Non-resident commission from Indian business is taxable in India and subject to withholding tax on remittance.

Commission earned by a non-resident agent from Indian exhibition business was treated as income accruing or arising in India because the right to receive it depended on exhibitors participating in India and paying in India. The fact that services were rendered outside India and commission was remitted abroad did not change the source of income. The treaty did not provide a broader exemption. As the commission was taxable in India, the resident payer was required to deduct tax at source on the remittance to the non-resident agent.

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Issues: (i) Whether a non-resident agent rendering services outside India and receiving commission outside India is liable to income tax in India on the commission earned from Indian exhibition business. (ii) Whether tax is required to be deducted at source from payments remitted by the resident applicant to the non-resident agent.

Issue (i): Whether a non-resident agent rendering services outside India and receiving commission outside India is liable to income tax in India on the commission earned from Indian exhibition business.

Analysis: The total income of a non-resident includes income that accrues or arises, or is deemed to accrue or arise, in India. Income is deemed to arise in India where it stems from a business connection, property, asset, source of income, or capital asset situated in India. On the facts, the commission became payable only when exhibitors participated in the exhibition held in India and made payment in India. The source of the agent's commission was therefore the Indian exhibition business, and the place where services were rendered abroad or where payment was remitted was not decisive. The Treaty did not confer a wider exemption, because income arising in India to a resident of the other contracting state could still be taxed in India.

Conclusion: The non-resident agent is liable to income tax in India on the commission income.

Issue (ii): Whether tax is required to be deducted at source from payments remitted by the resident applicant to the non-resident agent.

Analysis: Tax deduction at source is attracted where the sum paid to a non-resident is chargeable under the Act. Since the commission income was held to be taxable in India, the amount payable to the non-resident agent fell within the scope of the withholding provision governing payments to non-residents.

Conclusion: Tax is required to be deducted at source from the remittance to the non-resident agent.

Final Conclusion: The commission payable to the non-resident agent was held taxable in India, and the resident payer was obliged to withhold tax on the remittance.

Ratio Decidendi: Commission earned by a non-resident is taxable in India, and subject to withholding, when the source and right to receive that income arise from business operations situated in India, notwithstanding that the services are rendered abroad and payment is made outside India.

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