TaxTMI 
TaxTMI 
2018 (5) TMI 1601
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....ct without properly appreciating the facts of the case and the material brought on record. 2. On the facts and in the circumstances of the case, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. 3. It is, therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent." 3. The only issue raised by the Revenue is that Ld. CIT(A) erred in deleting the disallowance made by the AO on account of non- deduction of TDS u/s 195 r.w.s 40(a)(i) of the Act. 4. Briefly stated facts are that the assessee in the present case is a Private Ltd. Company and engaged in the manufacturing business of Microcrystalline Cellulose Powder, Crosscarmellose Sodium, Sodium Starch Glycolate, Dl Calcium Phosphate etc. 5. The assessee, in the year under consideration has claimed commission expenses of Rs. 54,06,265/- for the services rendered by the foreign commission agents in connection with its business. The details of the parties, commission amount and volume of the business referred by the commission agents are reproduced as under: Sr. No Name of the Commission Agent Country of ....
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....facts and submissions, the issues which are to be examined and decided are as under:- 1. Whether the commission paid to foreign agents is taxable in India by virtue of the provisions of section 5(2)(b) read with section 9(1)(i) of Income Tax Act. 2. Whether the provisions of section 195(2) were applicable on the appellant and he should have deducted tax and in case of no deduction he should have obtained a no deduction certificate from the AO. And 3. Whether the commission paid was genuine and the services have been rendered. 2.10. Regarding the first issue it is noted from the evidences given by the appellant as well as noted by the AO in his order that the services have been rendered by the foreign agents outside India. The sales were booked by them in their country or for the country for which they have been appointed as commission agents. None of the activities soliciting the clients and procuring the orders has taken place in India. The goods were being delivered by the appellant company in the other country. The activities of procuring the payment on behalf of the appellant company were also done abroad. The AO was, therefore, incorrect to ....
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....03,732 7,35.241 2,96,456 1,175.931 3,87,212 3,198,572 5 Chemphar Hongkong -- -- -- 75,851 1,09,770 1,85,621 6 Amoli Enterprise Ltd. Hongkong -- 1,80,413 1,80,413 7 Hakimsons Pvt. Ltd. Pakistan -- -- -- 44,223 44,223 8 Hector Norberto Levin Argentina 1,96,934 77.398 -- 2,75,215 92,785 6,42,332 9 To Kemimac (Coom) Singapore -- -- -- -- 20,930 20,930 M.A.J. Enterprise Pakistan -- -- -- -- 88,920 88,920 ii P.T.Signa Husada Indonesia -- 3,13,042 -- -- -- 3,13,042 12 Pharmo Trade Dhaka 34,414 -- -- -- 34,414 13 S B R and Co., Pakistan P. Ltd. Pakistan -- 47,810 -- -- -- ....
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....stablishment in India. All the agents had their offices on the foreign soil and nothing on record that they had PE in India. Further the assessing officer has also not pointed out any such fact in its order which indicate that there was any such office of the overseas agents in India which attract the deeming provisions. Further the observation that the source of income was in India is also not proper as it has clearly been discussed in the preceding paragraphs that none of the services have been rendered in India and source of income cannot be said to be in India as the source of income is the services rendered and not the sales. There is no business connection in India from which the income has been earned, there is no property through or from which the income has been earned. Therefore, the provisions of section 9(1)(i) also cannot be applied. 2.15. Reliance is placed on the judgement of honourable Supreme Court in the case of GE India Technology Centre Private Limited 327 ITR 456 and the judgement of honourable 1TAT Mumbai in the case of our Ardesi B Cursetjee 8. Sons Ltd. 115 TTJ 916. 2.16. With regard to AO's observation about obtaining the certificate o....
