AI Drafter 
TaxTMI 
TaxTMI 
2025 (11) TMI 29
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....-18. 2. The assessee is aggrieved by the disallowance made under Section 40(a)(ia) of the Act in respect of commission paid to overseas agents for procuring export sales and warehousing charges incurred abroad for storage of goods prior to delivery to overseas customers. 3. The facts in brief are that the assessee is engaged in the manufacture and export of fruit pulps, concentrates and processed vegetables to various international markets. During the year, it paid Rs. 25,84,396/- as commission to non-resident agents located in the UK, Australia, Netherlands, France, UAE, Hong Kong and Germany. These agents neither had any business operations in India nor any permanent establishment here. Their role was confined to canvassing orders a....
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....erved as under: "I have considered the above submission of the appellant with respect to grounds of appeal and related facts and gone through the AO's observation & decision in assessment order Considering the entire conspectus of the case I fully agree with the observation and decision of the AO in as much as the amount paid to the non-resident are deemed to arise in India u/s 9(1) and therefore, chargeable to tax in India. Moreover as per assessment order the AO has established that the provisions of Section 9(1) of the Income Tax Act, 1961 would squarely come into place, as soon as commission and warehousing Charges is having an element of Consultancy Technical and Managerial services for which said commission on export sale....
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....gard is dismissed." 8. Before us, the learned counsel for the assessee submitted that in earlier years, from assessment years 2013-14 to 2015-16, the Tribunal has already decided this very issue in assessee's favour. It was contended that the income in the hands of the foreign agents is purely business income accruing outside India, taxable here only if they had a business connection or permanent establishment in India, which has not been demonstrated. He further argued that warehousing charges are simple commercial payments for storage abroad and cannot be regarded as fees for technical services. 9. The learned Departmental Representative, on the other hand, placed heavy reliance on the order of the CIT(A). She submitted that the pay....
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....road and their remuneration was received abroad. Business income follows the situs of the business activity, not the location of the payer. It is the soil in which the enterprise operates that gives rise to the income, not the country from which payment is remitted. To treat such receipts as taxable in India, without territorial nexus, is to stretch the charging provision beyond its legitimate reach. 12. Equally, the attempt to describe such commission as fees for technical services is misconceived. The statutory definition of FTS contemplates the rendering of managerial, consultancy or technical services. These terms presuppose the imparting of specialised knowledge or the provision of considered advice. A foreign agent who merely canva....
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....hey income deemed to accrue in India. Once the payments are not chargeable to tax in India, the obligation under Section 195 does not arise, and the disallowance under Section 40(a)(ia) cannot be sustained. 15. This issue has already been considered and decided by the Tribunal in assessee's own case for assessment years 2013-14 to 2015-16. Vide order dated 21st February 2022, the co-ordinate bench held that such payments were not taxable in India in absence of a permanent establishment and that the disallowance made under Section 40(a)(ia) was liable to be deleted. For ready reference, the relevant findings are as under: "12. With regard to Ground No. 4 which is in respect of s 40(a)(i) of the Act relating to payments of export ....