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2018 (5) TMI 1840 - AT - Income TaxTDS u/s 195 - Disallowance u/s. 40(a)(i) - commission paid to foreign agents - payment of fees for technical services - nature of the payment made by the assessee to non-resident agents - income accrued in India - whether the commission/brokerage paid to foreign agents are chargeable to tax in India, thereby requiring the assessee to deduct tax at source on such payment? - application of source rule - HELD THAT:- AO himself at more than one place in the assessment order has recorded a finding of fact that the assessee has paid commission to foreign agents for booking/obtaining export orders - very much clear that the payment by the assessee is simply and purely in the nature of commission/brokerage for procuring export orders. Section 9(1)(vii) speaks of payment of fees for technical services. Applying the decision of GVK Industries (2011 (3) TMI 1 - SUPREME COURT OF INDIA), the payment made by the assessee to foreign agents under no circumstances can be brought within the term ‘fees for technical services’ as prescribed u/s. 9(1)(vii) - while examining identical nature of payment made by the assessee in assessment year 2010-11 as categorically held that the commission/brokerage paid to non-resident agents cannot be termed as fees for technical services. That being the case, the reasoning of the Assessing Officer that the provisions of section 9(1)(vii) of the Act is applicable to the commission paid, is unacceptable. Source rule applies to the payment made by the assessee Assessing Officer’s own admission, the main business of the assessee is export of cotton yarn and the disputed payment is in the nature of commission paid to foreign agents for procuring orders in their respective countries of residences. That being the case, the payment is not in the nature of fee for technical services. the commission paid to non-resident agents are not chargeable to tax in India either u/s. 9(1)(i) or under any other provisions of the Act since the non residents have no business connection in India or permanent establishment in India. That being the case, there was no liability on the assessee to deduct tax at source while paying commission to the non resident agent. The provisions of section 9(2) of the Act are not applicable, as the payment made by the assessee are not of the nature as provided under clauses (v), (vi) and (vii) of section 9 of the Act. payment made to non-resident for services rendered outside India, is not chargeable to tax in India. Hence, the assessee was not liable to deduct tax at source on such payment. - Decided in favour of assessee.
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