TaxTMI 
TaxTMI 
2018 (4) TMI 1566
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....rcumstances of the case and in law CIT(A) has erred in- 1. Deleting the disallowance of Rs. 4,06,78,105/- u/s 40(a)(ia) read with sec.195 for the I.T. Act on account of Non Deduction of TDS on payment of the Foreign Commission. 2. Deleting disallowance merely on the basis that one of the six commission agent non resident vide order 04.07.2013 by the Addl. DIT (International Taxation), Range-3, New Delhi. 3. Ignoring the Board's circular No. 7/2009 dated 22.10.2009 and order of AAR in appeal no. 983- 984 of 2010 dated 22.02.2012 in the case of SKF Boilers and Driers Pvt. Ltd and other judgment stated in assessment order of the AO. 4. Ignoring explanation 2 of the section 195 of the Income Tax Act." 2. Briefly stated the fac....
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.... in favour of the assessee. Operating part of the judgment is reproduced as under :- "12. On the said aspect we may refer to the decision of the Supreme Court in C.I.T. vs. Toshoku Limited, (1980) 125 ITR 525 (SC). This case relates to the assessment year 1962-63. The Indian assessee had paid commission to two foreign companies through whom they had procured export orders. Questions arose; what was the effect of the entries in the books of accounts of the Indian assessee which had resulted in debit and credit entries on account of commission and secondly, whether procurement of export orders by the foreign companies for the Indian company had resulted in a business connection. Two contentions were rejected by the Supreme Court inter-alia ....
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....inst the department." 13. The aforesaid decision is a complete answer to the contention raised by the Revenue and as mentioned in the assessment order that commission income had accrued and arisen in India when credit entries were made in the books of the respondent assessee in favour of the ETUK and the said income towards commission was received in India. As noticed above, the stand of the Revenue is contrary to the two circulars issued by the CBDT in which it is clearly held that when a nonresident agent operates outside the country no part of his income arises in India, and since payment is remitted directly abroad, and merely because an entry in the books of accounts is made, it does not mean that the non-resident has received any p....
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....s). In the present case, facts found by the Assessing Officer do not make out a case of business connection as stipulated in Section 9(1) (i) of the Act. There is hardly any factual discussion on the said aspect by the Assessing Officer. He has not made any foundation or basis for holding that there was business connection and, therefore, Section 9(1)(i) of the Act is applicable. Appellate authorities, on the basis of material on record, have rightly held that "business connection" is not established. 15. The scope and ambit of Section 195 of the Act has been explained by the Supreme Court in GE India Techonology Centre (P) Ltd. vs. CIT (2010) 327 ITR 456. In the said case the expression "any other sum chargeable under the provisions of ....