TMI Blog2014 (8) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... for technical services. The non-resident assessees did not carry on any business operations in the taxable territories - They acted as selling agents outside India - The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by cl. (a) of the Explanation to s. 9(1)(i) of the Act - The commission amounts which were earned by the non-resident assessees for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India - relying upon Commissioner of Income-Tax, AP Versus Toshoku Limited (and Another Appeal) [1980 (8) TMI 2 - SUPREME Court] - the services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services - Section 9 of the Act is not applicable to the case on hand and section 195 of the Act does not come into play – Decided against Revenue. - T.C.(A). No. 789 of 2013 - - - Dated:- 22-7-2014 - R. Sudhakar And G. M. Akbar Ali,JJ. For the Appellant : ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed under Section 40(a)(i) of the Act. 2.3. Assailing the order passed by the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals), after detailed analysis of the submissions made on either side and in the light of the Agency Agreement and Circular No.23 of 1969, held as under: 4.2. ..... Further, the Assessing Officer has considered the services rendered by the agent u/s 9(1)(vii) of the Income Tax Act. When you take the services rendered by the agent to the appellant into consideration, it is clear that they do not fall under the provisions of Section 9(1)(vii) of the Income Tax Act. No technical services have been provided by the agent. It is a question of only pure procuring the contract for the sale of appellant goods. There is no question of payment of royalty or technical fees for the agent on contract with the appellant. 4.3. As seen from the facts of the case, Agent is a non-resident. Agent is operating his business activities outside India. The commission paid related to services provided outside India. The agent does not have any permanent establishment or per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India as per Explanation inserted by Finance Act, 2010 with retrospective effect from 1.6.1976, which clearly states that the income of the non-resident shall be deemed to have accrued or arisen in India under clause (v) or (vi) of sub-section (1) of Section 9 and shall be included in the total income of the non-resident whether or not he is resident or place of business in connection in India or has rendered service in India? 3.1. Mr.T.Ravikumar, learned Senior Standing Counsel appearing for the Revenue, referring to Explanation (2) to Section 9(1)(vii) of the Act, would submit that the words fees for technical services are wide enough to engulf services in the nature of managerial, technical or consultancy services. He also relied upon the Explanation to Section 9(2) of the Act to plead that income of a non-resident shall be deemed to accrue or arise in India under clause (v) or clause (vi) or clause (vii) of Section 9(1) and shall be included in the total income of the non-resident, whether or not, (1) the non-resident has a residence or place of business or business connection in India; or (2) the non-resident has rendered services in India. In other words, the arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perused the orders of the Tribunal and the authorities below. 6. Before adverting the merits of the case, it would be apposite to refer to Sections 9(1)(i), 9(1)(vii) and 9(2) of the Act, which read as under: Section 9. Income deemed to accrue or arise in India.-- (1) The following incomes shall be deemed to accrue or arise in India -- (i) all income accruing or arising, whether directly or indirectly through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India, or through the transfer of a capital asset situate in India; ...... (vii) income by way of fees for technical services payable by-- (a) the Government ; or (b) a person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or (c) a person who is a non-resident, where the fees are payable in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leather business from overseas buyers wholesalers or retailers, as the case may be, the non-resident agent is paid 2.5% commission on FOB basis. That appears to be a commission simpliciter. What is the nature of technical service that the so-called non-resident agent has provided abroad to the assessee is not clear from the order of the Assessing Officer. The opening of letters of credit for the purpose of completing export obligation is an incident of export and, therefore, the non-resident agent is under an obligation to render such services to the assessee, for which commission is paid. The non-resident agent does not provide technical services for the purposes of running of the business of the assessee in India. The services rendered by the non-resident agent can at best be called as a service for completion of the export commitment. We are, therefore, of the considered opinion that the commission paid to the non-resident agent will not fall within the definition of fees for technical services . 8. The other plea raised by Mr.T.Ravikumar, learned Senior Standing Counsel appearing for the appellant referring to Explanation to Section 9(2) of the Act is that the income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asonably attributable to that part of the operations carried out in the taxable territories. If no operations of business are carried out in the taxable territories, it follows that the income accruing or arising abroad through or from any business connection in India cannot be deemed to accrue or arise in India (See CIT v. R. D. Aggarwal and Co. [1965] 56 ITR 20 (SC) and Carborandum Co. v. CIT [1977] 108 ITR 335 (SC) which are decided on the basis of s. 42 of the Indian I.T. Act, 1922, which corresponds to s. 9(1)(i) of the Act). 9. In the instant case, the non-resident assessees did not carry on any business operations in the taxable territories. They acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by cl. (a) of the Explanation to s. 9(1)(i) of the Act. The commission amounts which were earned by the non-resident assessees for services rendered outside India cannot, therefore, be deemed to be incomes which have either accrued or arisen in India. The High Court was, therefore, right in a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
