TaxTMI 
TaxTMI 
2019 (4) TMI 1651
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....3. For the AY 2012-13, the return was initially processed u/s 143(1) of the Act and subsequently the case was selected for scrutiny and the assessee was required to file the information called for. In response, the assessee filed the relevant information and on perusal of the same, the A.O. observed that the assessee-company had engaged some agents in foreign countries for following up with its customers for procurement of orders and recovery of the payments. It was observed that as per P & L Account for the A.Y. 2012-13, a sum of Rs. 1,14,33,012/- was debited under the head 'commission to foreign agents' but no tax was deducted at source. Observing that under the provisions of section 195 of the Act, any person responsible for making a payment to a nonresident, not being a company, or to a foreign company, any interest or any other sum chargeable under the provisions of the Act, shall at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by other mode, whichever is earlier, deduct income tax thereon at the rates in force. The assessee was therefore, asked to show-cause as to why there was ....
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....isions of section 9(1)of the Income Tax Act, 1961 read with Explanation thereto, apply to the facts of the present case. The CIT(A) failed to appreciate that since the services were rendered by foreign agents outside India couples with the fact that they are business receipts to them, there was no obligation to deduct taxes under section 195 of the Act. 4. The CIT(A) erred in invoking the provisions of section 9(1)(vi) of the Act which was not applicable to the facts of the present case. The findings given by the CIT(A) by invoking the definitions of Fee for Technical Services and Fee for Included Services are erroneous and unsustainable on facts and in law. 5. The appreciation of the agreements entered into by the appellant with its service providers by the CIT(A) are totally misplaced and unsustainable. The CIT(A) erred in selectively highlighting only few words in the agreements rather than looking into the factual gamut and the predominant services that were rendered to the appellant by its foreign agents." 6. Learned Counsel for the Assessee, while reiterating the submissions made before the authorities below referred to one of the agreement between the ag....
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....ces". Therefore, the finding of the CIT (A) is against the principles of natural justice and has to be set aside on this ground alone. 9. On merits of the issue also, we find that the foreign agents have rendered the services outside India and have also received the payments outside India. The contention of the assessee that they are the business receipts of the foreign residents and the foreign agent do not have any PE in India and hence the income is not taxable in India has not been controverted by the AO. The AO has not disputed the contention of the assessee that the payments made by the assessee are the business receipts of the foreign agents. The only reason for the disallowance was that the income has accrued or arisen to the foreign agent in India and for coming to this conclusion the AO had relied upon the direction of AAR in the case of SKF Boilers & Driers Ltd. The ld Counsel for the assessee had placed reliance upon the decision of the Coordinate Bench of the Tribunal in the case of M/s. Anand Technologies Ltd in ITA No.1246/Hyd/2017 dated 20.07.2018 wherein the Tribunal has considered similar circumstances and also the above decision of the AAR and after considerin....
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....ecause the basic criteria provided in the section is about genesis or accruing or arising in India, by virtue of connection with the property in India, control and management vested in India, which are not satisfied in the present cases. Under these circumstances, withdrawal of earlier circulars issued by the CBDT has no assistance to the Department, in any way, in disallowing such expenditure. It appears that an overseas agent of an Indian exporter operates in his own country and no part of his income arises in India and his commission is usually remitted directly to him by way of TT or posting of cheques/demand drafts in India and therefore the same is not received by him or on his behalf in India and such an overseas agent is not liable to income-tax in India on these commission payments. It is pertinent to note that s. 195 has to be read along with the charging ss. 4, 5 and 9. One should not read s. 195 to mean that the moment there is a remittance, the obligation to TDS automatically arises. If the contention of the Department is to be taken as correct, that any person making payment to a non-resident is necessarily required to deduct tax, then the consequence would be that th....
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.... to the provisions contained u/s 6 and 9 of the IT Act. However, a careful reading of section 9of the Act would make it clear that under Explanation 1(a) to section 9(1), it has been provided that in case of a business of which all the operations are not carried out in India, the income of such business only relating to such part of the income as is reasonably attributable to the operations carried out in India shall be deemed to accrue or arise in India. In the present case, AO has not brought any material on record to establish that non-resident agents have carried out any part of their business in India. 8. Moreover, section 195(1) envisages that tax is to be deducted at source on income which is chargeable under the provisions of IT Act. The Hon'ble Supreme Court while interpreting the expression 'chargeable under the provisions of this Act' as employed u/s 195(1) of the Act has held in case of GE India Technology Centre P. Ltd. (supra) that the said expression would mean that the remittance has got to be of a trading receipt, the whole or part of which is liable to tax in India. However, if the payments made to non-residents are not chargeable to ....