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2016 (1) TMI 75 - ITAT CHENNAI

2016 (1) TMI 75 - ITAT CHENNAI - [2015] 44 ITR (Trib) 571 (ITAT [Chen]) - TDS u/s 195 - disallowance of export sales commission paid to non-resident - non deduction of TDS - disallowance u/s 40(a)(i) - CIT(A) deleted the disallowance - Held that:- In the present case, the assessee has not established the facts on record that the non-resident has rendered services at abroad and there is no business connection in India by producing relevant records, viz., either agreement entered into by the asses .....

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ke necessary enquiry regarding the nature of services rendered by the non-resident agent and the payments made thereof. - Decided in favour of revenue for statistical purposes. - ITA No. 1797/Mds/2015 - Dated:- 16-10-2015 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER For The Appellant : Shri A.B.Koli, JCIT For The Respondent : Shri S. Sridhar, Advocate ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the Revenue is directed against the order of t .....

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owed the same. 4. 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 acti .....

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e is to be disallowed. 5. On the other hand, 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. According to the ld. AR, this issue is squarely covered by the judgment of the Madras High Court in the case of CIT v. Faizan Shoes P. Ltd. (367 ITR 155), wherein it was h .....

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d to the assessee was not clear 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 ag .....

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re, the disallowance made by the Assessing Officer towards export commission paid by the assessee to the non-resident to be deleted. 5.2. 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 .....

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edded or incorporated in them. The 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. 5.3. 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. 6. We have heard the parties .....

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ny, On which tax is deductible at 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 com .....

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