TaxTMI 
TaxTMI 
2017 (11) TMI 2074
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....sallowance u/s 40(a)(i) of the Income Tax Act, 1961. The assessment for impugned AY was framed by Ld. Income Tax Officer 28(2)(3), Mumbai u/s 143(3) on 31/12/2013. 2.1 Facts leading to the same are that the assessee being resident individual engaged as garment traders and exporter of engineering items under proprietary concern namely SNK Trading & Exports was assessed for impugned AY u/s 143(3) on 31/12/2013 at Rs.1,25,40,290/- after disallowance of Rs.1,15,07,972/- on account of foreign commission as against returned income of Rs.11,49,510/- filed by the assessee on 13/09/2011. The solitary issued involved in the appeal is disallowance of certain foreign commission payment u/s 40(a)(i) for want of deduction of tax at source. 2.2 Duri....
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....s according to the AO attracted disallowance u/s 40(a)(ia). 3.4 The assessee on the other hand argues that the commission paid to the agent for services rendered aboard was not "chargeable to tax in India' and therefore he was not required to deduct tax at source u/s 195 on such commission payments. 3.5 Examination of the facts of the transaction including the documentation available on record reveal that the assessee has purchased in India and exported to Ghana, West Africa manganese steel cast articles to one M/s. Standard Tools & Hardware Trading F.Z.E, through the non-resident agent M/s. Ghana Engineering Co. Ltd. The commission agent is based at Accra, Ghana and does not have any permanent establishment or busines....
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....d case, the term "any other sum chargeable under the provision of Act" in section 195 is explained. The Hon. Supreme Court held that, if payment is made in respect of the amount which is not chargeable to tax under the provisions of Act, TDS is not liable to be deducted. 3.9 the Hon. Delhi High Court in the case of CIT -vs- EON Technology (P) Ltd.343 ITR 366 (Delhi) (2012) following the decision in the case of GE India Technology Centre (P) Ltd. (SC) held that payment of sate commission to a non-resident agent operating outside India would not attract liability to deduct tax at source u/s 195 and disallowance u/a 40(a)(i) was not called for. 3.10 Similar view has been taken by the Hon. Mumbai Tribunal in the case of Gujara....
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....nt u/s 40(a)(ia) is deleted. Ground No. 1A is accordingly allowed. Aggrieved, the revenue is in further appeal before us. 3. The Ld. Departmental Representative [DR] placed reliance on the stand of Ld. AO whereas Ld. Counsel for Assessee [AR] placed reliance on the stand of first appellate authority. 4. We have carefully heard the rival contentions and perused relevant material on record. First of all, it is noted that failure to deduct TDS on foreign payment attracts disallowance u/s 40(a)(i) whereas the lower authorities, have, at most of the places, referred to the same as 40(a)(ia). However, assuming the same to be typographical error, we proceed further to decide the issue on merits. 5. The admitted facts are that the forei....
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....nagerial / Professional / Technical services within the meaning of Section 9(i)(vii). This view is fortified by the judgment of Hon'ble Delhi High Court rendered in CIT vs. EON Technology (P) Ltd. [343 ITR 366] where the Hon'ble court after considering the relevant CBDT circulars observed as under:- "Circular No. 23, dated July 23, 1969 Foreign agents of Indian exporters.- A foreign agent of Indian exporter operates in his own country and no part of his income arises in India. His commission is usually remitted directly to him and is, therefore, not received by him or on his behalf in India. Such an agent is not liable to income-tax in India on the commission. Circular No. 786, dated February 7, 2000 As clarified earlier i....
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.... be an assessee in default and shall also be liable to pay simple interest at the specified rate. 2. References were received from field officers on the issue of deduction of tax at source under section 195 of the Income-Tax Act, 1961 in the tight of the decisions of the Supreme Court of India in the case of GE India Technology (P.) Ltd. v. CIT [2010] 327 ITR 156 (SC) and Transmission Corporation of AP Ltd. and another v. CIT [1999] 239 ITR 587 (SC) and the decision of the Madras High Court in CIT v. Chennai Metropolitan Water tax Cases Appeals Nos.500-501 of 2005, with a request for clarification as to whether the tax is to be deducted under sub-section (1) of section 195 on the whole sum being remitted to a non-resident or only t....