TaxTMI 
TaxTMI 
2008 (5) TMI 447
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....partment in all these appeals is against the non-deduction of tax at source under section 195 of the Income-tax Act, 1961 ('the Act') from commission payments to foreign agents. 2. The assessee-company is a manufacturer of asbestos cement products and engineering products. Apart from domestic sales, the assessee has export sales also effected through agents based in foreign countries. During the years under consideration, the assessee had paid commission to certain parties. During the survey conducted under section 133A on 24-7-2000, it was noticed that no tax was deducted at source under section 195 on such foreign remittances made on account of commission to foreign agents. It was also noticed that no application whatsoever was made to t....
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....ingly, he raised a total tax demand of Rs. 1,85,23,261 and interest thereon amounting to Rs. 1,12,59,933. Thus, an aggregate demand of Rs. 2,97,83,194 was raised for the five years under consideration under section 201(1) and 201(1A) of the Act. 3. The CIT(A) held that the provisions of section 195 had no mandatory application in the case of the present assessee while remitting commission to the foreign agents. This was because of the fact that no part of the remittances constituted income or profit chargeable to tax so far as the assessee was concerned and there was no doubt in the mind of the assessee that a portion of such remittances could represent income chargeable to tax requiring a proper apportionment for application of section 19....
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....ut also for certain other services rendered by the latter. The services pointed out by him were to promote and popularize the products of the assessee, to secure orders for the assessee and it was argued that since the orders were in the name of the assessee and sales were made in India , income accrued to the payee in India. Further, he pointed out from the agreement that the agent was to provide commercial information to the assessee and also to provide after-sales service to the customer. Based on these facts, it was argued that it was a composite agreement because of various services to be provided by the payee and hence the income was chargeable to tax not only under the Act but also under the DTAA. Referring to Item (iv) in Explanatio....
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....order of the Assessing Officer quite vehemently. 5. The learned counsel referred to the order of the Assessing Officer and submitted that the entire nine-page of the order was without any factual foundation. It was further submitted that the arguments of the learned Departmental Representative were not at all in consonance with the order of the Assessing Officer. Referring to para 9.1 of the CIT(A)'s order, it was pointed out that as per the latter's finding, there was no dispute that the payments made to foreign agents were on account of commission paid on export sales. Therefore, all the arguments of the learned Departmental Representative pertaining to royalty or fees for technical services were irrelevant. The foundation of the Assessi....
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.... were taxable under section 9(1)(vii) of the Act. The court held that the two agreements could not be read in isolation. Both pertained to the same transaction. The services rendered by the experts and the payments made towards the same were part and parcel of the same consideration and the same cannot be severed and treated as a business income of the non-resident company for the services rendered by them in erection of machinery. Thus, the stand of the venue was rejected. In this background, let us examine the facts of the case before us. 7. The assessee has entered into agreements with certain non-residents appointing them as their sales agents. The agents are expected not only to procure orders for the assessee but are also expected to....
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....required to secure information about the demand of products and, furnish the same to the assessee, it is a commercial information the payment for which is deemed to be royalty. Generally, royalty is a payment made to landowners for mining rights. It is also a payment for the use of a patent. It is also a payment to an author by a publisher on the sales of a book. These are general illustrations of the payment of royalty. In Jowitt's Dictionary of English Law, 5th Edition, Volume 2, on page 1595, 'royalty' is defined as 'a payment reserved by the grantor of a patent, lease of a mine or similar right, and payable proportionately to the use made of the right by the grantee'. This definition envisages that there must be an existing owner of the....