TMI Blog2014 (2) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Toshoku Ltd. (1980 (8) TMI 2 - SUPREME Court ) is squarely applicable wherein held that the commission agents, who are engaged in the services executed outside India, cannot be considered to carry on any business operations in India and therefore, provisions of section 9(1)(i) of the Act and Explanation-1A will not be applicable. Similarly, in the case of GE India Technology Cen. (P.) Ltd (2010 (9) TMI 7 - SUPREME COURT OF INDIA) has held that the expression "chargeable under the provisions of the Act in Sec.195(1)" shows that the remittance has to be of trading receipt, the whole or part of which, is liable to tax in India. If tax is not so assessable, there is no question of tax at source being deducted. - Decided in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii)There is no requirement to deduct tax in the case of non-resident agents, who renders service outside India as per the decision of the Hon'ble Apex Court in GE India Technology Cen. (P.) Ltd v. CIT [2010] 327 ITR 456/193 Taxman 234/7 taxmann.com 18. (iii)The agents of the assessee do not have Permanent Establishment (PE) in India. 4. However, the Ld. A.O invoked the provisions of Sec.40(a)(i) because of the following reasons:- (i)The circular referred by the assessee was withdrawn by the Board vide Circular No.7/2009 dated 22.10.2009. (ii)Provisions of section 9(1)(i) of the Act provides that the income accruing or arising directly or indirectly, through or from any business connection from India shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance of commission payments to foreign agents during the year under consideration. (b)The total amount of commission disallowed amounted to ₹ 37.96 lacs. (c)The details of commission payments with names and addresses of the parties were submitted along with the confirmation from them. Letters from them stating that they had no place of India were also submitted. (d)The A.O had accepted the evidence for these payments and did not raise any issue regarding the genuiness of these payments. (e)The AO raised issues of non deduction of TDS on these payments citing the withdrawal of Circular No.786 of 2000. (f)Further regarding the issue following submissions was made:- (i)The foreign agents did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no obligation on the part of the firm to deduct tax at source on commission payments to the foreign agents. (k)The withdrawal of circular does not have the effect of any of the provisions of the Income-tax Act. (l)Reliance was placed on the decisions of the GE India Technology Cen (P.) Ltd. (supra), CIT v. Eon Technology (P.) Ltd. [2012] 343 ITR 366/[2011] 203 Taxman 266/15 taxmann.com 391 (Delhi), CIT v. Toshoku Ltd. [1980] 125 ITR 525 (SC), Wheels India Ltd. v. DIT [IT Appeal Nos. 4, 5 163 (Mad.) of 2012, dated 27-7- 2012] CIT v. Schreiner Airway BV [1990] 182 ITR 429/48 Taxman 204 (All.), Indopel Garments (P.) Ltd v. Dy. CIT [2003] 86 ITD 102 (Mad.). 6. Ld. Ld. CIT (A) after examining the issue allowed the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... export orders does not carry out any business operation in India and therefore no income is stated to accrue or arise in India. The CBDT Circulars clarifying this provision have been withdrawn but it has not changed the fundamental principles. If the commission agents acting as a selling agent outside India who is not chargeable to tax in India and the receipt in India of the sale proceeds remitted by the purchasers from abroad did not amount to an operation carried out by the non-resident commission agent in India has contemplated by clause (a) of the Explanation to 9(1) of the Act. The Apex Court in the case of CIT v. Toshoku Ltd [1980] 125 ITR 525 has categorically held that the commission amounts which were earned by the non-resident fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll.). 8. We have heard both the parties and carefully perused the materials available on record. From the facts of the case, it is evident that the assessee had made payments to commission agents located in foreign countries. These foreign agents have rendered services in their respective countries and had received the commission. It is also evident that the foreign agents did not have any PE in India and there was nothing brought on record to show that the agreements between the assessee the commission agents were entered in India. In these circumstance the decision rendered in the case of Toshoku Ltd. (supra) is squarely applicable considering the facts of the case before us. In this case, the Hon'ble Apex Court held that the com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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