TaxTMI 
TaxTMI 
2015 (6) TMI 548
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....ade by the Assessing Officer in assessment order dated 19.12.2011. 2. The assessee; a private limited company, manufactures and exports leather garments. On 30.09.2009, it had filed its 'return' declaring income of Rs. 53,38,033/-. In 'scrutiny', the Assessing Officer noticed the assessee to have incurred expenditure towards commission paid to non-residents amounting to Rs. 58,80,824/-. He disallowed the same; inter-alia, by observing that section 9 of the Act applied in this case as the commission amount had accrued to a non-resident/ payee principally on account of a business activity in India which required TDS deduction. The Assessing Officer further held that the certificate under section 195(2) of the Act had also n....
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.... is deemed to accrue or arise in India because of its business connection in India. Tile source of income emanates principally on account of the business activity conducted by the assessee in India and since withholding tax has not been deducted and remitted to the Government of India Account, this amount of Rs. 58,80,824!- is added to the taxable income of the assessee for the year on its disallowance u/s, 40(a)(i). 3.2 Alternatively, the assessee ought to produce, Tax Residency Certificate of the Commission Agent, undertaking from the commission agent that there is not Permanent establishment in India or a certificate' u/s. 195(2) to substantiate that the commission paid shall not be Chargeable under the Ac....
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....ion 195 of the Act has to be read along with the charging sections 4, 5 and 9 of the Act and the provisions of the Tax Treaties and the combined reading of the aforesaid sections clearly indicate that unless the income is chargeable to tax in India, there is no obligation to withhold the tax. (b) The AO has viewed that Board's Circulars 23 of 1969 and 786 dated 7.2.2000 have been withdrawn and therefore it cannot be relied upon further. The AO's view is not acceptable as the law related to withholding of tax u/s 195 of . the Act has not been changed even after withdrawal of the above circulars issued by the CBDT. (c) On similar and identical issue, Hon'ble ITAT, Hyderabad i....
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....(a)(i) of the Act and hence the Assessing Officer is directed to delete the addition of Rs. 58,80,824/-made to the returned income. This ground of appeal is allowed.' Therefore, the Revenue is in appeal. 4. We have heard both parties and gone through the case file and perused the case laws quoted by the assessee i.e. M/s. Eagle Press (P) Ltd ITA No.776/Mds/2008 dated 6.06.2011, M/s. Farida Shoes Private Ltd ITA No.359/Mds/2013 dated 11.04.2013 and M/s. Praksh Impex ITA No.08/Mds/2012 dated 2008-09. The Revenue's only grievance is that the aforesaid foreign agency commission paid by the assessee to the non residents/payee attracts disallowance under section 40 (a)(i) for non deduction of TDS. It is made clear that in support of....