2015 (10) TMI 1881

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.... commission paid to foreign agents invoking sec.40(a)(i) for alleged failure to deduct tax at source u/s.195 of the I.T. Act, 1961. 3. The facts of the case are that the assessee carries on business as a dealer/exporter of leather chemicals. It filed its return of income for the assessment year 2010-11 on 12.10.2010 admitting a total income of Rs. 43,91,890/-. Processing u/s.143(1) was completed on 5.3.2012. Subsequently, the case was selected for scrutiny and notice u/s.143(2) dated 25.8.2011 was issued to the assessee on 2.9.2011. After hearing the assessee, the Assessing Officer completed the assessment u/s.143(3) of the Act determining the total income of Rs. 1,31,72,810/- after making disallowance u/s.40(a)(i) of the Act. Aggrieved,....

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.... of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non-resident agent did not provide technical services for the purposes of running of the business of the assessee in India. Therefore, the commission paid to the non-resident agents would not fall within the definition of "fees for technical services" and the assessee was not liable to deduct tax at source on payment of commission". 4.1. The ld. AR, further submitted that the services rendered by the non-resident agent could at best be called as a service for completion of the export commitment and would not fall within the definition of "....

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.... were also received by them abroad, therefore, no income would arise under the provisions of sec. 9(1) of the Act. The ld. AR, further submitted that the following details are furnished before the lower authorities to suggest that the payments were made to non-resident towards sales commission: 1. Tabular statement showing details of (Foreign Agency) Commission paid with the names and addresses of the payees/sales order/commission paid - aggregate commission of Rs. 87,80,923/- on sales order of the value of Rs. 8,11,76,796/-. 2. Ledger account copy for commission expenses - foreign for the period 01-APR 2009 to 31- MAR 2010. 3. Foreign outward remittance advice issued by Bank of India, Purasawalkam Branch - 12 Nos. 4. Ledger acc....

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.... section 40(a)(i) which reads as under:- "40 Not withstanding ............. (a) In the case of any assessee - (i) Any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938) royalty, fees for technical services or other sum chargeable under this Act, which is payable A. Outside India - B. In India to a non-resident, not being a company or to a foreign company, On which tax is deductible at source under Chapter VIIB and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200:" 7. The aforesaid clause makes it clear that the disallowan....