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2007 (8) TMI 388 - AT - Income TaxDisallowance u/s 40(a)(i) selling commission, brokerage and other related charges to its non-resident agents in respect of sale of tea outside India - liability to deduct tax u/s 195? - HELD THAT:- Section 195 of the Act casts obligation on an assessee to deduct tax from the payments made to non-residents which is chargeable to tax under the Act. It was, therefore, necessary for Assessing Officer to establish that commission, brokerage and other selling expenses paid to non-resident agents included an element of income which was chargeable to tax in India. As per the Board Circular No. 786 no income accrued or arose in India either u/s 5(2) or section 9 of the Income-tax Act, 1961 and no tax was, therefore, deductible u/s 195. Consequently expenditure on commission and related charges payable to non-resident agents could not be disallowed u/s 40(a)(i) of the Act on the ground that tax was not deducted. Thus, we do not find any infirmity in the order of the CIT(A) and dismiss Ground No. 11 of the revenue's appeal. The cross-objection filed by the assessee is in support of the findings of the CIT(A). As we have upheld the order of the CIT(A), grounds of cross-objection are now academic in nature and, therefore, do not require adjudication, separately. In the result, the revenue's appeal is dismissed and the C.O. is treated as allowed.
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