TaxTMI 
TaxTMI 
2018 (4) TMI 1199
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....aw and on facts of the case in deleting the addition of Rs. 1,17,15,082/- made by AO on account of non-deduction of TDS payment made under the head 'Sales Commission to foreign Agents'. 2. The Ld. CIT (A) has erred in law and on facts of the case in deleting the disallowance of Rs. 1,74,162/- made by AO u/s 14A of the I.T. Act, 1961 read with Rule 8D of the I.T. Rules, 1961." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessing Officer disallowed an amount of Rs. 1,17,15,082/- paid by the assessee company as sales commission to foreign agent without Tax Deducted at Source (TDS) on the ground that such payments covered under the provision contained under section 9(1)(i) and 9 (1)(vii) of the ....
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....essed leather etc. having export of 97% of its product. It is also not in dispute that the assessee has paid Rs. 17,84,349/- to T.S. Sachs Inc. and Rs. 99,30,733/- to Deanston Ltd. as commission on sales. It is also not in dispute that the entire commission has been remitted directly abroad by the assessee company. It is also not in dispute that sales commission agent/non-resident Indian to whom the sales commission has been paid have rendered services outside the country and no part of the income has arisen in India. 7. Identical issue has already been set at rest by the Hon'ble Delhi High Court in case cited as CIT vs. Eon Technology P. Ltd. - (2012) 343 IT4R 366 (Delhi) in favour of the assessee. Operating part of the judgment is reprod....
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....In the instant case, the non-resident assessees did not carry on any business operations in the taxable territories. They acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by cl. (a) of the Explanation to s. 9(1)(i) of the Act. The commission amounts which were earned by the non-resident assessees for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India. The High Court was, therefore, right in answering the question against the department." 13. The aforesaid decision is a complete an....
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....the activity in India [CIT Vs. R.D. Aggarwal and Company(1965) 56 ITR 20 (SC), Carborandum & Co. Vs. CIT(1977) 2 SCC 862 and Ishikawajma-Harima Heavy Industries ltd. Vs. Director of income Tax, Mumbai(2007) 3 SCC 481]. The test which is to be applied is to examine the activities in India and whether the said activities have contributed to the business income earned by the non-resident, which has accrued, arisen or received outside India. The business connection must be real and intimate from which the income had arisen directly or indirectly. The question of business connection, therefore, has to be decided on facts found by Assessing Officer (or in the appellate proceedings). In the present case, facts found by the Assessing Officer do not....
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....appellate authority and the ITAT and correctly applied by them." 8. Aforesaid decision rendered by the Hon'ble Delhi High Court in CIT vs. Eon Technology P. Ltd (supra) by relying on the decision rendered by Hon'ble Supreme Court in case cited as CIT vs. Toshoku Limited - (1980) 125 ITR 525 (SC) is squarely applicable to the facts and circumstances of the case and in view of the matter, we are of the considered view that when a sales commission has been made by the assessee company on export orders from the buyers abroad and services have not been rendered by the payee in India, no part of the said income has arisen in India and as such, TDS is not required to be deductible at source and disallowance u/s 40(a)(i) of the Act made by the AO....