-how was made available under Article 12(4) of the India-USA DTAA; the disallowance was deleted. Interest under section 234A was also held leviable for the relevant assessment year because the statutory filing timeline did not permit exemption on the facts; the levy was upheld.

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Issues: (i) Whether commission paid to non-resident foreign agents for procuring export orders and related business support was liable to disallowance under section 40(a)(i) of the Income-tax Act, 1961 for failure to deduct tax at source under section 195. (ii) Whether interest under section 234A of the Income-tax Act, 1961 was leviable for the relevant assessment year.

Issue (i): Whether commission paid to non-resident foreign agents for procuring export orders and related business support was liable to disallowance under section 40(a)(i) of the Income-tax Act, 1961 for failure to deduct tax at source under section 195.

Analysis: The agreements showed that the foreign agents were appointed as non-exclusive sales representatives to promote products, locate customers, procure RFQs, assist in presentations, pricing discussions, and commercial communications. The payment was commission for procurement of orders, and the services did not amount to managerial, technical, or consultancy services. The material did not establish that any technical knowledge, skill, or know-how was made available to the assessee within the meaning of Article 12(4) of the India-USA DTAA. The unilateral domestic amendment could not override the treaty, and the earlier consistent treatment of similar commission payments also supported the assessee's case.

Conclusion: The disallowance under section 40(a)(i) was not sustainable and was deleted. The issue was decided in favour of the assessee.

Issue (ii): Whether interest under section 234A of the Income-tax Act, 1961 was leviable for the relevant assessment year.

Analysis: The return-filing timeline and the statutory framework left no room for exemption from interest where the extended date itself excluded such benefit. The assessee's challenge to the levy therefore lacked merit.

Conclusion: The levy of interest under section 234A was upheld. The issue was decided against the assessee.

Final Conclusion: The composite result was that the disallowance for foreign commission failed, while the interest levy survived, leaving the matter only partly in favour of the assessee.

Ratio Decidendi: Commission paid to non-resident sales agents for export solicitation and allied commercial support is not FTS/FIS unless the services are managerial, technical, or consultancy in nature and, under the relevant treaty, make available technical knowledge, skill, experience, or know-how to the payer.

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