TaxTMI 
TaxTMI 
2019 (5) TMI 530
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....opulated PCBs. For the assessment year 2010-11, they have filed their return of income on 30/9/2010 declaring a total income of Rs. 2,07,79,620/-. During the course of assessment proceedings, learned Assessing Officer noticed that the assessee had debited a sum of Rs. 98,27,357/- towards commission paid to the foreign agents. On a perusal of the MOU signed by the assessee with the agents, learned Assessing Officer felt that the nature of services to be provided by the foreign agents are in the nature of managerial/technical services covered under section 9(l)(viii) of the Income-tax Act, 1961 ("the Act") being paid by a resident and these are not being utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any sources outside India. 3. Assessee pleaded that the sale commission paid to the non-residents for the services provided outside India and the amount was not chargeable to tax in India as the said companies were not having any permanent establishment in India and whatever services being rendered by them were outside India. It was further contended that the assessee had not complied with the provi....
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....ssessee, Ld. CIT(A) recorded a finding that on the identical facts and relevant terms and conditions of MOU, disallowance of commission expenses of Rs. 56,92,085/-under section 40(a)(i) of the Act was made in Assessment year 2009-10 by treating the said expense in the nature of managerial/technical services covered under section 9(l)(viii) of the Act and the Ld. CIT(A) confirmed the said disallowance after discussing the facts and relevant provisions of MOU in the light of legal position. Following the said decision of Ld. CIT(A) for the Assessment year 2009-10, Ld. CIT(A) for this year also upheld the disallowance of commission expenses of Rs. 98,27,357/- made by the AO and accordingly dismissed the appeal of the assessee. 7. In the alternative, Ld. CIT(A) recorded that even the payments made by the assessee have to be considered as commission expenses, as claimed by the assessee, the same are not allowable as per the discussion of learned Assessing Officer in the remand report wherein he had clearly mentioned that the first commission agent namely MK group LLC, though working in USA but its control is within India as the managing director and sole proprietor of the assessee co....
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....d to M/s MK group LLC in excess of 3%. Ld. AR submitted that such an order dated 26/6/2014 post remand by the Tribunal, is pending consideration in appeal before the Ld. CIT(A). 10. Ld. AR further submitted that though for the Asstt. Year 2011-12, learned Assessing Officer passed the assessment order similar to that of the order dated 26/6/2014 for assessment year 2007-08, however, for the Assessment Year 2012-13 to Assessment Year 2014-15, the contentions of the assessee were accepted and no disallowance was made in respect of the commission paid to the non-resident sales agents. Ld. AR submits that the fundamental facts for all these assessment years being similar, the conclusions reached by the learned Assessing Officer in the subsequent years to the effect that no technical services are involved in respect of the payments of commission to the non-resident sales agents, and the payments are only towards the commission for sales. 11. He placed reliance on the decisions reported in CIT vs. EON Technology (P) Ltd (2012) 343 ITR 366 (Delhi); DCIT vs. Divi's laboratories Ltd (2011) 10 ITR (T) 501 (Hyderabad), Ciena Communications India Private Limited vs. ACIT (2018) 98 tax....
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....spect of the existence of the Permanent Establishment (PE) of either or both of these non-resident sales agents. 14. Subsequent to the remand of the matter relating to the Assessment Year 2007-08 by the Tribunal, learned Assessing Officer did not bring to tax the commission amount on the ground of any 'Fee for Technical Services' (FTS), in such an order learned Assessing Officer did not dispute the contention of the assessee that the two commission agents were not rendering any services of technical/managerial or consultancy nature so as to bring the payment within the mischief of Section 9(l)(vii) of the Act. There is no allegation that either M/s Cee-Jan Beevers or MK group have any Permanent Establishment (PE) in India. Additions were made on a different score. In respect of the addition on the commission paid to M/s Cee-Jan Beevers, learned Assessing Officer recorded a finding that M/s Cee-Jan Beevers is not an independent agency and control and management of M/s Sahasra Europe rest with M/s Sahasra Electronics Private limited, 50% of the commission paid to M/s Cee-Jan Beevers was disallowable on the ground that such 50% should be the income of the Permanent Establis....
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....ommission and other related charges payable to such non-resident having rendered services outside India. On this premise, Hon'ble judicial High Court held that there was no error in the orders of the first and second appellate authorities in deleting the disallowance. 17. In Divi's laboratories (supra) the assessee paid commission to the foreign agent for the services rendered outside India and the learned Assessing Officer disallowed the said expenditure under section 40(a)(ia) of the Act on the ground that the assessee had not deducted the tax at source on such payment. Assessee contended that the payment was made to foreign agent for services rendered outside India and payments were remitted to the banking channels as per the requirements of the RBI regulations and there was obligation to deduct the tax at source. The first appellate authority accepted the contention of the assessee and deleted the disallowance. In the appeal by the revenue, a Bench of Hyderabad Tribunal after noticing the CBDT circular No. 7, dated 22/10/2009 held that the withdrawal of the earlier circular No. 786, dated 7/2/2000 was of no assistance to the revenue in anyway in disallowing the ex....
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....e contentions of the assessee and it did not bring to tax any amount by disallowing any part of the commission paid to these two foreign entities. It is further seen that the assessment orders for the Assessment Years 2012-13, 2013-14 and 2014-15 are passed by the learned Assessing Officer after making enquiry in respect of the commission paid to M/s Cee-Jan Beevers and MK group LLC in those years. It could further be seen that in respect of those years it was represented by the assessee that an affidavit showing that neither the assessee nor any of its directors/associated enterprises had any interest in the ownership or management of the agent namely M/s Cee-Jan Beevers and/or his associated enterprises namely M/s Sahasra Europe and the fact that neither he nor his enterprises had Permanent Establishment (PE) in India. This assertion of the assessee was accepted by the learned Assessing Officer in these three years and also was acted upon. 21. Even otherwise, M/s Cee-Jan Beevers is a non-resident Indian and resident of Belgium whereas M/s MK group LLC is a resident of USA. M/s Cee-Jan Beevers is covered by the India Belgium Double Taxation Avoidance Agreement which if read wit....