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2020 (10) TMI 941 - HC - Income TaxIncome accrued in India - commission paid to the non-resident - whether services of the non-resident do not fall under the scope of 'technical services' as spoken of in Section 9(1)(vii)? - TDS u/s 195 - HELD THAT:- There is an element of managerial function coupled with all encompassing consultancy services and also purely technical services too. The appellant cannot raise a contention that the services of the non-resident do not fall under the scope of 'technical services' as spoken of in Section 9(1)(vii) and defined in Explanation-2. Activities carried out by the commission agent, who is a non-resident, to be covered under the exception to clause (b) of Section 9(1)(vii) - The commission, as is seen from Annexure-B, is 15% of the contracts/projects executed by the appellant on the basis of the marketing services rendered by the commission agent. The income derived by the appellant from the marketing services rendered by the commission agent is sourced from the three territories which are outside India. The activities of the non-resident agent are confined to those territories outside India - commission paid is 'fees payable in respect of services for the purposes of making or earning any income from any source outside India' is the compelling argument, which we find favour with. The income derived by the appellant is un-disputedly from the three territories mentioned in the agreement, which are admittedly outside India. There is no utilization of the services rendered by the non-resident agent within India. The projects executed by the resident company even within India was for sale to the foreign buyer and it cannot be said that merely for reason of the execution in India the service was utilized in India. The software developed in India was also for export; the appellant being a 100% EOU. The services rendered by the non-resident agent was for facilitating sale in the three outside territories. The services rendered for effecting exports by the appellant company to foreign buyers, makes the foreign countries the source of income. The execution of the project within India would not attract income tax since the income is derived from the sale of the product outside the territories of India and the execution is only to obtain such income from territories outside India. As has been declared in Sedco Forex International Drill Inc. [2005 (11) TMI 25 - SUPREME COURT] "an explanation to a statutory provision may fulfill the purpose of clearing up an ambiguity in the main provision or an explanation can add to and widen the scope of the main section". The Explanation cannot be found to have taken away or curtailed the effect of the clear exceptions provided by sub-clause (b) of Section 9(1)(vii). Commission paid to the non-resident in the present case is not taxable under the IT Act by virtue of Section 5(2) read with Section 9(1)(vii)(b), there is no scope for finding any liability on the resident company to deduct tax from source, from payments made by them to the non-resident. We rely on GE India Technology Centre [2010 (9) TMI 7 - SUPREME COURT] wherein it was categorically held that "the plain words of Section 195(1) which is in clear terms lays down that tax at source is deductible only from 'sums chargeable' under the provisions under the IT Act, i.e., chargeable under Sections 4, 5 and 9 of the IT Act" (sic. para 24). In favour of the assessee and against the Revenue.
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