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ITAT held that sums paid as commission to foreign agents and overseas warehousing charges constituted business income arising outside India and were not chargeable here; consequently no obligation to deduct tax under s.195 arose and disallowance under s.40(a)(ia) could not be sustained. The Tribunal found absence of business connection or PE in India and rejected characterization of the payments as FTS, observing that agents merely canvassed orders and warehouses provided space (rent), not managerial or technical services. As the receipts lacked territorial nexus and were not income chargeable under the Act, the revenue's additions were reversed and the taxpayer's appeal was allowed.
ITAT held that sums paid as commission to foreign agents and overseas warehousing charges constituted business income arising outside India and were not chargeable here; consequently no obligation to deduct tax under s.195 arose and disallowance under s.40(a)(ia) could not be sustained. The Tribunal found absence of business connection or PE in India and rejected characterization of the payments as FTS, observing that agents merely canvassed orders and warehouses provided space (rent), not managerial or technical services. As the receipts lacked territorial nexus and were not income chargeable under the Act, the revenue's additions were reversed and the taxpayer's appeal was allowed.
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