TaxTMI 
TaxTMI 
2019 (5) TMI 1679
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....t tax at source disallowance made is illegal and addition of Rs. 38,92,787/- made deserves to be deleted." 2. The assessee is partnership firm and engaged in the business of manufacturing of PP Bags. During the assessment proceedings, the AO noted that the assessee has paid commission of Rs. 38,92,787/- to various nonresident entities without making TDS. Accordingly, the AO has proposed to make disallowance of the said commission by invoking the provisions of Section 40(a)(i) r.w.s. 195 of the Act. In response the assessee submitted that the assessee engaged in the business of export of its final products and for this purpose, the assessee has tie up with non-resident persons for procuring the sales orders on behalf of the assessee. After....
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....s, the ld. AR of the assessee has reiterated its contention as raised before the authorities below and submitted that the payment of commission to non-resident is not chargeable to tax in India and consequently the assessee was not liable to deduct tax on such amount. Therefore, the provisions of Section 40(a)(i) of the Act cannot be invoked in the case of the assessee. He has relied upon a series of decisions and submitted that the courts have consistently held that the payment of commission to non-resident is not liable to tax in India when the non-resident has no P.E. in India. He has referred to the order of the ld. CIT(A) for the assessment year 2013-14 and submitted that the ld. CIT(A) has deleted an identical disallowance made by the....
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....ls of the commission paid by the assessee are as under:- S. No. Name of Agent Address Commission 1. Mr. Claudio Haberl A/c AV. Sesquicentenario 4540 CP1613, Buenos Aires, Argentina 22,06,46,7.00 2. Md. Habibur Rahman Kalibarl, Azizabad, Patharghata Barguna 3,31,442.00 3. Nadia Anwar hasan Ali AL-Shekh, Othman, Snafer Building Yemen 4,68,120.00 4. Reinhard Bosse UND Geschaftskunden Ag, Bahnhofstrabe 17,49525 Lengerich, Germany 7,10,060.00 5. Shamlan Naseer Ali Doha, Qatar, YEMEN 1,76,698.00 Total 38,92,787.00 The AO has disallowed the said amount U/s 40(a)(i)on the ground that the assessee has not deducted the tax at source as required U/s 195(1) of the Act. The AO has giv....
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.... specified in sub-section (1) of section 139, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid.] Explanation.-For the purposes of this sub-clause,- (A) "royalty" shall have the same meaning as in Explanation2 to clause (vi) of sub-section (1) of section 9; (B) "fees for technical services" shall have the same meaning as in Explanation2 to clause (vii) of subsection (1) of section 9;" The payment in question is commission and prima facie not royalty or Fee for Technical Services (FTS). The AO though observed that the payment in the nature of FTS, however the AO has not examined or not given the finding as to how the payment in question is FTS and what is the natu....
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.... view that the argument of the appellant that since the non-resident persons whom the payments were made did not have place of business or business connection in India, therefore, the appellant was not required to deduct tax at source on the above referred payments, is not correct. Regarding the second argument of the appellant that the income of the recipients of the above referred expenses was not "sum chargeable under the provisions of income Tax Act, 1961 therefore the provisions of Section 195(1) are not applicable to these payments" the A/R of the appellant was specifically requested to clarify whether any ruling was obtained from the Authority for Advance Ruling u/s 245(2), regarding non taxability of the income of the recipient in I....
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....n 5(2) reproduced as under:- "5(2) Subject to11 the provisions of this Act, the total income12 of any previous year of a person who is a non-resident includes all income from whatever source derived which- (a) is received14 or is deemed to be received in India in such year by or on behalf of such person ; or (b) accrues or arises14 or is 14deemed to accrue or arise to him in India during such year. Explanation 1.-Income accruing or arising outside India shall not be deemed to be received14 in India within the meaning of this section by reason only of the fact that it is taken into account in a balance sheet prepared in India. Explanation 2.-For the removal of doubts, it is hereby declared that income which has been included i....