TaxTMI 
TaxTMI 
2019 (5) TMI 1602
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....e case and also in law, has erred in deleting the addition of Rs. 1,30,86,150/- made by the AO in view of withdrawal of Circular Nos. 23 of 1969 and 786 of 2000 by the CBDT vide which CBDT withdrew the immunity available to such foreign remittance. (iii) The decision of the Ld. CIT(A) is also contrary in view of Circular No.7/2009 of the CBDT (which is in existence) vide which it makes mandatory for the assessee to deduct TDS on foreign remittance." 3. The revenue has raised the following grounds of appeal for the Assessment Year 2012-13:- "(i) The Ld. CIT(A), on the facts and in the circumstances of the case and also in law, has erred in deleting the addition of Rs. 1,61,28,196/- made by the AO on account of commission expenses in view of provision of Section 195 and Section 9(1 )(i) of the Income-Tax Act. (ii) The Ld. CIT(A), on the fact and in the circumstances of the case and also in law, has erred in deleting the addition of Rs. 1,61,28,196/- made by the AO in view of withdrawal of Circular Nos. 23 of 1969 and 786 of 2000 by the CBDT vide which CBDT withdrew the immunity available to such foreign remittance. (iii) The decision of the Ld. ....
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....her disallowance also, determining the total income at Rs. 72993680/-. 6. Assessee preferred an appeal before the ld CIT(A), who passed an order dated 24.03.2015 deleting the above disallowances as per para No. 4 of his order. Therefore, the revenue is in appeal before us. 7. The ld DR reiterated the findings recorded by the ld AO and ld AR relied upon the orders of the ld CIT (A). 8. We have carefully considered the rival contentions and also perused the orders of the lower authorities. The assessee has submitted a paper book showing that foreign agents rendered services out of India for procurement of the orders from the overseas buyers and for getting approval of the goods. No evidences were laid before us to show that any of the services by the agents were performed or rendered in India. Dealing with the other contention of the revenue the ld CIT(A) has dealt with the whole issue and deleted the above addition as per the para No. 4 to 4.4 of his order as under:- 4. "In ground no. 1, Ld. AR has impugned the addition of Rs. 1,30,86,150/- u/s. 40(a)(i) of the Income Tax Act in respect of commission paid to foreign commission agents without deduction of Tax at ....
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....f the assessee or in financial control. It has further been explained that assessing officer by relying upon affidavit of the assessee, as discussed above, unduly emphasized the other services which the commission agents are supposed to render, but cannot be treated as technical consultancy services. It has also been explained that services referred to in the affidavit were not in any way remotely connected with a technical consultancy but they were incidental to receive^ and execute the export orders meaning thereby that the first limb of the role of the commission agents ends with placing orders and the last limb ends when the goods are reached to the destination and have been accepted by the buyer and payments are realized from them and between there is no role of commission agents during the execution of the orders which shows that AO is wrong when he is equating such incidental services to the nature of technical consultancy. In this regard, Ld. AR placed reliance on the following judicial decisions: (i) Anand Transport P. Ltd. v. Asst. Commissioner of Income Tax (2015) 370 ITR 524 (Mad) (ii) Asst. Commissioner of Income Tax vs. Lohia Starlinger Ltd. (2014) 6....
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....endered outside India, used outside India and payments were made outside India in the absence of a permanent establishment in India. Irrespective of Circular issued by CBDT, the question of taxability of such commission to income-tax has to be decided as per the provisions of section 9(1) of the Act. Such income (commission) in the hands of non-resident commission agents did not accrue or arise directly or indirectly, through or from any business connection in India or through the transfer of capital asset situated in India. The provisions of sec. 9(l) were hence not applicable to such payment of commission by appellant to nonresident agents and the and therefore were not taxable in India. Accordingly, provisions of Section 195 can also not be invoked in respect of such payments made, therefore, the appellant was not required to make any reference to the Assessing officer for determination of TDS rate u/s 195 of the Income tax Act. In view of the above, Ground 1 of the appellant is allowed and addition of Rs.l,30,86,150/-is deleted." 9. In any case, there is no dispute that the agents being located outside India and not resident of India were canvassing sales f....
