TaxTMI 
TaxTMI 
2014 (2) TMI 1223
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....erred in deleting the disallowance of commission by Ld. AO for Rs. 37,90,073/-, which was paid by the assessee to non-resident agents outside India for the services rendered by them outside India. 3. The brief facts of the case are that the assessee is a firm, filed its return of income on 12.10.2010 admitting total income of Rs. 14,56,840/-. Subsequently the case was taken for scrutiny and assessment U/s.143(3) of the Act was completed on 05.11.2012 wherein Ld. Assessing Officer disallowed an amount of Rs. 37,96,073/- invoking section 40(a)(i) of the Act for non-deduction of tax for the commission paid to foreign agents. The assessee's arguments were that:- (i)As per the Board's Circular Nos.23/23.7.1969, 163/29.5.1975 & 786/7.2.....
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.... the assessee firm's case, the invoice is inclusive of the commission payable to agents as per the payment system agreed upon. (v)The argument of the Assessee that the agents do not have PE in India is not applicable in this case because:- (a)The business connectivity from which the income is generated is very much in India and the payments are made from India. (b)The non-resident agents does the following activity on behalf of the assessee such as procuring export order, providing confirmed export orders, providing information regarding respective customers and executing the export sales. (vi) Reliance was also placed in the case of R. Dalmia v. CIT [1977] 106 ITR 895 (SC). 5. Before the Ld.CIT (A), Ld. A.R had made the followin....
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....th those countries, the business profits could be taxed only in that state and not in India. As per Article-7 of the tax treaties entered into between India and other countries, it was provided that the business profits of a non-resident enterprise can be taxed in India only if such enterprise carries out business through PE in India. (h)The assessee has been making the commission payments all these years, which were acceptable by the department and all these were done on scrutiny assessments under section 143(3). (i)Only during the year under review, the disallowance was sought to be made by following a decision of Advance Ruling Authority (AAR) (j) In view of the decisions of various judicial authorities including the Hon. Supreme Cour....
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....getting orders to the appellant. The operation of the Sec.195 of the IT Act comes into force for deducting TDS on foreign payments paid by the resident assessee to non-resident agents only when the payment made to the non-residents if their income chargeable under Indian Income Tax Law. In the instant case, the TDS liability does not arise on such commission payments which are an offshoot from its chargeability to income tax U/s. 5(2) of the IT Act. Various courts decisions have held that in such type of situations, the provisions of deducting tax will not arise as the Overseas commission income of a foreign agent is not taxable in India in the absence of 'business connection'. A commission payment working outside India for obtainin....
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....cial precedents has mentioned above, the AO is not justified in disallowing the commission payments made abroad on the ground that no TDS was deducted and therefore keeping in view of the various case laws mentioned supra and respectfully following them, the AO is directed to delete the addition made at Rs. 37,96,073/-" 7. Before us, Ld. D.R. argued in support of the order of Ld.A.O and Ld. A.R relied on the order of the Ld.CIT (A). Further the Ld. A.R relied on the decisions of the case Asstt. CIT v. Farida Shoes (P.) Ltd. [2013] 143 ITD 400/34 taxmann.com 268 (Chennai), Prakash Impex v. Asstt. CIT [IT Appeal No. 8(Mds.) of 2012, vide order dt.30.03.2012] & CIT v. Model Exims [2013] 358 ITR 72/219 Taxman 289/38 taxmann.com 319 (All.). 8.....