TMI Blog2015 (11) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... will have no territorial nexus with India or is not chargeable in India, the Government would nonetheless collect taxes. In the present case, on a perusal of the assessment order or the order of the learned Commissioner of Income-tax (Appeals), we do not find any conclusive finding given by the authorities concerned that the payments made to non-residents are chargeable to tax under the Income-tax Act. Applying the principles laid down by the hon'ble Supreme Court as aforesaid, it is to be held that the provisions of section 195 would not be applicable to payments made by assessee to non-resident agents. Thus the provisions of section 195 would not be applicable to the commission payments made by the assessee to non-resident Indians, as such income is not chargeable to tax under the provisions of the Act. Consequently, disallowance made under section 40(a)(i) would also not survive. - Decided in favour of assessee. - I. T. A. No. 1773 /Hyd/ 2014 (assessment year 2010-11) - - - Dated:- 1-4-2015 - B. RAMAKOTAIAH (Accountant Member) and SAKTIJIT DEY (Judicial Member) A. V. Raghu Ram for the appellant. Rajat Mitra for the respondent. ORDER The order of the Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e India. Thus, it was submitted, provisions of section 195 would not be applicable to such payments. The Assessing Officer, however, did not find merit in the submissions of the assessee. He was of the view that as per section 195(1) of the Act, the assessee was required to deduct tax at source on commission payments to even non-residents. The Assessing Officer, in this context, relied upon the decisions of the Authority for Advance Rulings (AAR) in the case of SKF Boilers and Driers Pvt. Ltd., In re (AAR Nos. 983-984 of 2010, February 22, 2012) [2012] 343 ITR 385 (AAR) and in the case of Rajiv Malhotra, In re [2006] 284 ITR 564 (AAR) wherein it was observed that the expression accrue or arise occurring in section 5 of the Act would mean income is said to accrue or arise when the right to receive it comes into existence. Therefore, the commission paid to non-resident agents would be deemed to accrue or arise in India. Accordingly, the Assessing Officer applying the provisions of section 40(a)(i) disallowed the commission payment of ₹ 78,46,489. Being aggrieved, the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals). 5. The learned Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the hon'ble Supreme Court and a decision of the Income-tax Appellate Tribunal, Delhi Bench were cited before the learned Commissioner of Income-tax (Appeals), but, he completely ignored/overlooked them. In support, he relied upon the following decisions : 1. CIT v. Model Exims [2013] 358 ITR 72 (All). 2. CIT v. Faizan Shoes P. Ltd. [2014] 367 ITR 155 (Mad). 3. Deputy CIT v. Hyderabad Industries Ltd. [2008] 24 SOT 98 (Hyd). 4. Indo Court Industries Ltd. v. DCIT, I. T. A. No. 123/Del/2011, dated July 8, 2011. 5. Aurobindo Pharma Ltd. v. Addl. CIT I. T. A. No. 1096/Hyd/11 and others, order dated January 31, 2014. 7. The learned Departmental representative, on the other hand, relied upon the assessment order as well as the order of the Commissioner of Income-tax (Appeals). 8. We have considered the submissions of the parties and perused the orders of the Revenue authorities as well as other materials on record. We have also carefully applied our mind to the decisions cited at the bar. On a perusal of the assessment order, it is very much evident that the Assessing Officer has not disputed the fact that commission payments were made to non-reside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 195 would not apply. The hon'ble Supreme Court further observed that if the scope of section 195 is enlarged to that extent, then, it would result in a situation where, even though, the income will have no territorial nexus with India or is not chargeable in India, the Government would nonetheless collect taxes. In the present case, on a perusal of the assessment order or the order of the learned Commissioner of Income-tax (Appeals), we do not find any conclusive finding given by the authorities concerned that the payments made to non-residents are chargeable to tax under the Income-tax Act. Applying the principles laid down by the hon'ble Supreme Court as aforesaid, it is to be held that the provisions of section 195 would not be applicable to payments made by assessee to non-resident agents. This view is also supported by the following decisions : 1. CIT v. Model Exims [2013] 358 ITR 72 (All). 2. CIT v. Faizan Shoes P. Ltd. [2014] 367 ITR 155 (Mad). 10. Further, the co-ordinate Bench while examining identical nature of dispute in the case of Aurobindo Pharma Ltd. (supra) held in the following manner : 25. As far as the amount paid as sales commission is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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