TaxTMI 
TaxTMI 
2019 (6) TMI 1649
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....e was selected for scrutiny. Subsequently, notice under section 143 (2) along with questionnaire and notice under section 142 (1) was issued to assessee, in response to which representatives of assessee appeared before Ld. AO and filed requisite details as called for. 3. Is Ld. AO observed that assessee is engaged in manufacture and export of cotton yarn/knitted fibres. From the books of accounts produced by assessee, Ld. AO observed that assessee debited a sum of Rs. 2,60,48,963/-, towards commission on export sales on which TDS under section 195(1) was not deducted. The Ld.AO, accordingly disallowed expense under section 40 (a) (ia) of the Act, for non-deduction of TDS under section 195 (1) of the Act. 4. Aggrieved by addition made by Ld.AO, assessee preferred appeal before Ld. CIT (A), who allowed claim of assessee, by following order passed by her predecessor in assessee's own case for assessment year 2010-11. Aggrieved by order of Ld.CIT (A), revenue is in appeal before us now. 5. At the outset, Ld.AR submitted that, this issue stands squarely covered in favour of assessee by decision of this Tribunal in assessee's own case for assessment year 2010-11 in ITA No. 1559/....
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....ppeals) has allowed the claim of the assessee by giving the finding in paras 5 & 6 as under : "5. I have considered the appellant's submission also perused the assessment order. The appellant engaged in the manufacture and export of cotton yarn/knitted fabrics. The observation of the Assessing Officer is that the appellant has debited a sum of Rs. 1,68,59,037 towards an export soles and on such commission TOS was not deducted. However, the appellant's contention is that the appellant company had appointed agents at various countries to collect orders and pass them to the company in India for export of the goods dealt by the company. These agents are paid agreed commission based on the quantity /free of the exported goods against the order procured by the agent. The operation of the agents operates on behalf of the appellant company. These agents do not have any operation in India nor do they carry out any other business in India. The appellant had furnished copies of 'Marketing Agency Agreement' and from it transpires that agents are non-resident agent and their business operation in abroad only and PE whatsoever in India. In this context the appellant placed r....
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.... (SC) 74 : (2009) 314 ITR 309 (SC) wherein the apex Court has categorically held that the resident is not required to deduct TDS under s. 195(1) of the Act, if the income of non-resident recipient is not taxable in India. Given this binding precedent, the judgment of Karnataka High Court in the case of Samsung Electronics Co. Ltd & Ors. vs. CIT & Ors. (supra) would not apply to the cases where the non-resident recipient is not taxable in India, We also find that the judgment of apex Court in the case of Ishikawajrna-Harima Heavy Industries Ltd. vs. Director of IT (2007) 207 CTR (SC) 361 (2007) 288 ITP. 408 (SC) wherein it vas held that for s. 195 is to be attracted, the services rendered by the nonresident should have been rendered in India and also should have been used in India and that, this twin tests has to be satisfied for s. 195 is to be attracted. We find that the legislation introduced the Explanation to s. 9(2) of the Act, after this judgment, with retrospective effect from 1st June, 1976 in the Finance Act, 2007, Despite this introduction of Explanation to s. 9(2) of the Act, the Karnataka High Court in the case of Jindal Thermal Power Co. Ltd. vs. Dy. CIT (2009) 225 CTR....
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....ories Pvt. Ltd. (supra). The learned Departmental Representative has not brought to our notice any contrary decision/precedence. In view of the above facts and circumstances of the case where the commission payment in question is not treated by the Assessing Officer as ITS or royalty then in the absence of PE, it is not chargeable to tax in India. The learned Departmental Representative has relied upon the Explanation 2 of Section 195(1) of the Act. However, we are of the view that this Explanation 2 to Section 195(1) would not obliterate the prerequisite condition of Section 195(1) that "sum chargeable under the provisions of the Act". We further note that an identical issue has been considered by the co-ordinate bench of this Tribunal in the case of Zanav Home Collection (supra) in paras 38 to 41 asunder: 38. We have considered the rival submissions The copies of the Agreement between the Assessee and the non-resident (7 out of the 10 non-residents listed in the earner part of this order) has been filed before us as Annexure-H in the paper book filed by the Assessee. The main clauses in the agreement needs to be seen to appreciate the contentions of the parties before us....