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2014 (5) TMI 738 - AT - Income TaxDisallowance u/s 40(a)(ia) of the Act – Sales commission paid to foreign agent – Applicability fo section 195 of the Act - Held that:- There cannot be any dispute with regard to the services rendered by the foreign party - The commission bill of M/s. Business International, Bangladesh for USD 3954.38 and also the details of foreign commission from 1.4.2006 to 31.3.2007 furnished by the assessee in the papers furnished clearly substantiate the claim of the assessee as to the services rendered by the foreign party - there was no justification for the CIT(A) to dispute the very rendering of services by the foreign party to the assessee, so as to justify the disallowance under the provisions of S.37(1) itself - the payment has been made by the assessee through direct remittance to the party outside India - there is no reason to dispute the claim of the assessee that it is under no obligation to deduct tax at source in terms of S.195 of the Act - the applicability of provision of S.195(2), since the sum paid to non-resident is outside the scope of income taxable under the Income Tax Act. Relying upon GE India Technology Centre (P.) Ltd. v. CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] - a person is liable to deduct tax u/s 195(1) only when the payment is made by him is chargeable under the provisions of the Act - The payer becomes an assessee in default only when he fails to fulfil the statutory obligation u/s 195(1) and if payment does not contain the element of income, the payer cannot be made liable - the commission paid by the assessee does not contain any element of income taxable in India, the provisions of S.195 does not apply - In the absence of any certificate with regard to non-taxability of the commission to income-tax in India, it has been decided in Millennium Infocom Technologies Ltd. v. Asstt. CIT [2008 (1) TMI 437 - ITAT DELHI-E] - such a certificate from the Department is not essential, as the payer has an option to obtain such a Certificate from the Accountant instead of approaching the Revenue authorities, before making a payment to non-residents - there is no justification for any disallowance in respect of commission payments made by the assessee to its foreign agent, either in terms of Section 40a(ia) or u/s 37(1) of the Act – Decided in favour of Assessee.
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