TaxTMI 
TaxTMI 
2026 (6) TMI 973
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....to make payments to the foreign entities without deducting tax at source. 2. On the facts and in the circumstances of the case and in law the Ld.CIT(Appeals) -13 Pune, erred in deleting the disallowances u/s. 40a(i) of the IT Act even when there is an express provision stipulated in section 195 of the IT Act and that the assessee chose to circumvent the said provisions and not to seek an NOC from the concerned Assessing Officer, to decide whether or not TDS is to be made at a lower deduction or at Nil rate. 3. On the facts and in the circumstances of the case and in law the Ld.CIT (Appeals) -13 Pune, erred in deleting the disallowances u/s. 40a(i) of the IT Act without appreciating that the right to receive the commission arises in India when the order is executed in India. 4. On the facts and in the circumstances of the case and in law the Ld.CIT(Appeals) - 13 Pune, erred in deleting the disallowances u/s. 40n(i) of the IT Act, without appreciating the fact that documents that the assessee relics on, not only casts doubts on the genuinity of the transactions but also makes it clear that the said documentation has been made in order to avoid and take shel....
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....lier years, but no such disallowance was made by the AO. 5. Ld.AR relied on the following: i. ACIT vs. Kapoor Industries Ltd., [2021] 125 taxmann.com 271 (Delhi-Trib.); ii. PCIT vs. Sesa Goa Ltd., [2023] 146 taxmann.com 35 (Bombay); iii. ACIT vs. Manoj Raizada [2023] 154 taxmann.com 54 (Delhi-Trib.) 6. Findings and analysis: We have heard both the parties and perused the records. Assessee is an individual filed his original return of income on 29-11-2020, declaring total income at Rs. 21,10,85,690/-. Assessee then revised the return on 04-03-2021 declaring total income at Rs. 21,10,85,690/-. Assessee's case was selected for scrutiny. The AO issued notice u/s. 143(2) of the Act on 29-06-2021. Subsequently, the AO issued notices u/s. 142(1) and show cause notice which were complied by the assessee. Assessee is a proprietor of M/s. Bharat Tanks and Vessels, engaged in the business of design, manufacturing, assembly and installation of tanks and vessels for storage, transportation of oil, gas and chemicals and activities allied thereto. During the hearings, the AO observed that assessee had made payments outside India of Rs. 21,20,55,594/- with....
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....djusted against the payment of tax, if any, to the payee/recipient non-resident." 7. Aggrieved by the assessment order, the assessee filed appeal before the Ld.CIT(A), the relevant paragraphs of order of the Ld.CIT(A) are reproduced as under: The decision in CIT v. Toshoku Ltd. provides a strong precedent that income for services rendered wholly outside India by a non-resident with no Indian business presence is not taxable in India under Section 9. While the Explanation to Section 9(2) broadens the scope of deemed accrual of income for "fees for technical services", the Appellant's case pertains to non-technical services. The general principles of territorial nexus and the source of income continue to be relevant for such services. Furthermore, the rulings in Device Driven and Lufthansa Cargo regarding the exceptions in Section 9(1)(vii)(b) (even though for technical services) indicate a legislative intent to exclude income related to foreign business and income sources from deemed accrual in India. This underlying principle supports the Appellant's argument that payments for non-technical services utilised for a foreign income-generating project shoul....
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....non-residents for repairs of aircraft, which were used for earning income primarily from sources outside India, fell within the exclusionary clause of Section 9(1)(vii) (b) and were not chargeable to tax in India. This principle is analogous to the present case, where the technical services are utilised for a project that is a source of income outside India. I find that the payments made by the Appellant for technical services utilised at their foreign project site, which constitutes a source of income outside India, are not deemed to accrue or arise in India. Therefore, considering the specific exception provided in Section 9(1)(vii)(b), the clarification by the Supreme Court in GVK Industries, and the ratio of the Lufthansa Cargo case, there was no obligation on the Appellant to deduct TDS under Section 195 of the Act on these payments. Consequently, the disallowance under Section 40(a)(i) for non-deduction of TDS is therefore not warranted. The disallowance of Rs. 18,14,259 under Section 40(a)(i) of the Income Tax Act, 1961, in respect of payments made to non-resident suppliers of technical services on the foreign project site, is directed to ....
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....e vide letter dated 14-03-2022 had filed details of payments before the AO. The copy of the said Letter is at Page 40-54 of the Paper Book. It is noted that Assessee has paid Following Amounts: Assistance Services Abroad - Rs. 2,97,06,910/- Commission Paid Abroad -Rs. 16,63,24,750/- Rental Charges paid Abroad -Rs. 1,42,09,675/- Professional fee- -Rs. 12,08,105/- Testing Charges -Rs. 6,06,154/- 11. Assessee has paid Commission to following companies: Linaks Company Ltd Universal Engineering & Consultancy Services Ltd Frontline Building Materials Co LLC All the above mentioned entities are based in Ghana . They have filed certificate that they have received amounts outside India for the work done by them for Assessee outside India and They do not have any PE or business connection in India. The said certificates were filed before the AO and CIT(A). The copies are in the paper book. 12. On perusal of the copies of Agreements entered with them it is noted that these companies have provided Assessee services related to the tender issued by one of the oil company in Ghana. Assessee has filed copies of these ....
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....ances of the case, the Hon'ble ITAT is right in deleting the addition of Rs. 5,07,06,761 u/s. 40(a)(ia) towards payment of commission of foreign agents where TDS was not deducted ignoring the decision of AAR in the case of Rajiv Malhotra, In re [2006] 155 Taxman 101/284 ITR 564/203 CTR 607 and SKF Boilers and Driers Pvt Ltd, wherein it was held that commission paid to export agents is taxable in India in view of sec. 5(2)(b) r.w.s. 9(1)(i) of IT Act? .................. 7. As regards proposed question A, this appears to us to be on a finding of fact. The question would not arise because the finding of the fact remained unchallenged. The question of TDS on commission income paid to foreign agents and the non-deduction of TDS is an issue fully covered by the decision of the Supreme Court in GE India Technology Centre (P.) Ltd. v. CIT [2010] 7 taxmann.com 18/193 Taxman 234/327 ITR 456/234 CTR 153. There is, in addition, the decision of a Division Bench of this Court in CIT v. Gujarat Reclaim & Rubber Products Ltd. [2017] 79 taxmann.com 352/[2016] 383 ITR 236/287 CTR 83 (Bom.) where, following the Supreme Court decision in CIT v. Toshoku Ltd. [1980] 125 ITR 525/19 ....