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....and income is said to accrue or arise when the right to receive it comes into existence. It is further held that no doubt the agents rendered services abroad and have solicited orders, but the right to receive the commission arises in India when the order is executed by the applicant in India. It was also held that fact that the agents have rendered services abroad in the form of soliciting the orders and the commission is to be remitted to them abroad are wholly irrelevant for the purpose of determining the situs of their income. According to that ruling provision of section 195 would apply since the right to receive the commission arises in India when the order is executed by the applicant in India 14. However the above decision has been relied up on by revenue in many such decisions but has been dealt with holding that no tax is required to be deducted where services by agents are not rendered in India in following cases :- i. Deputy Commissioner of Income-tax, Circle- 16(1), New Delhi vs. Taj International (P.) Ltd. [2018] 96 taxmann.com 222 (Delhi - Trib.) [20- 07-2018] ii. Deputy Commissioner of Income-tax, Cir.-2(1)(1), Ahmedabad vs. Gujarat Microwax (P.....
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.....com 330 (Mumbai - Trib.) [23-05- 2014] xviii. Income-tax Officer, Business Ward -V (4), Chennai vs. Trident Exports [2014] 44 taxmann.com 297 (Chennai - Trib.) [27-02-2014] xix. Joint Commissioner of Income-tax (OSD), Central Circle - IV (3), Chennai vs. V. Deenadayalavel [2012] 23 taxmann.com 125 (Chennai) [22-06-2012] xx. Deputy Commissioner of Income-tax, Spl. Range-23, Mumbai vs. Sandoz (P.) Ltd. [2012] 23 taxmann.com 430 (Mumbai) [09-05-2012] 15. Further honourable Delhi High court in [2014] 49 taxmann.com 412 (Delhi)/[2014] 227 Taxman 351 (Delhi)/[2014] 272 CTR 117 (Delhi) in DIT V Panalfa Autoelektrik Ltd has dealt with the identical issue about taxability of commission payment u/s 9 (1) 91) and ( (1) (vii) of the act and has decided the issue as under :- "4. The Assessing Officer relying upon the decision of the Authority for Advance Rulings in In Re: Wallace Pharmaceuticals (P.) Ltd., In re [2005] 278 ITR 97/48 Taxman 347 (AAR) held that the commission payment to the non-resident company on procuring orders was taxable as 'fee for technical service' under sub-clause (b) to Section 9(1) (vii) of the Act. The initial direction ....
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....removal of doubts, it is hereby clarified that the expression "through" shall mean and include and shall be deemed to have always meant and included "by means of", "in consequence of" or "by reason of". ** ** ** (vii) income by way of fees for technical services payable by- ** ** ** (b) a person who is a resident, except where the fees are payable in respect of services 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 source outside India; or ** ** ** Explanation 2. - For the purposes of this clause, "fees for technical services" means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient, or consideration which would be income of the recipient chargeable under the head "Salaries".' 7. Section 5(2) states that total income of a person, who is a nonresident, includes income from all sources....
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....per Explanation 1 clause (a) to Section 9, in case of a business of which all operations are not carried out in India, only such part of income as is reasonably attributable to the operations carried out in India is deemed to be accrued or arisen in India under clause 9(1)(i). By Finance Act, 2012, Explanation 4 has been added with retrospective effect from 1st April, 1962, clarifying the expression "through" to have always meant and included, "by means of", "in consequence of" or "by reason of". There is no finding by the Assessing Officer and there is no allegation that a non-resident was carrying on any operation whatsoever in India. Thus, there is no question of attributing any income to operations carried on by the non-resident in India. No such argument has been addressed. 11. The Assessing Officer in his order under Section 195/197 of the Act has relied upon the judgment in the case of Wallace Pharmaceuticals (P.) Ltd. (supra), which has been distinguished on facts by the first appellate authority and the Tribunal. The factual matrix, including the agreement between the assessee and the non-resident and the terms, have not been spoken of by the Assessing Of....
