TaxTMI 
TaxTMI 
2012 (12) TMI 838
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....t of commission/discount on sales paid. On a query as to why the export commission be not disallowed for non-deduction and non-deposit of the TDS, the assessee submitted before the Assessing Officer, the requisite details, from which, it was seen that the assessee had the aforesaid amount on commission of export, on which, the assessee had neither deducted, nor deposited TDS; that the assessee company had stated before the Assessing Officer that it was dealing in export of projects and commodities and was also into construction activities; that it stated that in the course of its export business activities, it was required to appoint agents and pay commission to its foreign agents for their services; that it was stated that these agents provided invaluable services to the assessee company in the foreign country; that it was stated that the agents provided services in the form of obtaining orders, clearance of goods, support in scheduling of timely inspection of goods and issuance of clearance, follow up and arranging payments and other miscellaneous services relating to contractual obligations during the execution of the contract; that it was stated that the Reserve Bank of India p....
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.... delivering the services to the satisfaction of the exporter; that the exporter, thus, utilizes the information, data and know how, as gathered by the agent, to further his business activities; that it was, thus, presumed that there is an element of consultancy, technical and managerial services, for which the commission in question was paid for services rendered regarding the nature of products and inspection, timing and prices of products and detailed technical and other formalities; that thus, the provisions of Section 9 of the Act would come into play as soon as any export commission was paid or became due; that as per Section 195(1) of the Act, TDS is to be deducted on any interest or any some chargeable under the Act, which is payable to the non-resident; that according to Section 195(2) of the Act; when the payer considers that the whole of such sum would not be income chargeable in the case of the recipient, then, the issue is to be decided by the Assessing Officer on an application by the assessee/payer; that a similar application of making the obligation on the payee is cast pay Section 195(3) of the Act, for non-deduction of TDS, or lesser deduction of TDS; that as such,....
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....were made to export agents operating in their own countries, due to which fact no income arose in India; that the commission was remitted directly to the agents; that the foreign agents of the assessee company did not have any permanent establishment in India and they rendered the services to the assessee outside India, in respect of projects carried out by the assessee company outside India; that as such, the export commission paid by the assessee can, in no manner, be treated as income deemed to accrue or arise in India within the meaning of Section 9(1)(vii)(b) of the Act; that further, the payments in question represented export commission paid to the assessee's foreign agents for procuring export orders and they cannot be termed as fees for technical services; that the Ld. CIT (A) has correctly taken into consideration all these facts while correctly deciding the matter in favour of the assessee, as was done by the Ld. CIT (A) for Assessment Year 2008-09. The ld. counsel for the assessee has placed reliance on the following case laws:- (i) CIT v. EON Technology (P.) Ltd. [2012] 343 ITR 366 (copy is placed on record) (ii) Dy. CIT v. Divi's Laboratories Ltd. [2011] 1....
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....hnical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries".] 9. It is evident that Section 9 provides for payment of fees for technical services. Section 195 provides for deduction of TDS only on the sums chargeable. If at all the sum is chargeable, then only there can be a deduction u/s 195. In the case in hand, we have incontrovertible evidence on record that the payment of commission has been made to agents outside India for services rendered outside India. Commission has not been paid in India or for services rendered in India. The agents also do not have any Permanent Establishment in India. Any tax that would accrue or arise is only outside the country and not in India. Very importantly this payment does not also fall within the ambit of Section 9(1)(vii) of the Act as the services under consideration is not....
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....he income or profits of the recipient, such as payments to contractors and sub-contractors and the payment of insurance commission. It was the contention of the assessee in that case that where the whole of the amount was not taxable and only a portion of it was taxable, the provisions of s. 195 were not attracted. The Court held that, in such a situation, where a portion is taxable, it is incumbent on the assessee to approach the AO under s. 195(2) for a certificate to determine the appropriate portion of the amount on which tax is to be deducted, if the assessee does not want to deduct the amount on the entire amount. 12. In view of the discussion above, it is crystal clear that the payment of commission was not a sum chargeable to tax within the provisions of the Indian Income Tax Act. In such circumstance, the assessee could not have deducted tax at source under Chapter XVII-B. If deduction was not possible, the necessity of invoking the provisions of Section 40(a)(ia) would not arise. As such, it is held that the addition to the tune of Rs. 34,41,02,001/- has no legs to stand. The same stands deleted. The assessee succeeds in Ground of Appeal No. 3 and its parts." On caref....
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....d No. 1 raised by the revenue is accordingly rejected. 12. So far as regards ground No. 2, the Assessing Officer made addition of Rs. 1,23,57,341/- on account of retention money. As per the assessment order, it was found that the assessee had reduced the aforesaid amount from its net profit. On query, the assessee submitted that in some business transactions, a part of the income was retained by the customer to be realized after satisfactory performance of a contract or upon fulfillment of certain conditions; that it was a common business practice that a customer to retain from 2% to 10% of the contract amount; that this amount was realized after a stipulated period or upon satisfactory performance of the entire contract; and that in most of the cases, the retention money was adjusted against claim for delay in completion of contract, on quality goods or on any other ground. The Assessing Officer was not impressed by the aforesaid reply of the assessee company. It was observed that the assessee was following the mercantile system of accounting, wherein, the money retained by the authority from the contract payments made to the assessee constituted income accrued to it and was taxa....