TMI Blog2014 (3) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... gh, Sr. DR For the Respondent : Shri Pradeep Dinodia Shri R K Kapoor, CAs ORDER Per U. B. S. Bedi, Judicial Member: This appeal of the Department is directed against the order passed by Ld. CIT(A) XV, New Delhi dated 04.09.2012 relevant to assessment year 2005-06 wherein Department has challenged deletion of disallowance of Rs.1,56,30,554/- made on account of failure to deduct TDS on market development expenses. 2. The facts indicate that Ld. CIT Delhi-IV, New Delhi vide order dated 21.10.2010 passed u/s 263 of the I. T. Act, 1961 had set aside the order of the A.O. dated 10.12.2007 on the ground that the A.O. has failed to make any inquiry/investigation into admissibility of the expenditure on market development of Rs.1,56,30,554/- debited to P L account. In the course of fresh proceedings before the A.O., the assessee duly furnished the copy of relevant agreement with the Foreign Service Provider and also furnished details of the amounts paid to the Foreign Service provider for promotion of the business of the assessee, particularly, in USA and UK. It was submitted by the assessee before the A.O. that the service provider did not carry on any business t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urse of proceedings had also made detailed submissions dated 23.12.2010 in support of its claim that no tax was deductible in respect of remittance of Rs.1/43/59/740/- made to foreign service providers/ as the remittance did not fall within the meaning of lee for technical services/. Similarly/ the assessee also explained that business promotion expenses and entertainment expenses incurred in India were not liable for any tax deduction at source. However/ in respect of advertisement and publicity expenses/ it had duly deducted tax wherever applicable and deposited the same/ as will be evident from the detailed statement of the expenses attached separately. However, the AD without giving a reason for not rebutting the contention of the assessee made vide its elaborate submission on the issue, simply stated that the submission of the assessee was not acceptable, as in many cases TDS has not been made, which as per law should have been made; and proceeded to disallow the entire sum of Rs.1,56,30,554/-. From the perusal of the statement of expenses under the sub-head -business promotion expenses, entertainment expenses and advertisement publicity expenses, it will be seen that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and technical know-how fees. The AO had not at all addressed the relevant provisions of the Act under which the assessee was liable to deduct tax at source, except making a general statement that the assessee was liable to deduct tax at source. It is not in dispute that the provisions of section 195(1) are attracted where the payment has some element of income chargeable to tax in India. Only sections which deal with income accruing or deemed to be accruing in India are sections 5(2) or 9(l)(vi)j(vii) of the Income-tax Act. It may therefore be held that the assessee was not liable to tax at source in respect of payments made to foreign service providers (Professional Sales Representatives), as no income accrues or is deemed to accrue in India; and as such, the disallowance made by the AO is uncalled for and legally untenable. Reliance in this regard is also placed on the decision of Ind Telesoft Pvt. Ltd. (2004) 267 ITR 725 (AAR).-----------. 4. To buttress the above argument, the assessee also relied upon the decision of Ind Telesoft Pvt. Ltd. (2004)267 ITR 725 (AAR) and CIT vs Ion Technology Pvt. Ltd. 46 SOT (2011) 323 (Del.) and further reliance was placed on Circular No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices rendered by these service providers. The service providers had rendered services to the appellant company outside India and it did not have permanent establishment in India and the payments were also received outside India. I find that the facts of the appellant case are identical to the case of Econ Technology (P) Ltd. (supra) wherein, ITAT Delhi Bench has held that: ---------If the contention of the Department that the moment there is remittance, the obligation to deduct TDS arises is to be accepted in words, chargeable under the provisions of the Act in section 195 (1) get obliterated The payer is bound to deduct tax at source only if the amount is assessable in India and if the tax is not so assessable, there is no question of making TDS (Para 20). The Commissioner (Appeals) had correctly referred to CBDT Circular No.23J dated 23.7.1969. Therein, it has been observed that where a foreign agent of an Indian exporter operates in his own country and his commission is directly remitted to him, such commission is not received by him or on his behalf in India and that such agent is not liable to Income-tax in India on the commission received by him (Para 27) In CBDT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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