TaxTMI 
TaxTMI 
2022 (9) TMI 1555
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....ces in the territory of North American, South American and the Caribbean markets. MSSPL had entered into Sales & Marketing agreement with the assessee. For the assessment year 2012-2013, an amount of Rs 3,47,83,552/- has been received by the assessee as sales commission. The assessee did not file the return of income on the premise that commission income is not taxable in India. 3. There was a survey in the case of MSSPL and proceedings u/s 201 of the I.T. Act was completed. Consequently, proceedings were initiated U/S 147 of the Act in the case of the assessee by issue of Notice U/S 148(1) dated 29.03.2019. The assessee filed a return of income on 13.06.2019, wherein it declared 'Nil' income. The learned AO vide Notice dated 18.06.2019 furnished the reasons for reopening the assessment. It was stated that services provided by the assessee are taxable as FTS both as per the Act and DTAA and as return of income has not been filed, the above income has escaped assessment. 4. Against the reasons, the assessee filed objections before the AO on 01.07.2019. The assessee made detailed submissions as to why sale commission received from MSSPL is not taxable. It is stated that....
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....g officer is thus bad in law and liable to be quashed. 3. The lower authorities have erred in passing the assessment order under section 147 read with section 144C without disposing off the appellant's objections to reasons stated for reopening recorded by passing a speaking order as contemplated by the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd. v. ITO (2003) 259 ITR 19. The final assessment order passed in violation of the decision of the Supreme Court is bad in law and liable to be quashed. Taxability of Sales Commission: 4. The lower authorities have erred in : (i) Not appreciating that sales commission received from ASPL is not taxable in India as per the provisions of Income Tax Act, 1961 (`Act'); (ii) Not appreciating that services provided by appellant does not qualify as FTS as per Act and does not satisfy the test of `Make Available' as envisaged in India-USA DTAA and therefore does not qualify as fees for included services under DTAA. 5. The lower authorities have erred in placing reliance on the judicial decisions which are distinguishable both on facts of the case and provisions of law.....
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....om 169 (Karnataka) (viii) SLP dismissed by Supreme Court - (2022) 134 taxmann.com 60 (SC); (ix) Bengal Tea & Fabrics Ltd.. v DCIT (2018) 91 taxmann.com 38 (Kolkata - Trib.); (x) DCIT v Divi's Laboratories Ltd (2011) 12 taxmann.com 103 (Hyd.); (xi) CIT vs. Model Exims, (2014) 42 taxmann.com 446 (ALL) (xii) Brakes India Ltd. v DCIT (2013) 33 taxmann.com 501 (Chennai - Trib.); (xiii) Sri Subbaraman Subramanian v Asst CIT (2013) 30 taxmann.com 236 {Bangalore - Trib.); (xiv) ACIT v India Shoes Exports (P.) Ltd (2015) 57 taxmann.com 303 (Chennai-Trib.); (xv) ACIT v Evergreen International Ltd (2018) 91 taxmann.com 111 (Delhi -Trib.); (xvi) CIT v Orient Express (2015) 56 taxmann.com 331 (Madras); (xvii) Divya Creation v ACIT (2017) 86 taxmann.com 276 (Delhi-Trib.); and (xviii) Khimji Visram & Sons v ACIT (2014) 52 taxmann.com 485 (Mumbai- Trib.). (xviii) GVK Industries Ltd. v. ITO (2015) 54 taxmann.com 347 (SC). (xix) Foster Wheeler France SA (IT-62-ITAT-2016 CHNY). 7. The learned AR also took us through the decisions relied on by the AO and distinguished the same. I....
