TaxTMI 
TaxTMI 
2015 (6) TMI 708
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.... source on the 'Export Sales Commission' payments made to the non resident u/s.195 of the Act; 2.1 It is submitted that Section 40(a)(i) has been amended by the Finance Act, 2004 and w.e.f. 01.04.2005, and any amount payable outside India or in India to a non-resident, then such payment made without deduction of TDS cannot be allowed as a deduction while computing the profits and gains of business; 2.2 It is submitted that the Explanation 2 to Sec.195 inserted by the Finance Act, 2012 specifically states that the income of a non-resident shall be deemed to accrue or arise in India under clause (v) or (vi) or (vii) of subsection (1) of section (9) and shall be included in his total income whether or not the non resident has a residence or place of business or business connection in India or has rendered services in India; 2.3 The Ld CIT(A) ought to have appreciated that the decision of the Apex Court in the case of M/s. Transmission Corporation of Andhra Pradesh reported in (239 ITR 589 (SC) clearly held that TDS should be effected at the rates in force, if the amount is paid to a non-resident. The rights of the payee or the recipient are fully safeguarded under sec....
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....on and related suitable forecasts requiring special technical knowledge, experience, skill and know-how. He referred to various Double Taxation Avoidance Agreements (DTAAs) defining fee for technical services. Section 9(1)(vii) pertaining to fee for technical services was quoted. The Assessing Officer opined in light thereof that assessee's export business had to be construed as 'source' from which commission income in question is earned and the same is situated in India. He proceeded on this reasoning and invoked section 40(a)(i) to disallow the impugned commission payments of Rs. 78,54,319/-. 4. The CIT(A) has accepted the assessee's corresponding ground as under: 4.1.2 I have considered the assessee's submissions as well as the orders of the Hon'ble ITAT in the cases of M/s. Farida Shoes P Ltd (ITA No.159/Mds/2013 dated 11.04.2013 for A.Y. 2008-09) and M/s. Delta Shoes P Ltd (ITA No.909/Mds/2013 dated 31.07.2013) etc. The facts involved in the cases of M/s. Farida Shoes P Ltd and M/s. Delta Shoes P Ltd, are exactly similar to those involved in the present assessee. In the said cases (i.e. Farida Shoes P Ltd and Delta Shoes P Ltd) the payments made to the non-reside....
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....Delhi High Court has also held that the commission payment to its British parent/ holding company ETUK could not said to have been accrued to ETUK in India and therefore, the assessee was not liable to deduct tax at source from payment of commission to ETUK. The head note of adder is reproduced hereunder: "Section 9 of the Income-tax Act, 1961 - Income - Deemed to accrue or arise in India Assessment year 2007-08 - Assessee-company was engaged in business of development and export of software - During relevant assessment year, it had paid commission to its British parent/holding company ETUK on sales and amounts realized on export contracts procured by ETUK for assessee - Assessing Officer held that commission income earned by ETUK had accrued in India or was deemed to accrue in India and, therefore, assessee was liable to deduct tax at source therefrom and as there was failure, said expenditure should be disallowed under section 40(a)(ia) - Whether when ETUK was not rendering any service or performing any activity in India itself, commission income could be said to have accrued, arisen to or received by ETUK in India merely because it was recorded in books of assessee in India o....
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.... submissions shows that the said non-resident agents have no business connection in India, nor they have any permanent establishments in India. They are procuring export orders for the assessee. Thus, the said non-resident agents are operating outside the country and all the services are rendered abroad only. In other words, though the said non-residents are rendering services to the assessee (Indian company) these services are rendered totally outside the country. In such a situation the payments (commissions) made to such agents are not liable to be taxed in India. 4.1.4 The decision of Delhi Tribunal in the case of Asia Satellite Telecommunications Co. Ltd. v. Dy. CIT (85 ITD 478)(Del), relied on by the Assessing Officer in his order, is with respect to the consultancy charges. The consultancy charges are normally technical in nature, where the utilization of the services plays a crucial role in deciding the place accrual of income. In the case of commission payments, like in the present case, the services cannot be considered as "technical services". In such cases, the place of residence of the agents and the place of canvassing (marketing) is the deciding factor. The non-re....
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....ve decision of the ITAT, (M/s. Farida Shoes P Ltd, in ITA No.159 /Mds/2013 dated 11.04.2013), is equally applicable to the facts of the present assessee also. Therefore, respectfully following the decision of ITAT, in the case of M/s. Farida Shoes P Ltd (in ITA No.159/Mds/2013 dated 11.04.2013), I hold that the above transactions of "Export Sales Commission" payments to the non-residents for procuring export orders, are not assessable to tax in India and consequently the assessee company is not under any obligation to deduct the TDS on the above commission payments ix] s.195 of the Act. The provisions of sec.40(a)(i) have no application in the present case. Accordingly, the additions made by the Assessing Officer, on account of disallowance of "Export Sales Commission" payments of Rs. 78,54,319/- for non-deduction of TDS u/s40(a)(i) r.w.s. 195 of the Act, are not justified and deleted." Therefore, the Revenue is in appeal. 5. We have heard both parties and gone through the case file. The only issue for our consideration is as to whether the assessee's commission payments made to its overseas agents in lieu of procuring export orders amount to 'fee for technical services' or n....