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2019 (10) TMI 1224 - AT - Income TaxTDS u/s 195 - TDS on payments towards import of coal - income deemed to have accrued or arises in India - Taxation Avoidance Agreement (DTAA) between India and Indonesia, India and Singapore and India and Switzerland - HELD THAT:- Contract for sale of coal were entered between the assessee and non-resident on principal to principal basis. The contracts were executed outside India. Non-resident suppliers directly delivered coal from outside India to the appellant without routing through the agent SPEPL. That apart from procurement of order there is no role of SPEPL directly or indirectly in respect of sales, coal shipment services, collection of money and import documentation. It is also an undisputed fact that the Ld. A.O has not doubted the amount of arm's length and nature of commission income earned by SPEPL in India from these non-residents. In the instant case after examining the facts we are of the considered view that SPEPL is an independent agent and by no stretch can be termed as an agent wholly and exclusively associated to any particular non-resident supplier. The case of the assessee squarely falls in the Proviso to Section 9(1) of the Act which provides that “such business connection shall not include any business activity carried out through a broker/agent commission agent or any other agent having an independent status if such broker, agent, commission agent having an independent status is coming in the ordinary course of his business”. Since in our view there is no “business connection” between the non-resident and SPEPL therefore there will be no “income deemed to have accrued or arises in India of the alleged non-resident suppliers in relation to the role of coal purchased by the assessee. Since no “business connection” is established of the non-resident suppliers in India for the purpose of computing income as per Section 9(1) there is no permanent establishment (PE) of the alleged four non resident suppliers in India. Also we are of the considered view that the agent SPEPL is an independent agent and is not wholly and exclusively associated with the alleged non resident suppliers. Thus the action of the A.O of estimating the profit on the amount remitted and subsequently calculating the TDS default @41.21% (gross) on the deemed profit is uncalled for. - Decided in favour of assessee Applicability of TDS on payments towards inspection charges - CIT(A) confirming the action of the Ld. A.O treating the inspection report charges paid to PT Arth Buana as “fees of technical services” - HELD THAT:- The content of the quotation only refers to the inspection certificates i.e. before the shipment starts from the place of origin inspection report is to be filed. This service is specifically related to procurement of coal. We do not see any technical services to have been provided to the assessee irrespective of the fact that the services are provided in India or outside India. It is not the case of the revenue that PT Arth Buana has a business connection or permanent establishment in India. In our view the service provided are not in the nature of “Fee for Technical Service” but are the charges for inspecting the vessel, therefore we find no merit in the finding of Ld. A.O treating assessee in default for non deduction of tax at source u/s 195 of the Act on the alleged payment towards inspection charges to non-resident. We therefore set aside the finding of Ld. CIT(A) and delete the addition of TDS - Appeal of the assessee stands allowed.
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