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2011 (2) TMI 105 - AT - Income TaxCommission income - Disallowance u/s 40(a)(i) - Deemed income u/s 9 - TDs u/s 195 - since the assessee was not in a position to interact and set up a sales and marketing support management operations in the clients’ locations, ETUK was to invest and operate the sales and marketing operations from UK. Thus, ETUK rendered services to the assessee company outside India. - Held that: no business connection exists, much less is established. The operations carried out by ETUK were not carried out in India. ETUK does not have any permanent establishment in India. ETUK was acting as the assessee’s marketing agent and was providing marketing and sales support to all purchases executed by the assessee company for its overseas clients. - It was for the rendering of this service that the commission was paid by the assessee to ETUK. The payment was remitted outside India. - the provisions of section 9(1)(i) of the Act are not fulfilled and there is no deemed accrual of income in India. So, there is no income which could be said to be includible in the total income of ETUK, u/s 5(1) of the Act and, therefore, there is no case for charging income tax in respect of the commission payment made by the assessee to ETUK, under section 4(1) of the Act. Sec. 195 - TDS on any Sum - held that: If the contention of the Department that the moment there is remittance the obligation to deduct TAS arises is to be accepted then we are obliterating the words “chargeable under the provisions of the Act” in section 195(1). The said expression in section 195(1) shows that the remittance has got to be of a trading receipt, the whole or part of which is liable to tax in India. The payer is bound to deduct TAS only if the tax is assessable in India. If tax is not so assessable, there is no question of TAS being deducted. (See: Vijay Ship Breaking Corporation and Others v. CIT, (2008 -TMI - 31137 - SUPREME COURT )). Commission - In “CIT v. Toshoku Limited”(1980 -TMI - 5841 - SUPREME Court)it was observed that the expression “business connection” pre-supposes that the business is carried on in India by the non-resident. The commission amounts earned by the non-resident for the services rendered outside India were held incapable of being deemed to be income accrued or arisen in India. In the present case also, the commission amount has been earned by ETUK, undisputedly, for the services rendered in the UK and not in India.
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