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2015 (12) TMI 1746
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....(vii) of the Income Tax Act, 1961, being payment in the nature of fee for technical services and hence tax has to be deducted at source. Your appellant submits that since the non resident agent is only canvassing orders for sale of goods to foreign customers, the services of the nonresident agents will not come within the purview of management services and hence your appellant is not liable to deduct tax at source. 3. Without prejudice to the above mentioned contentions, it is also submitted that, the provisions of section 40(a)(ia) of the Income Tax Act, 1961, are applicable only on the amount shown as payable in the Balance Sheet as a liability, and in your appellant's case no amount is shown as payable as on 31/03/2010 in the Balance Sheet, and on that ground also tax is not deductable at source on the export commission paid (Ref: Vector Shipping Services (P) Ltd - 357 ITR 642 (All) (2013). 4. The learned Commissioner of Income-tax(Appeals) erred in confirming the disallowance of proportionate amount of interest amounting to Rs. 264,786/- on the amount advanced to sister concerns. Your appellant has advanced the amount in earlier years and there were sufficient interest fr....
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....er dated 28/10/2014 passed by the Ld. CIT(A), the assessee has raised the above said grounds of appeal. 7. Ground Nos. 1 & 5 are general in nature and require no adjudication and they are disposed of accordingly. 8. As regards Ground No. 2 which pertains to the disallowance of agency commission paid to non resident agent amounting to Rs. 25,28,998/-. According to the assessee, the agency commission is wrongly mentioned as Rs. 29,60,202/- in the assessment order as well as in the Ld. CIT(A)'s order and the same should have been Rs. 25,28,998/-. It is the case of the assessee that the services of non resident agent were rendered outside India and also payments were made outside India. Furthermore, the non resident agent did not have any permanent establishment in India. It was further submitted by the assessee that the nature of services rendered by the non resident agent, which is procurement of orders, could not be treated as managerial service or technical service so as to bring the same within the ambit of section 9(1)(vii) of the Act. Also the assessee had the right of execution of the order or cancel the order procured by the agent. Moreover, there was no fixed payment to....
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.... may be required to be paid to the non-resident may only by a trading receipt, and may contain a fraction of sum as taxable income. It is true that in some cases, a trading receipt may contain a fraction of sum as taxable income, but in other cases such as interest, commission, transfer of rights of patents, goodwill or drawings for plant and machinery and such other transactions, it may contain large sum as taxable income under the provisions of the Act. Whatever may be the position, if the income is from profits and gains of business, it would be computed under the Act as provided at the time of regular assessment. The purpose of sub-section(1) of section 195 is to see that the sum which is chargeable u/s. 4 of the Act for levy and collection of income-tax, the payee should deduct income-tax thereon at the rates in force, if the amount is t be paid to a non-resident. The said provision is for tentative deduction of income-tax thereon subject to regular assessment and by the deduction of income-tax, rights of the parties are not, in any manner, adversely affected. Further, the rights of payee or recipient are fully safeguarded under sections 195(2), 195(3) and 197. Only thing whic....
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....icer or the Ld. CIT(A) that the non resident agent was carrying on any operations in India. In the case of DIT vs. Panalfa Autoelektrik Ltd. in I.T.A. No. 292/2014, the Hon'ble Delhi High Court has held as under: "15. The services rendered, the procurement of export orders, etc. cannot be treated as management services provided by the non-resident to the respondent-assessee. The non-resident was not acting as a manager or dealing with administration. It was not controlling the policies or scrutinizing the effectiveness of the policies. It did not perform as a primary executor, any supervisory function whatsoever." "22. In the present case, commission paid for arranging of export sales and recovery of payments cannot be regarded as consultancy service rendered by the non-resident. The non-resident had not rendered any consultation or advice to the respondent-assessee. The non-resident no doubt had acquired skill and expertise in the field of marketing and sale of automobile products, but in the facts, as notice by the Tribunal and the Commissioner of Income Tax(Appeals), the non-resident did not act as a consultant, who advised or rendered any counseling services. The skill, b....
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....ficer. The opening of letters of credit for the purpose of completing export obligation is an incident of export and, therefore, the nonresident agent is under an obligation to render such services to the assessee, for which commission is paid. The non-resident agent does not provide technical services for the purposes of running of the business of the assessee in India. The services rendered by the non-resident agent can at best be called as a service for completion of the export commitment. We are, therefore, of the considered opinion that the commission paid to the nonresident agent will not fall within the definition of fees for technical services." . 13. The reasoning given in the impugned order that because the percentage of commission is high, the services rendered by the non resident agent are managerial in nature is not acceptable to us. The nature of the transaction has remained the same wherein the services were rendered to the assessee abroad and the payments were also received by the non resident agent abroad. In the case of DCIT vs. Transformers & Electricals Kerala Ltd. (2014) 50 taxmann.com 454) (Cochin-Trib.), it was held as under: "13.As is evident from the ....
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.... 195 of the Act or remittances made to a foreign concern. 16. In the result, the appeal filed by the Revenue is dismissed." 14. The argument of the Revenue that for non deduction of TDS, obtaining of certificate from the concerned Assessing Officer is mandatory is not acceptable. On a plain reading of the provisions contained in Chapter-XVIIB of the Act, more particularly section 195, there is no absolute liability on the part of the assessee to deduct tax at source notwithstanding that the payment is not chargeable to tax under sections 4, 5 or 9 of the Act. It is reasonable to conclude that TDS provisions are attracted only when the payment is chargeable to tax in India. The Revenue had incorrectly interpreted the ratio of the judgment of the Hon'ble Supreme Court in the case of Transmission Corporation of A.P. Ltd. (supra) wherein the Hon'ble Court was not concerned with this question. The Hon'ble Delhi High Court in the case of Van Oord ACZ India (P) Ltd. vs. CIT (2010) 323 ITR 130, while referring to the aforesaid judgment of Transmission Corporation of A.P. Ltd. (supra) dealt with the aforesaid situation and held as under: "14. Since both the parties heavily relied u....
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....ollowing extracts from the said judgment: ".............The scheme of sub-ss. (1), (2) and (3) of s. 195 and s. 197 leaves no doubt that the expression 'any other sum chargeable under the provisions of this Act' would mean 'sum' on which income-tax is leviable. In other words, the said sum is chargeable to tax and could be assessed to tax under the Act. Consideration would be - whether payment of sum to non-resident is chargeable to tax under the provisions of the Act or not? That sum may be income or income hidden or otherwise embedded therein. If so, tax is required to be deducted on the said sum. What would be the income is to be computed on the basis of various provisions of the Act including provisions for computation of the business income, if the payment is trade receipt. However, what is to be deducted is income-tax payable thereon at the rates in force. Under the Act, total income for the previous year would become chargeable to tax under s.4, Sub-s.(2) of s.4 inter alia, provides that in respect of income chargeable under sub-s. (1), income-tax shall be deducted at source where it is so deductible under any provision of the Act. If the sum that is to be paid to the non....