Tax deduction at source not required for commissions to non-resident agents for services rendered outside India; disallowance deleted.

Commission payments to non-resident agents for services performed wholly outside India do not give rise to income accruing or arising in India; therefore tax deduction at source is not required and consequent disallowance under provisions relating to non-deduction is not sustainable. The assessing officer applied an incorrect provision and failed to follow identical earlier appellate decisions and DRP directions holding the payments outside Indian source; the revenue did not dispute factual identity. Operative effect: the disallowance of such commission expenses is deleted and the assessee's appeal is allowed.

---

---

Issues: (i) Whether the disallowance under Section 40(a) of commission payments made to non-resident agents without deduction of tax at source is rightly sustained for A.Y. 2017-18.

Analysis: The appeal concerns commission payments to non-resident agents for services rendered outside India and the consequential invocation of tax deduction at source provisions. The assessing officer applied a provision relating to non-deduction of tax at source and disallowed a portion of the expense; the applicability of Section 40(a)(i) and Section 195 of the Income-tax Act, 1961 was in dispute. The record shows identical payments and identical factual matrix were considered in earlier assessment years where appellate authorities and the DRP directed deletion of the disallowance, relying on the principle that income of non-resident agents for services rendered entirely outside India does not accrue or arise in India. The assessing officer in the impugned assessment applied an incorrect provision and did not distinguish the earlier orders. The revenue representative did not controvert the factual identity or the applicability of the precedents relied upon.

Conclusion: Disallowance of commission expenses paid to non-resident agents without deduction of tax at source is deleted and the appeal is allowed in favour of the assessee.

---