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....n 325 and Rajiv Malhotra (2006) 284 ITR 564 (Delhi). The judgements are not applicable to the present facts as there are several other decisions of Hon'ble ITAT, Mumbai in the case of ACIT (International Taxation) Vs. Star Cruise India Travel Services Pvt. Ltd. [14 ITR (T) 282 (Mum)], CLSA Limited Vs. ITO (International Taxation] [56 SOT 254], which hold that such kind of commission is not taxable in India and accordingly no liability to deduct tax was there. Further the decision of honourable Supreme Court of India in the case of Hon'ble Supreme Court in the case of CIT vs. Toshoku Limited 125 ITR 525, still prevails as on date and is the law of the land as regards applicability of TDS provisions to commission paid to overseas/non-resident agents by Indian Exporters. 2.20. Further, reliance is placed on the following decisions/judgments:- * ACIT Vs. Modern Insulators Ltd. [56 DTR 362 (Jaipur Trib.)] * Ishikawajama - Harima Heavy Industries Ltd. Vs. Director of Income Tax [207 CTR 361] * Dy. Commissioner of Income Tax Vs. Divi's Laboratories Ltd. [(2011) 60 DTR (Hyd) (Trib) 210] * ITO, International Taxation, Chennai Vs. Pras....
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....ere were the uncontroverted facts that the agents were non - residents and they were acting outside India and providing the services in lieu of commission from abroad only. The agents did not have any permanent establishment for business connection or business place in India, Thus, in absence of any activity being carried out in India by a non - resident commission agent, the commission does not accrue or arise in India, and hence, not taxable in India. Therefore, the disallowance of Rs. 54,06,265/- under section 40(a)(ia) made by the AO is directed to be deleted." 9. Being aggrieved by the order of Ld. CIT(A) Revenue is in second appeal before us. Both the parties before us relied on the order of authorities below as favorable to them. 10. We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, assessee has made payment to various agents as commission based in foreign countries on account of export made to the parties referred by them. The AO disallowed the same on two grounds, firstly, the identification of the parties, details of payment & services rendered by them were not furnished, secondly no TDS was de....
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....ntial not chargeable to tax in India. Now coming to the fact that whether such commission income by the foreign agents were deemed to accrue or arise in India in terms of provision of Section 9 of the Act, which reads as under:- "Income deemed to accrue or arise in India. 659. 66(1) The following incomes shall be deemed67 to accrue or arise in India :- 68(i) all income accruing or arising, whether directly or indirectly, through or from any business connection69 in India, or through or from any property69 in India, or through or from any asset or source of income in India, 70[* * *] or through the transfer of a capital asset situate in India. 71[Explanation 1].-For the purposes of this clause- (a) in the case of a business of which all the operations72 are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations72 carried out in India ; (b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase o....
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.... but, neither these rulings are binding precedents for us nor are we persuaded by the line of reasoning adopted in these rulings. As for the AAR ruling in the case of SKF Boilers & Driers (P.) Ltd. In re [2012] 343 ITR 385/206 Taxman 19/18 taxmann.com 325 (AAR - New Delhi), we find that this decision merely follows the earlier ruling in the case of Rajiv Malhotra, In re [2006] 284 ITR 564/155 Taxman 101 (AAR - New Delhi) which, in our considered view, does not take into account the impact of Explanation 1 to Section 9(1)(i) properly. That was a case in which the non-resident commission agent worked for procuring participation by other non-resident entities in a food and wine show in India, and the claim of the assessee was that since the agent has not carried out any business operations in India, the commission agent was not chargeable to tax in India, and, accordingly, the assessee had no obligation to deduct tax at source from such commission payments to the non-resident agent. On these facts, the Authority for Advance Ruling, inter alia, opined that "no doubt the agent renders services abroad and pursues and solicits exhibitors there in the territory allotted to him, but the rig....
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....tation, we humbly come to the conclusion that we are not persuaded by these rulings." Similarly we also find support & guidance from the judgment of Hon'ble Gujarat High Court in the case of PR CIT Vs. MGM Exports in R/Tax Appeal No. 309 of 2018 vide order dated April 11, 2018. The relevant extract of the order is reproduced below : "7. In the recent order in Tax Appeal No. 290 of 2018, we had dealt with similar situation making following observations: "It can thus be seen that while confirming the order of CIT [A], the Tribunal relied on judgment of the Supreme Court in the case of G.E India Technology Centre P. Limited vs. Commissioner of Income-Tax & Anr., reported in [2010] 327 ITR 456 (SC) = 2010-TII-07-SC-INTL. In such Judgment, It was held and observed that the most important expression in Section 195[1] of the Act consists of the words, "chargeable under the provisions of the Act". It was observed that, "..A person paying interest or any other sum to a non-resident is not liable to deduct tax if such sum is not chargeable to tax under the Act," Counsel for the Revenue, however, drew our attention to the Explanation 2 to sub-section [1] of Secti....