TaxTMI 
TaxTMI 
2015 (4) TMI 191
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....he facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in holding that the non-resident has no business connection for the export sales commission received from the assessee? 4) Whether under the facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in holding that the assessing officer did not establish the existence of business connection and therefore there is no liability to deduct tax at source, without appreciating the fact that the onus is on the assessee to show that it is not liable to deduct at source?" 2. The facts, in a nutshell, are as hereunder :- The assessee is doing business of strategic and consultancy services limited and filed its return of income for the assessment year 2009-10 declaring an income of Rs. 1,42,51,852/-. The return was processed under Section 143 (1) of the Act. Thereafter, the case was selected for scrutiny and notice under Section 143 (2) was issued and served on the assessee. The Assessing Officer, after calling for details from the assessee, completed the assessment under Section 143 (3) and assessed the total income at Rs. 1,73,25,104/- by making disallowa....
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....Where no such tax liability is fastened on the payee who received the commission, there is no obligation on the part of the payer to deduct the tax in India." 5. Aggrieved against the said order, the present appeal has been filed by the appellant/Revenue. 6. Heard Mr.T.R.Senthil Kumar, learned standing counsel appearing for the appellant/Revenue and perused the materials found in the typed set of documents. 7. This Court, in the case of Commissioner of Income Tax Vs Faizan Shoes Pvt. Ltd. (48 Taxman.com 48), had an occasion to consider a similar issue and after exhaustive analysis of the different provisions of the Income Tax Act and also taking into consideration the law laid down by the Supreme Court with regard to the said provisions, held as follows :- 6. Before adverting the merits of the case, it would be apposite to refer to section 9(1)(i), section 9(1)(vii) and section 9(2) of the Act, which read as under : Section 9. Income deemed to accrue or arise in India.(1) The following incomes shall be deemed to accrue or arise in India (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India,....
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....rned senior standing counsel appearing for the Revenue that commission paid by the assessee to the non-resident agent would come under the term "fees for technical services". In the case on hand, for procuring orders for leather business from overseas buyers wholesalers or retailers, as the case may be, the non-resident agent is paid 2.5 per cent. commission on FOB basis. That appears to be a commission simpliciter. What is the nature of technical service that the so-called nonresident agent has provided abroad to the assessee is not clear from the order of the Assessing Officer. The opening of letters of credit for the purpose of completing export obligation is an incident of export and, therefore, the non-resident agent is under an obligation to render such services to the assessee, for which commission is paid. The non-resident agent does not provide technical services for the purposes of running of the business of the assessee in India. The services rendered by the non-resident agent can at best be called as a service for completion of the export commitment. We are, therefore, of the considered opinion that the commission paid to the non-resident agent will not fall within the ....
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....accruing or arising abroad through or from any business connection in India cannot be deemed to accrue or arise in India (see CIT v. R. D. Aggarwal and Co. [1965] 56 ITR 20(SC) and Carborandum Co. v. CIT [1977] 108 ITR 335(SC) which are decided on the basis of section 42 of the Indian Income-tax Act, 1922, which corresponds to section 9(1)(i) of the Act). 9. In the instant case, the non-resident assessees did not carry on any business operations in the taxable territories. They acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by clause (a) of the Explanation to section 9(1)(i) of the Act. The commission amounts which were earned by the non-resident assessees for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India. The High Court was, therefore, right in answering the question against the Department." 11. The facts of the present case are akin to the facts of the decision in Toshoku Ltd.'s case, referred supra. In th....