TaxTMI 
TaxTMI 
2021 (4) TMI 466
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....appeal. 2.The above appeal was admitted on the following substantial questions of law: "(i) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the Tribunal was justified in cancelling the order of the CIT under section 263 without considering that the CIT had validly exercised his powers under section 263 of the Income Tax Act, 1961? (ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the jurisdiction of the CIT while invoking section 263 of the Income Tax Act is confined only to those issues which form part of the Show Cause Notice ? (iii) Whether the facts and in the circumst....
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....come accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India; * * * (vii) income by way of fees for technical services payable- Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day April, 1976, and approved by the Central Government. Explanation 1. - For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have....
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....come 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 wholesalers or retailers, as the case may be, the non-resident agent is paid 2.5 per cent. commission on FOB basis. That appears to be a commission simpliciter. What ....
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....ansaction where tobacco was exported to Japan and France and sold through non-resident assessees who were paid commission, held as under: "8. The second aspect of the same question is whether the commission amounts credited in the books of the statutory agent can be treated as incomes accrued, arisen, or deemed to have accrued or arisen in India to the non-resident assessees during the relevant year. This takes us to section 9 of the Act. It is urged that the commission amounts should be treated as incomes deemed to have accrued or arisen in India as they, according to the department, had either accrued or arisen through and from the business connection in India that existed between the non-resident assessees and the statutory agen....
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....e India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by clause (a) of the Explanation to section 9(1)(i) of the Act. The commission amounts which were earned by the nonresident assessees for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India. The High Court was, therefore, right in answering the question against the Department." 11. The facts of the present case are akin to the facts of the decision in Toshoku Ltd.'s case, referred supra. In the instant case also the assessee engaged the services of non-....
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....ess substantial question of law arises for consideration in this appeal. Accordingly, the order passed by the Tribunal is confirmed and this appeal is dismissed. No costs." 4. Mr.Aasim Shezad, learned counsel appearing for the respondent-assessee submitted that the Hon'ble Supreme Court in the Judgment reported in (2000) 2 Supreme Court Cases 718 [Malabar Industrial Co. Ltd. v. Commissioner of Income Tax, Kerala State] had decided the issue in favour of the assessee. Para 10 of the Judgment of the Hon'ble Supreme Court reads as follows:- " ........... 10. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as....