TaxTMI 
TaxTMI 
2017 (9) TMI 820
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..../s TWC, 2 Route De Cillers Le Lac, Les Chauchets, Les Fins 25,500/-, France and Rs. 57,52,086/- were paid to M/s Newtechno SA, Rue Des Fontaines 2 2087, Cornaux Ne, Switzerland as foreign agency commission for promoting the sale all over Europe. The assessee also furnished the copy of the agreement with the foreign commission agent. 3. The Assessing Officer noticed that the assessee has not deducted tax on such foreign agency commission as per the provision of section 195 of the I.T. Act. He, therefore, asked the assessee to explain as to why disallowance u/s 40a(i) should not be made in respect of such commission expenses as they come under the purview of section 195 of the I.T. Act. 4. The assessee submitted that the foreign agents appointed by the assessee firm provide services from their respective country and for the work done by them, payment of commission is directly remitted to them in their country. Since these agents operate outside India and they do not have any permanent establishment or business connection in India, no part of their income accrues or arises in India under the provisions of section 5(2) read with section 9(1) of the I.T. Act. Further, since the pa....
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....ly after realisation of proceeds by the assessee from the customers solicited by the agents. Further, it is explicitly stated in point 4 of the agreement that in case of any losses/interest etc. being not paid by the customers on account of delay in payment, the same will be adjusted against commission earned by the agent. Further, point 5 of the agreement states that Mr. Alban Chaumet is personally acting as an agent of M/s Divya Creation. Therefore, he inferred that the income of foreign agent has a real and intimate connection with the income accruing to the assessee and this relationship amounts to a business connection through or from which income can be deemed to accrue or arise to the non-resident. Rejecting the various explanations given by the assessee and relying on the decision of the AAR in the case of SKF Boilers and Driers Pvt. Ltd. reported in 68 DTR 106 and the decision of AAR in the case of Rajiv Malhotra reported in 284 ITR 564., the Assessing Officer disallowed the expenses debited under the head Foreign Commission amounting to Rs. 62,12,609/- u/s 40a(i) of the I.T. Act. 8. In appeal, ld. CIT(A) distinguishing the various decisions cited before him upheld the ....
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....ational Taxation) vs. Welspun Corporation Ltd. reported in 77 taxmann.com 165, he submitted that the Tribunal in the said decision has held that the services of the nature rendered by non-resident commission agents cannot be treated as fees for technical services any way and the same is not chargeable to tax in the hands of the non-resident commission agent and consequently there is no requirement of tax withholding on the same. He submitted that the Tribunal in the said decision has held that two decisions of AAR relied on by the Assessing Officer and the CIT(A) are neither biding precedents for ITAT nor they have laid down the correct position of law. 13. Referring to the decision of Hon'ble Allahabad High Court, which is the jurisdictional High Court in the case of the assessee, he submitted that Hon'ble High Court in the case of CIT vs. Model Exims reported in 363 ITR 66 has held that the agreement with non-resident commission agents for procuring orders does not involve rendering any managerial or technical services and consequently no tax withholding required on payment of said commission. The Hon'ble High Court has further held in the said decision that Explanation to....
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....rs Pvt. Ltd. (supra) and the decision in the case of Rajiv Malhotra (supra). We find the ld. CIT(A) while upholding the action of the Assessing Officer held that income arising to the agent on account of export commission very much falls within the ambit of provisions contained in section 5(2)(b) of the I.T. Act as the income has accrued in India when the right to receive the same came into existence. According to him although the nonresident agent has rendered services and procured orders abroad but the right to receive the commission certainly arise in India when the order gets executed by the assessee. According to him, the mere fact that the agent is to render services abroad and the commission is to be remitted to him abroad are wholly irrelevant for the purpose of determining the income since income is from a source in India. 20. We find identical issue had come up before the Ahmedabad Bench of the Tribunal in the case of Welspun Corporation Ltd. (supra). The Tribunal in the said decision has held that the payments made by the assessee for services rendered by non-resident agents could not be held to be fees for payment for technical services. These payments were in nature....