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.... software product/services on behalf of the Appellant; * Co-Ordination between the customers in North American, South American and Caribbean market and MSSPL; * Following up with the customers in North American, South American and Caribbean market for collection of amount. 10. In the instant case, the assessee is not providing any technical, managerial or consultancy services rather has been engaged to act as authorized business partner to market and promote the products or services of MSSPL outside India In fact, the AO/DRP have not even concluded as to what is the nature of services rendered by the assessee. The decision regarding what are the products/services that are to be developed or provided, the price to be charged to the customer etc. are solely taken by MSSPL. The assessee does not play any role in the decision-making process. Further, once the assessee procures the orders, it is at the discretion of MSSPL whether to sell the product or render services to identified customers. The Hon'ble Delhi High Court in case of DIT (International Taxation) vs Panalfa Autoelectrik Ltd (2014) 49 taxmann.com 412 (Delhi) held that commission paid by the assessee to ....
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....(SC) held that the sales commission paid to the commission agents outside India was not taxable in India. The Apex Court observed that the sales commission earned by the non-resident agents cannot be deemed to accrue or arise in India. 12. The Hon'ble Madras High Court in the case of CIT vs Faizan Shoes (P.) Ltd (2014) 48 taxmann.com 48 (Madras) had held that Assessee was not liable to deduct tax at source when non-resident agent provides services outside India on payment of commission. 13. In the case of Exotic Fruits (P.) Ltd reported in (2013) 40 taxmann.com 348 (Bangalore- Trib.), the Bangalore Bench of the Tribunal held that payment made to the non-resident agents does not fall within the meaning of managerial services as mentioned under section 9(l)(vii) of the I.T. Act and not required to deduct TDS under section 195. Further, it has been held that in the absence of permanent establishment(s) of such agents in India, the export commission income of the agents was not liable to be taxed in India and thus, the assessee was not obliged to effect any deduction of tax on the commission payments made to the agents who were positioned overseas. 14. The ITAT in the case of ....
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....erland based company for raising required finance from international organisations on most competitive terms, payment made to swiss company for rendering such consultancy services amounted to 'fee for technical service' liable to tax in India. The above judgment of Hon'ble Apex Court is not applicable to facts of the present case. In the above judgment Hon'ble Supreme Court observed that the non-resident entity provided various services like advising the assessee on various aspects like financial structure, and security package to be offered to the lender, study of various lending alternatives for the local and foreign borrowings, making assessment of expert credit agencies worldwide and obtaining commercial bank support on the most competitive terms, assisting the assessee-company in loan negotiations and documentations with the lenders, structuring, negotiating and closing financing for the project in a coordinated and expeditious manner. The above services are clearly in the nature of consultancy services as they assist in decision making. However, in the instant case, the assessee has rendered sales and marketing services to MSSPL. No consultancy services are re....
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....ement of services and the same has been confirmed by the DRP. The project management services does not constitute technical or consultancy services and therefore are outside the ambit of "FIS" as defined in India-USA DTAA. Even if it is assumed without admitting that marketing services is technical or consultancy in nature, it did not make available any technical knowledge, experience, know-how, process to MSSPL. The term "make available" under the treaty law postulates a concept wherein the recipient of the services is not only benefited by the services but there is also a transfer of the technology, processes, skill etc., to the recipient in a manner which will enable the latter to apply the technology, processes, skill etc., in future without recourse to the service provider. The term "make available" encompasses some sort of durability and stability with reference to the transfer of technology, processes and skill etc., so that the same is not regarded as transient or ephemeral. 21. As per Memorandum of Understanding ("MOU") on Article 12 of the Treaty, entered into by the Government of India and the Government of USA on May 15, 1989, the technology is considered "made avail....
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....to the recipient of the service to make use of the said technology. The tax is not dependent on the use of the technology by the recipient. The recipient after receiving of technology may use or may not use the technology. It has no bearing on the taxability aspect is concerned. When technical service is provided, that technical service is to be made use of by the recipient of the service in further conduct of his business. Merely because his business is dependent on the technical service which he receives from the service provider, it does not follow that he is making use of the technology which the service provider utilises for rendering technical services. The crux of the matter is after rendering of such technical services by the service provider, whether the recipient is enabled to use the technology which the service provider had used. Therefore, unless the service provider makes available his technical knowledge, experience, skill, know how or process to the recipient of the technical service, in view of the Clauses in the DTAA. the liability, to tax is not attracted. .................... 22. What is the meaning of "make available". The technical or consult....