TaxTMI 
TaxTMI 
2015 (10) TMI 2786
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....eed on that basis. 3. Briefly stated relevant material facts are like this. During the course of assessment proceedings, the Assessing Officer noted that the assessee has claimed a deduction in respect of commission paid to overseas agents, aggregating to Rs. 56,89,251/- but has not deducted any tax at source from the payments so made. In response to Assessing Officer's requisition to show cause as to why the expenses so incurred not be disallowed under section 40(a)(i), it was inter alia submitted by the assessee that under Circular no.786 of 2002 the assessee was not required to deduct tax at source from the payments made to agents abroad. As for the circular having been withdrawn vide subsequent Circular no.7 of 2009 dated 22nd September, 2009, it was submitted by the assessee that by withdrawing this Circular the legal interpretation for provisions of section 195 has not changed. It was pointed out that the foreign agents did not render any service in India that they have no place or permanent establishment in India and that they work abroad to procure orders. It was also explained that the payment made to overseas agents was not on account of any technical or managerial servi....
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....ent of Rs. 2,13,537/- to Sukla Rasiklal Suryaprasasd, Rs. 11,189/- to Global Impact USA, LLC and Rs. 32,312/- to Fresnedo Alba Nell Carlos on the ground that no sales were effected through these agents in the relevant previous year. The remaining disallowance made by the Assessing Officer was deleted. Aggrieved by the deletion of this disallowance, the Assessing Officer is in appeal before us 4. We have heard the rival submissions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 5. We have noted that the short grievance of the Assessing Officer is that the payment of commission of Rs. 54,32,213/- was in the nature of consideration for rendition of managerial consultancy services by non-resident and accordingly tax should have been deducted from the same and since the assessee has not deducted tax at source, the payments so made should be disallowed under section 40(a)(i). The case of the Revenue thus hinges on whether or not the payments in question can be treated as managerial or consultancy service rendered by non-resident. We find that, so far as this aspect of the matter is concerned, it is squarely covered b....
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.... is payable to a person referred to in article 314 of the Constitution or to a person who, having been appointed before the 15th day of August, 1947, to be a Judge of the Federal Court or of a High Court within the meaning of the Government of India Act, 1935, continues to serve on or after the commencement of the Constitution as a Judge in India. Explanation.-For the removal of doubts, it is hereby declared that for the purposes of this section, income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of sub-section (1) and shall be included in the total income of the non-resident, whether or not,- (i) the non-resident has a residence or place of business or business connection in India ; or (ii) the non-resident has rendered services in India." 7. On a reading of section 9(1)(vii) of the Act, we are not inclined to accept the plea taken by the learned senior standing counsel appearing for the Revenue that commission paid by the assessee to the non-resident agent would come under the term "fees for technical services". In the case on hand, for procuring orders for leather business from overseas buyers - wholesaler....
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....lause (a) of the Explanation to clause (i) of sub-section (1) of section 9 of the Act which provides that in the case of a business of which all the operations are not carried out in India, the income of the business deemed under that clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. If all such operations are carried out in India, the entire income accruing therefrom shall be deemed to have accrued in India. If, however, all the operations are not carried out in the taxable territories, the profits and gains of business deemed to accrue in India through and from business connection in India shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in the taxable territories. If no operations of business are carried out in the taxable territories, it follows that the income accruing or arising abroad through or from any business connection in India cannot be deemed to accrue or arise in India (see CIT v. R. D. Aggarwal and Co. [1965] 56 ITR 20 (SC) and Carborandum Co. v. CIT [1977] 108 ITR 335 (SC) which are decided on the basis of sectio....