AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 746
X X X X Extracts X X X X
X X X X Extracts X X X X
....ts, it revealed to the AO that the assessee had claimed expenditure of commission payment of Rs. 1,05,98,558/- in foreign currency. The ld.AO has confronted the assessee to show as to whether it has deducted TDS on such commission payment. If not, then why it should not be disallowed by applying the provisions of section 40(a)(ia) of the Income Tax Act. In response to the query of the AO, the assessee filed a detailed written submissions which has been reproduced by the AO on page nos.2 to 5 of the assessment order. In brief the contention of the assessee was that it had paid commission to foreign agent for the services rendered by them outside India. Services were of providing details of prospective customers and after sale ensuring payment towards export sales. It was also contended that normally talks with such agents were by means of electronic media, such as telephone, email etc. The agents also arrange meetings with prospective buyers during the visit of marketing head in that country. There was no formal agreement. However, for the sales made through them commission is payable/paid to them on receipt of their debit notes after realization of export proceeds. The payments wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndia is not chargeable to tax in India and the receipt in India of the sale proceeds remitted by the purchasers from abroad did not amount to an operation carried out by the non-resident commission agent in India as contemplated by clause (a) of the Explanation to 9(1) of the Act. The Apex Court in the case of CIT Vs Toshoku Ltd [1980] 125 ITR 525(SC) has categorically held that the commission amounts which were earned by the non-resident for services rendered outside India could not be deemed to be income which had either accrued or arisen in India. Further, in the case of Authority for advance rulings in the case Ind Telesoft(P) Ltd [2004] 267 ITR 725 (AAR) it is held that no tax was deductible at source under section 195 of the Act on payments of commission and retainer fee made by the appellant to the non- resident companies for securing business outside India where the said entities had no office or business operations in India. 3.3.2. Hon'ble Apex Court, in the case of GE India Technology Cen. (P.) Ltd. [2010] 327 ITR 456(SC) has held that the expression "chargeable under the provisions of the Act in Sec.195(1)" shows that the remittance has to be of trading receipt, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....no IDS was deducted. In view of the various case laws mentioned supra and respectfully following them, I am of the considered view that the claim of the Appellant is in accordance with law. The Assessing Officer is directed to delete the addition made at Rs. 1,05,98,558/-. This ground of appeal is allowed." 4. At the very outset, the ld.counsel for the assessee contended that similar payments were made in the assessment years 2001-02 to 2009- 10 and 2011-12. Dispute in all these years either at the instance of the Revenue or at the instance of the assessee travelled upto the Tribunal, and consistently it has been held that element of income was not involved in such transactions. Thus, non-resident commission agents are not taxable in India because they have not carried out any activity in India. He placed on record copy of the tribunal's order in the assessment year 2009-10. He further pointed out that the ld.CIT(A) has made reference to the facts and the status of disallowance of such commission payments in earlier years. He also contended that ITAT, Ahmedabad in the case of DCIT Vs. Welspun Corporation Ltd., 77 taxmann.com 165 (Ahd) has considered similar aspects elaborately. F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y technical activity, the assessee entered into a contract with foreign agents. In terms of the agreement, the agent was to develop, expand and promote the sales and marketing for assessee's products, make market plans and establish a marketing network of representatives to help and promote assessee's products, to provide information such as market development, activities of competitors, intentions and plans of clients and financial information on clients, to provide advanced information about the tenders, gathering technical specifications of project and work incidental thereto, and to identify sub-contractors and logistic service provider, such as shippers and cargo handling agencies, to ensure the smooth execution of contracts. * During relevant year, the assessee made payment of export commission to commission agents without deducting tax at source. The assessee claimed that the export commission was not a service and if at all they are being construed as services, the same was being rendered outside India and was not taxable in India under section 5(2). Accordingly, the tax was not required to be withheld under section 195. * The Assessing Officer held that the res....