TMI Blog2021 (4) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... and the judgment delivered by the Income Tax Appellate Tribunal is in favour of the assessee. Keeping in view the totality of the circumstances of the case, this Court is of the considered opinion that in the present case the Associated Enterprises has rendered services out of India in the form of placing orders with the manufacturers who are already outside India. The commission was paid to Associate Enterprises out of India. No taxing event has taken place within the territories of India and therefore, the Tribunal was justified in allowing the appeal of the assessee. - ITA NO.223/2018 - - - Dated:- 12-3-2021 - HON'BLE MR. JUSTICE SATISH CHANDRA SHARMA AND HON'BLE MR. JUSTICE V.SRISHANANDA APPELLANTS (BY SRI.SANMATHI E.I., ADV.,) RESPONDENT (BY SRI.NAGESWAR RAO, ADV.,) JUDGMENT SATISH CHANDRA SHARMA J., The present appeal is arising out of the order dated 28.09.2017 passed by the Income Tax Appellate Tribunal, Bangalore in case No. IT(TP)A No.1611/Bang/2017 (M/s. Puma Sports India Private Ltd. Vs. DCIT, Bangalore). 2. The facts of the case reveal that the assessee- Company is engaged in the business of wholesale trading and had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case especially when the assessee failed to deduct TDS in view of specific provision of Section 5(2)(b) read with Section 9(1)(i) of the Act and the expenses made by the assessee without deducting the TDS are not at all permissible keeping in view Section 40(a)(i) of the Act. 3. The appeal has been admitted on the following substantial questions of law: Whether on the facts and in the circumstances of the case, the Tribunal is right in setting aside the disallowance made under Section 40(a)(1) of the Act for the sum of ₹ 7,29,13,934/- by holding that the income of the non-residents by way of commission cannot be considered as accrued or arisen or deemed to accrue or arise in India as the services of such agents were rendered or utilized outside India and the commission was also paid outside India? 4. Heard the learned Counsel appearing for the parties and perused the record. 5. Learned Counsel for the appellants-Income Tax department has placed reliance upon a judgment delivered by the Hon ble Supreme Court in case of GVK INDUSTRIES LTD. AND ANOTHER VS. INCOME TAX OFFICER AND ANOTHER reported in 371 SC ITR 453 and his contention is that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter on the basis of the situs in India because right to receive the commission accrued in India when the assessee receives the imported goods. In the present case, the Associated Enterprises have rendered services outside India in the form of placing the orders with manufacturers and the commission to Associated Enterprises was remitted to them abroad. 8. The commission that becomes payable after receipt of goods accrued when services were rendered in the form of placing orders with the manufacturers. Therefore, the Tribunal was justified in holding that the income of income of the non-residents by way of commission cannot be considered as accrued or arisen or deemed to accrue or arise in India as the services of such agent were rendered/utilized outside India and the commission was paid outside India. It is nobody s case that the Associated Enterprises rendered services inside India in the form of placing orders with the manufacturers. Undisputedly, the services were rendered outside India and the commission was paid outside India and therefore, the Tribunal was justified in holding that the TDS is not deductible from commission payment to a foreign agency on foreign soil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India : [Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government.] [Explanation 1.-For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date.] [Explanation 2.-For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries .] 21. Explanation to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormed after the Second World War, initially had 51 members. Presently, it has 193 members. With the efflux of time, there has been birth of nation States which enjoy political independence and that has led to cross-border and international trade. The State trade eventually has culminated in formulation of principles pertaining to international taxation jurisdiction. It needs no special emphasis to state that the said taxation principles are premised to promote international trade and to allocate taxation between the States. These rules help and further endeavour to curtail possibility of double taxation, tax discrimination and also to adjudicate resort to abusive tax avoidance or tax evasion practices. The nation States, in certain situations, resort to principle of tax mitigation and in order to protect their citizens, grant benefit of tax abroad under the domestic legislation under the bilateral agreements. 24. The two principles, namely, Situs of residence and Situs of source of income have witnessed divergence and difference in the field of international taxation. The principle Residence State Taxation gives primacy to the country of the residency of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urged that the commission amounts should be treated as incomes deemed to have accrued or arisen in India as they, according to the Department, had either accrued or arisen through and from the business connection in India that existed between the non-resident assessees and the statutory agent. This contention overlooks the effect of clause (a) of the Explanation to clause (i) of sub-section (1) of section 9 of the Act which provides that in the case of a business of which all the operations are not carried out in India, the income of the business deemed under that clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. If all such operations are carried out in India, the entire income accruing therefrom shall be deemed to have accrued in India. If, however, all the operations are not carried out in the taxable territories, the profits and gains of business deemed to accrue in India through and from business connection in India shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in the taxable territories. If no operations of business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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