TMI Blog2018 (7) TMI 1982X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT (A) who has given a categorical finding to this effect. We also note that the assessee had been making similar payments in earlier as well as subsequent assessment years which were accepted by the department in assessment orders framed u/s 143(3) of the Act and no adverse inference had been drawn by the department in this regard. Accordingly, we find no reason to interfere with the findings of the Ld. CIT (A) in this regard and we dismiss the grounds raised by the department. - ITA No. 6140/Del/2014 - - - Dated:- 20-7-2018 - SHRI G.D. AGRAWAL, HON BLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For the Appellant : S/Shri Rakesh Gupta, Somil Aggarwal For the Respondent : Shri Deepesh Gupta, Advocate ORDER PER SUDHANSHU SRIVASTAVA, J.M. This appeal is preferred by the department against the order dated 26.08.2014 passed by the Ld. CIT (Appeals)-19, New Delhi for assessment year 2011-12. 2. Brief facts of the case are that the assessee company is engaged in the business of manufacturing, trading and marketing of footwear. The return of income was filed declaring tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (A). 3. The Ld. Sr. DR placed extensive reliance on the findings of the Assessing Officer and submitted that the Assessing Officer had examined the correspondences between the assessee and the commission agents and based on the correspondences, the Assessing Officer had reached a conclusion that the role of agents was not confined to that of mere marketing agents but they were found to be constantly in touch with the assessee regarding various transactions leading to export by the assessee. The Ld. Sr. DR submitted that the correspondences reveal that the various agents were providing valuable inputs regarding the kind of samples to be made available which include descriptions regarding the size, the lining to be used, the design, the pricing, the quantity, the delivery dates, the style, material to be used, colour etc. and, therefore, in view of section 9(vii)(c) of the Act, the nature of services being provided by the parties was more in the nature of consultancy services. Ld. Sr. DR also placed reliance on a ruling of the Hon ble Authority for Advanced Rulings (IT), New Delhi in the case of SKF Boilers and Driers Pvt. Ltd. in AAR No. 983-984 of 2010 and submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts had a direct nexus with the quantum of sales. It was also submitted that the rate of commission paid to the foreign agents was at the same rate at which the commission agents situated in India were remunerated. Ld AR also submitted that these commission agents had no Permanent Establishment in India so as to fall within the mischief of section 9(i) of the Act and were only sales agents. Ld. AR also submitted that the department has accepted and allowed payment of commission to foreign agents without deduction of tax at source in earlier assessment years as well as in subsequent assessment years. It was submitted that in view of principle of consistency also, commission paid was deductible. The Ld. AR also submitted a chart depicting details of commission paid to the foreign agents in the previous and subsequent assessment years and submitted that there were parties which were common in all these assessment years. Ld. AR also placed on record copies of assessment orders passed u/s 143(3) of the Act for assessment years 2010-11, 2012-13, 2013- 14 and 2014-15 wherein the payments of similar commission was not disallowed. Ld. AR also placed reliance of a plethora of judicial preced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever payments are made on account of commission for procuring sales orders, tax was not required to be deducted at source. 5.2 The Hon ble High Court of Allahabad in the case of CIT vs. Model Exims reported in 366 ITR (All) has also held that payment of commission to foreign agents did not make liable such foreign agents to pay tax in India and, thus, tax was not liable to be deducted at source u/s 195 of the Act. The scope of Explanation 2 to section 9(l)(vii) of the Act by the Finance Act, 2010 was also examined by the Hon ble Allahabad High Court in the case of CIT vs. Model Exims (supra) which was followed by the Tribunal in that assessee's own case for the immediately preceding year. The relevant observations of the Tribunal are extracted hereunder for the sake of ready reference:- 5. The ld. counsel for the assessee has contended that this issue is covered by the order of the jurisdictional High Court and various orders of the Tribunal, particularly in the case of ACIT vs. M/s Model Exims, Kanpur in I. T.A. No. 697/LKW/2013 in the light of CBDT circular and amendments. We find that the view taken by the Tribunal has been approved by the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l adviser for his products. He has further observed that being commission agent required managerial acumen expertise and therefore, would be covered under Section 9 (1) (vii) of the Act as managerial services. On perusal of the assessment order and assessment folder, I find that the A.O. has not brought anything on record which could demonstrate that these agents had been appointed as selling agents, designers technical advisers. Rather on me contrary I find that the agreement is of for procuring orders and nothing else. In absence of any such evidence, this observation of the A.O. is mere conjecture and therefore, no cognizance of the same can be taken. It is a trite law that suspicion, no matter how grave, cannot take place of evidence. In this case, there is even no case of suspicion, leave aside any evidence to the effect that the agents were not only selling agents but also designers and technical advisers. The confirmation from the respective foreign agents that the foreign agents did not have any branch or PE in India further supports the case of the appellant. 5.3.3 The A.O.'s observation that as a selling agent, the agent has to have managerial acumen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 6) is applicable in as much as in the present case there was no decision of the Supreme Court or High Court or any statutory provision, which was contrary to the circular, which was withdrawn on 22.10.2009. The questions of law are covered by the judgments of this Court cited as above, and are decided in favour of the assessee and against the department 6. We, therefore, following the aforesaid judgment of the jurisdictional High Court, decide the issue in favour of the assessee and confirm the order of the Id. CIT(A) in this regard. 5.3 Similarly, the Hon ble Delhi High Court in the case of Director of Income Tax (International Taxation) vs. Panalfa Autoelektrik Ltd. reported in 49 taxmann.com 412 (Delhi) examined different types of services and their Lordships have held that services rendered for procurement of export orders etc. cannot be treated as managerial services provided by the non- resident to the respondent assessee. Their Lordships further defined the consultancy services and technical services. For the sake of reference, we extract the relevant observations of the Hon'ble High Court of Delhi as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not bothered to refer and to examine the relevant clauses, which certainly was not the right way to deal with the issue and question. [Para 17] Further, would be incongruous to hold that the nonresident was providing technical services. The nonresident had not undertaken or performed 'technical services', where special skills or knowledge relating to a technical field were required. Technical field would mean applied sciences or craftsmanship involving special skills or knowledge but not fields such as arts or human sciences. [Para 19] The moot question and issue is whether the nonresident was providing consultancy services. [Para 20] The word 'consultant' refers to a person, who is consulted and who advises or from whom information is sought. In Black's Law Dictionary, Eighth Edition, the word 'consultation' has been defined as an act of asking the advice or opinion of someone (such as a lawyer). It may mean a meeting in which parties consult or confer. For consultation service under Explanation 2, there should be a provision of service by the non-resident, who undertakes to perform it, which the acquirer may us ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
