TaxTMI 
TaxTMI 
2014 (1) TMI 440
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.... assessee is not liable to deduct tax at source on the commission payments made to non-residents under section 195 of the Act. 2. Brief facts of the case are that the assessee is a company engaged in the business of manufacture and export of shoe uppers and leather shoes. The assessee filed return of income on 29.9.2009 declaring income of Rs. 21,77,570/-. The assessment was completed under section 143(3) on 9.12.2011 determining income of Rs. 2,28,77,350/-. While completing the assessment, the Assessing Officer disallowed Rs. 2,06,99,780/- under section 40(a)(i) stating that the assessee did not deduct TDS on the commission payments made to non-residents. The Assessing Officer held that the assessee made commission payments to non-residen....
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....required to be deducted under section 195 of the Act. However, the Assessing Officer relying on the decision of the Hon'ble Supreme Court in the case of Transmission Corpn. of Andhra Pradesh Ltd. v. CIT 239 ITR 587 disallowed commission payments made to non-residents on the ground that the assessee is under an obligation to obtain no objection for making payments to non-residents under section 192 and in the absence of same, the assessee is required to be deducted TDS and since the assessee did not deduct TDS the same is liable to be disallowed under section 40(a)(i) of the Act. On appeal, the Commissioner of Income Tax (Appeals) after considering the submissions of the assessee and examining the agreements with commission agents by the ass....
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....respect of all shipments effected on cash against document basis. The Commissioner of Income Tax (Appeals) observed that exporter will pay commission of 2.5% on FOB value of all orders procured by the agent. The Commissioner of Income Tax (Appeals) also observed that the withdrawal of circular No.23/1969 by the Board vide circular No.7/2009 is not applicable for the assessment year 2009-10, since the circular was withdrawn on 22.10.2009, therefore, circular No.23 of 1969 is very much applicable to the facts of the assessee. It was the observation of the Commissioner of Income Tax (Appeals) that the services rendered by non-resident agents to the assessee do not fall under the provisions of section 9(1)(vii) of the Act, as no technical servi....
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....erefore, no disallowance could be made u/s 40A(i) on the ground that tax was not deducted at source under section 195. 4.5 The Hon'ble Supreme Court overruled the decision of the Karnataka High Court in Samsung Electronics Limited case in the case of GE India Technology Cen.(P) Ltd. v. CIT [2010] 327 ITR 456 (Se). The ITAT, Mumbai 'D' Bench in the case of DICT Range-7(2), Mumbai Vs Rediff.com India Limited in Appeal No.3061 (Mum.) of 2009 held that "As held by the Supreme Court in the case of GE India Technology Centre (P.) Ltd v. CIT (2010) 327 ITR 456/193 Taxman 234, tax deduction at source obligations under section 195(1) arise only if the payment is chargeable to tax in the hands of non-resident recipient. Ther....
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....educt tax at source from the foreign remittance". The ITAT 'D' Bench, in the case of ACIT, Company Circle-II(I) v. M/s Eagle Press (P.) Ltd on similar facts, relying on the judgement of Hon'ble Supreme Court in case of GE India Technology Centre (P.) Ltd v. CIT and another 327 ITR 456 held that the liability of TDS is not cast on the assessee, where the services were rendered outside India and such services were rendered by non-residents. Referring to the above discussion and the judgements relied on by the appellant in his submissions, I direct the Assessing Officer to delete the addition. This ground of appeal is allowed." 6. On going through the order of the Commissioner of Income Tax (Appeals), we find that the non-residents are only p....