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....native policies that will lead toward the goals, (b) getting the organization to adopt the policies, (c) scrutinizing the effectiveness of the policies that are adopted, (d) initiating steps to change policies when they are judged to be less effective than they ought to be." Management thus pervades all organisations. Traditionally administration was distinguished from management, but it is now recognised that management has a role even in civil services. According to the Fontana Dictionary of Modern Thought, page 366, management was traditionally identified with the running of business. Therefore, management as a process is practised throughout every organization from top management through middle management to operational management.' Recently this Court in CIT v. Bharti Cellular Ltd., [2009] 319 ITR 139/[2008] 175 Taxman 573 had observed:- 'The word "manager" has been defined, inter alia, as: "a person whose office it is to manage an organization, business establishment, or public institution, or part of one; a person with the primarily executive or supervisory function within an organization, etc., a person controlli....
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....z any third party shall be legally binding on PAL only when the same are authorized by virtue of a written and signed authorisation executed by PAL in favour of AGENTA. ** ** ** 4. Commission (a) PAL agrees and AGENTA accepts that the amount of commission payable to it shall be the difference between consideration which PAL receives in terms of the purchase contract/order form the purchaser(s) and the pre determined guaranteed consideration settled and agreed between the parties, as described in Annexure 1 annexed hereto; (b) The parties agree that all the taxes applicable and required to be deducted in India to the transaction contemplated herein at the date of execution of this agreement and at any time in future during the terms of this agreement shall be deducted from the commission (as described herein above) before the same is paid and transferred to the bank account of AGENTA (herein referred to as the commission payable)" 16. The non-resident, it is clear was appointed as a commission agent for sale of products within the territories specified and subject to and in accordance with the terms set out, which the non-resident accepted. The....
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....d to the fact that the term is required to be understood in the context in which it is used, "fee for technical services" could only be meant to cover such things technical as are capable of being provided by way of service for a fee. The popular meaning associated with "technical" is "involving or concerning applied and industrial science".' 19. The said term was also interpreted by this Court in case of Bharti Cellular Ltd. (supra) where emphasis was laid on the element of human intervention, but we are not concerned with the said aspect in the present case. The non-resident had not undertaken or performed "technical services", where special skills or knowledge relating to a technical field were required. Technical field would mean applied sciences or craftsmanship involving special skills or knowledge but not fields such as arts or human sciences (see paragraph 24 below). 20. The moot question and issue is whether the non-resident was providing consultancy services. In other words, what do you mean by the term "consultancy services"? This Court in Bharti Cellular Ltd. (supra) had referred to the term "consultancy services" in the following words:- ....
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....ondent-assessee. The non-resident no doubt had acquired skill and expertise in the field of marketing and sale of automobile products, but in the facts, as notice by the Tribunal and the Commissioner of Income Tax (Appeals), the non-resident did not act as a consultant, who advised or rendered any counselling services. The skill, business acumen and knowledge acquired by the non-resident were for his own benefit and use. The non-resident procured orders on the basis of the said knowledge, information and expertise to secure "their" commission. It is a case of self-use and benefit, and not giving advice or consultation to the respondent-assessee on any field, including how to procure export orders, how to market their products, procure payments etc. The respondent-assessee upon receipt of export orders, manufactured the required articles/goods and then the goods produced were exported. There was no element of consultation or advise rendered by the non-resident to the respondent-assessee. 23. Decision in the case of Wallace Pharmaceuticals (P.) Ltd. (supra) is clearly distinguishable as in the said case the non-resident consultant had to perform several services in the natur....
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.... a fee. Similarly, special skill or knowledge is used to create a troubleshooting database that customers will pay to access over the Internet. In these examples, however, the relevant special skill or knowledge is not used when providing the service for which the fee is paid, i.e. allowing the consumer to play the computer game or consult the troubleshooting database. 42. Many categories of e-commerce transactions similarly involve the provision of the use of, or access to, data and software (see, for example, categories 7, 8, 9, 11, 13, 15, 16, 20 and 21 in annex 2). The service of making such data and software, or functionality of that data or software, available for a fee is not, however, a service of a technical nature. The fact that the development of the necessary data and software might itself require substantial technical skills is irrelevant as the service provided to the client is not the development of that data and software (which may well be done by someone other than the supplier) but rather the service of making the data and software available to that client. For example, the mere provision of access to a troubleshooting database would not require more than....