TaxTMI 
TaxTMI 
2018 (5) TMI 1840
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment proceedings, the Assessing Officer while verifying the financial statements of the assessee found that the assessee has claimed deduction of an amount of Rs. 1,36,71,242.13 on account of commission paid to foreign agents for booking export orders for the assessee. The Assessing Officer was of the view that while paying commission to the foreign agents the assessee was required to deduct tax at source u/s.195 of the Act. Since, he has failed to do so, he called upon the assessee to explain why the deduction claimed should not be disallowed. In response, it was submitted by the assessee that commission was paid to foreign agents towards services rendered outside India and the said foreign agents neither have any permanent establishment nor any business connection in India. The payment was also made outside India. Thus, it was submitted, such payment cannot be considered as income of the foreign agents chargeable to tax in India. Therefore, the provisions of section 195 are not applicable. It was further submitted, in the assessee's own case for the preceding assessment years, the Tribunal has deleted the similar disallowance made by the Assessing Officer on account of paym....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d in India, irrespective of the fact whether the recipient is located outside India, the payment made to them is taxable in India. In this context, he referred to the provision contained u/s. 9(1)(vii)(b) and Explanation to section 9(2) of the Act. 8. The ld. Authorized Representative strongly relying upon the findings of the ld. Commissioner of Income Tax (Appeals) submitted that the payment was made by the assessee to persons who are not only located outside India but they have rendered services in their respective countries. Therefore, neither they have any business connection in India nor any permanent establishment in India. He submitted, as per the provision of section 195 of the Act, only in the event of a particular payment made to a non resident, is chargeable to tax in India tax is required to be deducted at source while making such payment. He submitted, since, the payment made by the assessee to foreign agents are not chargeable to tax in India, the provision of section 195 are not applicable and the assessee is not required to deduct tax at source on such payment. He submitted, in assessee's own case for assessment years 2010-11 and 2011-12, similar disallowance mad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent; or habitually maintains in India a stock of goods or merchandise from which he regularly delivers goods or merchandise on behalf of the non-resident; or habitually secures orders in India, mainly or wholly for the non-resident. Thus from the reading of the aforesaid provision, it is clear that if any income is received by a non resident through its business connection in India then it will be taxable in India. From the definition of the business connection as provided under Explanation 2 to section 9(1)(i) of the Act, it is very much clear that the nonresident agents to whom the assessee has paid commission/brokerage do not have any business connection in India. Further, the other conditions of section 9(1)(i) are also not applicable to the payments made by the assessee to non-resident agents. It is also a fact on record that none of the non-resident agents have permanent establishment in India. While making the disallowance u/s. 40(a)(i) of the Act, the Assessing Officer has placed strong reliance upon the decision of the Hon'ble Supreme Court in the case of GVK Industries (supra) and in fact to apply the said decision, the Assessing Officer has made attempt to rope in the pa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d obtaining commercial bank support on the most competitive terms, assisting the assessee's loan negotiation and documentation with lender and structuring/negotiating and closing the financing for the project in a coordinate and expeditious manner. For the services rendered, the non resident company was to be paid at the rate of 0.75% of the total debt financing which is termed as "success fee". The dispute between the assessee and the department was with regard to the nature of success fee and whether the assessee was required to deduct tax at source in terms of section 195 while making payment of success fee. The Hon'ble Supreme Court after examining the issue at depth as well as the nature of the payment made by the assessee held that success fee paid by the assessee to the non-resident company is in the nature of fee for technical services as per section 9(1)(vii) of the Act. Having held so, the Hon'ble Supreme Court referring to the provisions of section 9(1)(vii)(b) of the Act as well as section 9(2) held that applying the source rule, the success fee paid to the non resident company is chargeable to tax in India. Facts are completely different in the appeal before us. In Ass....