TaxTMI 
TaxTMI 
TaxTMI 
2011 (3) TMI 1628
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....e year under consideration was completed on 26-2-2004 determining the total income of Rs. 6,95,42,210/-. Aggrieved against this assessment order, the assessee filed an appeal before the CIT (A). On appeal, the CIT (A) allowed certain relief to the assessee. Against the order of the CIT (A), the department filed appeal before the ITAT. The Tribunal vide order dated 31-10-2007 allowed the appeal of the department in ITA No.797/Hyd/2004. The Tribunal in the order referred to above set aside the issue relating to disallowance under section 40a (ia) of the Act for the commission payments made by the assessee to the foreign agents. As regards computation of deduction under section 80HHC of the Act when the income is computed under section 115JA, the Tribunal directed to compute the eligible profit for deduction on the basis of adjusted book profit under section 115JA of the Act in terms of the decision of Special Bench in the case of DCIT vs. Syncom Formulations (I) Ltd., (13 SOT 404). The present assessment order has been passed by the assessing officer in pursuance to the direction of the Tribunal. The assessing officer after affording opportunity to the assessee made a disallowance of....
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....and also to find out whether there was any intention to make the payment by cheque or draft. The assessing officer was also directed to reconsider the issue in the light of the judgment of Hon'ble Apex Court in the case of Oagle Glass Works. In response to the notice issued by the assessing officer, the assessee reiterated that the commission was paid by them to the foreign agents for the services rendered outside India and the payments were remitted through the banking channel as per the requirement of RBI regulations. The assessee also stated that the fact in their case is different from the one referred to the case of Oagle Glass Works. The assessee also relied on the decision of the Tribunal, Hyderabad Bench "B" in the case of Premier Explosives Limited in ITA No.736/Hyd/03 for assessment year 1998-99, wherein, it was held that commission paid to nonresident agents who operate from abroad and not having any permanent establishment in India and the payments are remitted directly abroad is an allowable expenditure and there is no obligation to deduct tax at source. The assessing officer however did not accept the explanation of the assessee and he found that during the year under....
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.... in the case of payment made to San International. 6. The learned departmental representative submitted that during the year under consideration, the assessee claimed to have paid commission of Rs. 38,81,237/- to 29 non-resident agents. Out of total 25 non-resident agents, the assessee furnished correspondence in respect of 13 agents only. In respect of other agents, the assessee could not substantiate the claim that the provisions of section 40a (ia) are not attracted. Therefore, it is rightly held by the assessing officer that the provisions of section 40a (ia) are attracted. It is further submitted that wherever the assessing officer found that the payment of commission was not liable for deduction of TDS, he allowed the expenses as allowable expenditure and the balance is only disallowed as per the provisions of section 40a (ia) of the Act. 7. The learned counsel for the assessee submitted that the issue is covered in favour of the assessee by the decision of apex court in the case of GE India Technology Centre P. Ltd. Vs. CIT and Another (327 ITR 456). It is submitted that for the assessment year 2006-07 similar payments were made and during the scrutiny assessments, after o....
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.... an overseas agent of Indian exporter operates in his own country and no part of his income arises in India and his commission is usually remitted directly to him by way of TT or posting of cheques/demand drafts in India and therefore the same is not received by him or on his behalf in India and such an overseas agent is not liable to income-tax in India on these commission payments. This view is fortified by the judgment of Apex Court in the case of CIT vs. Toshoku Limited reported in 125 ITR 525. 9. It is pertinent to note that the section 195 of the Act has to be read along with the charging sections 4, 5 and 9 of the Act. One should not read section 195 to mean that the moment there is a remittance; the obligation to deduct TDS automatically arises. If we were to accept such contention, it would mean that on mere payment in India, income would be said to arise or accrue in India. These are the observations made in the judgment of Apex Court in the case of GE India vs. CIT reported in 327 ITR 456, relied on by the learned counsel for the assessee, for the proposition that provisions relating to deduction of tax applies only to those sums which are chargeable to tax under the In....
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....s judgment, with retrospective effect from 1-6-1976 in the Finance Act, 2007. Despite this introduction of Explanation to section 9(2) of the Act, the Karnataka High Court in the case of Jindal Thermal Power Co. Ltd., vs. DCIT reported in 321 ITR 31 held that the law laid down by the Apex Court in the case of Ishikawajima Harima Heavy Industries Limited (supra) still holds good despite the retrospective amendment to section 9 of the Act. In our opinion, the requirement of services of the non-resident being rendered in India and being utilized in India is still valid, despite the judgment of the Karnataka High Court in the case of Samsung Electronics (supra) and withdrawal of earlier circulars issued on this subject by CBDT. 11. It is well settled law that the provisions of Double Taxation Avoidance Agreement would prevail over the provisions of the Income-tax Act, would seem to have been completely not followed by Karnataka High Court while rendering the judgment in the case of Samsung Electronics (supra). Therefore, in our considered opinion, the law related to deduction of tax at source under section 195 has not been changed consequent to the judgment of Samsung Electronics (sup....