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2018 (5) TMI 2086 - AT - Income TaxTDS u/s 195 - tax withholding liability - vicarious liability - payments made to non-residents - non deduction of taxes at source on payments for commission of sales exports arid legal and professional charges - income as accrued in-India - HELD THAT:- As in case of Farida Leather Company [2016 (2) TMI 798 - MADRAS HIGH COURT] wherein it was held that Merely because a person has not deducted tax at source or a remittance abroad, it cannot be inferred that the person making the remittance, has committed a default in discharging his tax withholding obligations because such obligations come into existence only when the recipient has a tax liability in India. The tax withholding liability of the payer is inherently a vicarious liability on behalf of the recipient and therefore, when the recipient / foreign agent do not have the primary liability to be taxed in respect of income embedded in the receipt, the vicarious liability of the payer to deduct tax does not arise. This vicarious tax withholding liability cannot be invoked, unless primary tax liability of the recipient / foreign agent is established. In this case, the primary tax liability of the foreign agent is not established. Therefore, the vicarious liability on the part of the assessee to deduct the tax at source does not exist. In the instant case, it is seen, admittedly that the nonresident agents were only procuring orders abroad and following up payments with buyers. No other services were rendered other than the above. Sourcing orders abroad, for which payments have been made directly to the non-residents abroad, does not involve any technical knowledge or assistance in technical operations or other support in respect of any other technical matters. It also does not require any contribution of technical knowledge, experience, expertise, skill or technical know-how of the processes involved or consists in the development and transfer of a technical plan or design. The parties merely source the prospective buyers for effecting sales by the assessee. When the transaction does not attract the provisions of Section 9 of the Act, the Revenue has no case and the appeal is liable to be dismissed - Decided in favour of assessee. Commission on sales has been paid to one M/s Excel Enterprises, Ludhiana are operating from India. Hence, the addition made by the Assessing Officer under section 40(a)(ia) to that extent stands confirmed.
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