TaxTMI 
TaxTMI 
2013 (11) TMI 907
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.... deduct at source on the overseas commission payments made to the non-resident under section 195(2) of the Act by relying upon the decision of the Hon'ble Apex Court in the case of Transmission Corpn. of Andhra Pradesh [239 ITR 589]. 3. Facts in brief are that the assessee is engaged in the business of manufacture and export of shoes and shoe uppers. It filed e-return of income for the assessment year under consideration by declaring total income of Rs. 2,35,96,080/-. The case was initially processed under section u/s 143(1) and assessment was completed under section 143(3) of the Act on 27-12-2010 determining total income at Rs. 8,16,34,932/-. 4. During the course of assessment proceedings, the Assessing Officer has observed that the assessee had made certain payments as overseas agencies commission to the extent of Rs. 5,62,13,826/- and that the assessee has not deducted TDS on those payments under section 195. He further observed that since these payments were made to non-residents in foreign countries for the services utilized, provisions of section 195 were attracted. When the Assessing Officer has asked to explain, it was submitted by the assessee before him that th....
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....sion to overseas agents for effecting the sales without deduction of tax at source. It is also stated that all the overseas agents are operating in their own countries and they have no presence whatsoever called in India or they do not have any permanent establishments / connections in India. Their activity was to procure the orders from the customers abroad and ensuring prompt realization of export proceeds. It is also seen that the said commissions are remitted directly to the overseas agent through swift transfer / IT and the payment is not received by them or on their behalf in India. In view of the above, the appellant contended that the non resident agents are not liable to tax in India on these commission payments. 4.4 The appellant contended that the observations made by the AO with regard to Sec. 195 are not acceptable for the following reasons : (i) The withholding provisions for foreign payments are covered by Sec. 195 of the Act, which clearly says that any person who makes payment to a non resident has to deduct tax at specified rates, if the said payment is chargeable to income tax in India. (ii) In order to attract Sec. 195 the services by ....
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....he payer and the situs of the utilization of the services which determine the taxability of the such services in India is not relevant as long as the services are utilized in India and thereby invoked the provisions u/s 40(a)(ia) of the I.T. Act. The appellant company has entered into an agreement for marketing of its leather footwear and other products with non resident agents. The non resident agents would get commission for promoting the appellant companies' products. The terms of the agreement indicate that the non resident agents acting on commission basis, outside India and not rendered any services in India. As the services are rendered outside India the provisions of section 5 cannot be applied to the commission paid so as to make it taxable in India. It is also seen that the non resident agents do not have any permanent establishment in India. The sales commissions are remitted directly to these agents through banking channels and the payment is not received by them are on their behalf in India. Further, in order to attract section 195, the services by the non resident agents should have been rendered in India and also should have been used in India. As the AR pointed ....
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.... 10. We have heard both sides, perused the materials available on record and case law cited. In this case, the assessee has made certain payments to overseas agents as commission and no TDS was deducted. According to the Assessing Officer, the assessee's business is situated in India and the payments were also made from India and according to section 195, the assessee is under obligation to deduct TDS. Therefore, by invoking section 40(a)(i), he has disallowed an amount of Rs. 5,62,13,826/-. On appeal, the CIT(Appeals) deleted the disallowance on the ground that the commission was paid to non-resident agent and it cannot be said to have been accrued in India and section 195 have no application. The only issue for our consideration is as to whether the assessee is under obligation to deduct the TDS under section 195 or not. The CIT(Appeals), by considering the entire facts and circumstances of the case passed a detailed order by observing that section 195 have no application to assessee's case. In the case of Prakash Impex (supra), the Coordinate Bench of ITAT Chennai has considered the very same issue and observed that the commission paid to non-resident agent for the servi....