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Chenitan Color Chem Pvt. Ltd. Versus The Assistant Commissioner of Income-tax, Company Circle-I (3) , Chenna

2015 (10) TMI 1881 - ITAT CHENNAI

Disallowance u/s 40(a)(i) - non deduction of TDS u/s.195 on commission paid to foreign agents - Held that:- If there are services rendered by non-residents, who have no permanent establishment in India or have any business connection in India, by virtue of which the payment of commission accrued or arose in India then, it is exempted, if the assessee is able to prove that the services were rendered by those non-residents at abroad.

In the present case, the assessee has not establishe .....

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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 - Decided in favour of assessee for statistical purposes. - ITA No. 1480/Mds/2015 - Dated:- 12-8-2015 - SHRI CHANDRA POOJARI AND SHRI CHALLA NAGENDRA PRASAD, JJ. For The Appellant : .....

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that the assessee carries on business as a dealer/exporter of leather chemicals. It filed its return of income for the assessment year 2010-11 on 12.10.2010 admitting a total income of ₹ 43,91,890/-. Processing u/s.143(1) was completed on 5.3.2012. Subsequently, the case was selected for scrutiny and notice u/s.143(2) dated 25.8.2011 was issued to the assessee on 2.9.2011. After hearing the assessee, the Assessing Officer completed the assessment u/s.143(3) of the Act determining the total .....

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see. 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 .....

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from the order of the Assessing Officer. The opening of letters of credit for the purpose of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non-resident agent did not provide technical services for the purposes of running of the business of the assessee in India. Therefore, the commission paid to the non-resident agents would not fall within the d .....

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Assessing Officer 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 .....

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he obligation to deduct tax at source, is however, limited to appropriate proportion of income chargeable under the Act forming part of the gross sum of money payable to the non-resident. 4.3. The Ld. AR further submitted that income though accrued in India, the services were rendered to the assessee abroad and the payments were also received by them abroad, therefore, no income would arise under the provisions of sec. 9(1) of the Act. The ld. AR, further submitted that the following details are .....

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ce issued by Bank of India, Purasawalkam Branch - 12 Nos. 4. Ledger account of Gee Kay Trading for the period 01-APR 2009 to 31-MAR 2012. 5. Outward payment customer advice issued by Standard Chartered Bank for payment of commission (Rs. 15,84,507.20P) 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 .....

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/s. 40(a)(i) of the I.T. Act. The services rendered by the agent falls within the ambit of Explanation (2) of sec. 5 of the I.T. Act. The fact that the agent has rendered services abroad in the form of soliciting orders and the commission is to be remitted to them abroad is wholly irrelevant for the purpose of determining the situs of their income. According to the ld. DR, non-deduction of TDS towards this income is to be disallowed. 6. We have heard the parties and perused the record. At the ou .....

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source under Chapter VIIB and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200: 7. The aforesaid clause makes it clear that the disallowance shall be made in case of any payment made which is chargeable under this Act and is payable outside India or in India to a nonresident not being a company or to a foreign company on which tax is deductible at .....

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