2014 (8) TMI 170 - MADRAS HIGH COURT

Payment towards overseas agents commission – Commission paid to non-residents u/s 40(a)(i) – TDS not deducted u/s 195 - Agent’s service u/s 9(1)(vii) r.w section 9(2) – Held that:- The plea of the revenue cannot be accepted that commission paid by the assessee to the non-resident agent would come under the term fees for technical services - for procuring orders for leather business from overseas buyers wholesalers or retailers, the non-resident agent is paid 2.5% commission on FOB basis - The opening of letters of credit for the purpose of completing export obligation is an incident of export and the non-resident agent is under an obligation to render such services to the assessee, for which commission is paid - The non-resident agent does not provide technical services for the purposes of running of the business of the assessee in India - The services rendered by the non-resident agent can at best be called as a service for completion of the export commitment - the commission paid to the non-resident agent will not fall within the definition of fees for technical services.

The non-resident assessees did not carry on any business operations in the taxable territories - They acted as selling agents outside India - The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by cl. (a) of the Explanation to s. 9(1)(i) of the Act - The commission amounts which were earned by the non-resident assessees for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India - relying upon Commissioner of Income-Tax, AP Versus Toshoku Limited (and Another Appeal) [1980 (8) TMI 2 - SUPREME Court] - the services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services - Section 9 of the Act is not applicable to the case on hand and section 195 of the Act does not come into play – Decided against Revenue.