TaxTMI 
TaxTMI 
2016 (3) TMI 1308
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....come of Rs. 1,95,25,727/-. The case of the assessee was selected for scrutiny and accordingly notice u/s. 143(2) was issued to the assessee on 24-08-2011. During the course of scrutiny assessment proceedings the Assessing Officer observed that the assessee has made payment of Rs. 8,17,740/- as commission to Moden Italy on which no tax at source was deducted. The Assessing Officer held that the assessee was required to deduct tax at source on the aforesaid payment u/s. 195 of the Act. Since, the assessee has failed to deduct the same, the amount of commission paid is liable to be disallowed u/s. 40(a)(i) of the Act. Aggrieved by the assessment order dated 21-12-2012, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) vide impugned order upheld the findings of Assessing Officer on the issue and rejected the claim of the assessee in respect of disallowance u/s. 40(a)(i). Now, the assessee is in second appeal before the Tribunal assailing the findings of the authorities below. 3. Shri Kishor Phadke appearing on behalf of the assessee submitted that the assessee had paid commission to Mod-en Italy a foreign ag....
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....non-resident agent for procuring export orders is not chargeable to tax in India, therefore, the assessee was not required to deduct tax at source. 4. On the other hand Shri Hitendra Ninawe representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals). The ld. DR submitted that the order was procured by the assessee from an Indian entity. Thus, the services were provided in India, the citus of the foreign agent is in India. Therefore, the assessee was liable to deduct tax at source under the provisions of section 195 on the payment of commission for procuring supply orders. The ld. DR in support of his submissions placed reliance on the decision of Hon'ble Delhi High Court in the case of Commissioner of Income Tax Vs. Havells India Ltd. reported as 352 ITR 376. The ld. DR further submitted that Circular No. 23 of 1969 has been withdrawn. The ld. DR prayed for dismissing the appeal of the assessee and confirming the order of Commissioner of Income Tax (Appeals). 5. Controverting the submissions made on behalf of the Revenue, the ld. AR submitted that the validity of CBDT Circular No. 23 of 1969 was reiterated by another CBDT Ci....
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.... commission payable to non-resident agents rendering services abroad 1. In their Audit Report for 1997-98 [D.P. No. 79(I.T.)] the Comptroller & Auditor General (C & A G) Raised an objection that the Assessing Officer in computing the profits and gains of business or profession, in a case in Mumbai charge, had wrongly allowed a deduction in respect of a payment to a non-resident where tax had not been deducted at source. The nature of the payment in this case was export commission and charges payable for services rendered outside India. In the view of C & A.G. the expenditure should have been disallowed in accordance with the provisions of section 40(a)(i) of the I.T. Act, 1961. It has come to the notice of the Board that a similar view, on the same set of facts has been taken by some Assessing Officers in other charges. 2. The deduction of tax at source under section 195 would arise if the payment of commission to the non-resident agent is chargeable to tax in India. In this regard attention to CBDT Circular No. 23 dated 23rd July, 1969 is drawn where the taxability of Foreign Agents of Indian Exporters was considered alongwith certain other specific situations. I....
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....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 non-resident agent will not fall within the definition of fees for technical services. 8. The other plea raised by Mr. T. Ravikumar, learned Senior Standing Counsel appearing for the appellant referring to Explanation to Section 9(2) of the Act is that the income of the non-resident shall be deemed to accrue or arise in India under Clauses (v) or (vi) or (vii) of Section 9(1) of the Act and shall be included in the total income of the non-resident, whether or not the non-resident has rendered services in India. 9. The Explanation to Section 9(2) of the Act was substituted by the Finance Act, 2010 with retrospective effect from 1.6.1976. The above said explanation would come into play only if the said amount paid would fall under the headings: (i). income by way of interest as set out in Section 9(1)(v) of the Act; or (ii). income by way of royalty as set out in Section 9(1)(vi) of the....
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....n-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." 11. The facts of the present case are akin to the facts of the decision in Toshoku Limited case, referred supra. In the instant case also the assessee engaged the services of non-resident agent to procure export orders and paid commission. That apart, the Commissioner of Income (Appeals) as well as the Tribunal have correctly applied the principle laid down in GE India Technology Cen. (P) Ltd. case, referred supra, to hold that the assessee is not liable to deduct tax at source when the nonresident agent prov....