TMI Blog2015 (10) TMI 1881X X X X Extracts X X X X X X X X Extracts X X X X ..... abroad and there is no business connection in India by producing relevant records, viz., either agreement entered into by the assessee with them or correspondence took between the parties. Without examining these details, we are not in a position to decide the nature of services rendered by the non-resident agent. Therefore, it is appropriate to remit the entire issue back to the file of the AO with direction to the assessee to prove that it was sales commission towards procurement of orders from abroad. Accordingly, the entire issue is remitted back to the file of the AO for fresh consideration and the AO is directed to make necessary enquiry regarding the nature of services rendered by the non-resident agent and the payments made thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge with documental evidence that the amount paid to non-residents is falling under the category of commission. As the assessee has failed to discharge its onus, the CIT(Appeals) dismissed the ground taken by the assessee. Against this, the assessee is in appeal before us. 4. The Ld. AR submitted that the income accrued outside India for the services rendered for marketing and the recipient of the commission has no business connection in India, what is paid to the non-resident is not taxable in India. Hence, there is no question of TDS from that payment. He relied on the judgment of the Madras High Court in the case of CIT v. Faizan Shoes P. Ltd. (367 ITR 155), wherein it was held, dismissing the appeal, that on a reading of section 9( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... towards export commission paid by the assessee to the non-resident to be deleted. 4.2. According to the ld. A.R., the income has been accruing outside India for the services rendered for marketing assessee s products in abroad and recipient has no business connection in India, what is paid to the agent is not taxable in India, hence, there is no question of deduction of tax at source from that payment and no assessment of recipient has been made in India. Further, he submitted that only when the income of the agent is chargeable to tax under the provisions of the Act, then only the assessee is liable to deduct TDS as per sec. 195C of the I.T. Act. The person paying the commission to a non-resident is not liable to deduct tax if such ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .20P) to Gee Kay Trading LLC, UAE. Further, the ld. AR submitted that there is no question of deduction of TDS on the above payments made to the nonresident agent. 5. On the other hand, the Ld. DR submitted that the selling agent in this case though had rendered services abroad, was entitled to receive the commission for the services rendered to the assessee and received the amount through or from business connection which it had in India and source of income is in India. Being so, the income shall be deemed to accrue or arise in India. Since the source of income of the non-resident, who is the agent of the assessee, it earned commission from the business activity of the assessee and the assessee has not deducted TDS, it should be dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny on which tax is deductible at source. Therefore, the first condition required to be fulfilled is the payment must be chargeable under the Act, thereafter the question of deduction of tax will arise. Section 195 (1) of the Act also prescribes that tax has to be deducted while making payment to non-resident which is chargeable under the provisions of the Act. Therefore, the condition precedent for deduction of tax is the income must be chargeable under the provisions of the Act. In the facts of the present case, the assessee has not produced the agreement entered into by the assessee with foreign agents to show that they were appointed to act as Commission agents outside India in their respective countries. The AO has disallowed commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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