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TMI Blog2016 (2) TMI 798X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) (CIT (A)). 2.2. The CIT (A) allowed the appeal by the assessee and deleted disallowance made by the Assessing Officer on the ground that: (a) the agents abroad were non-residents operating outside India; (b) the commission paid relates to services provided outside India; (c) the agents did not have any permanent establishment in India; and (d) the amounts were remitted directly outside India. The CIT (A) also relied on the decision of the Apex Court, reported in (2010) 327 ITR 456 (G.E India Technology Cen. P. Ltd., v. CIT) and held that the commission payments made to the nonresidents cannot be treated as income deemed to accrue in India and Section 195 of the Act has no application in such cases. The further findings are that: (a) the non-grant of 'nil deduction certificate' would not entitle the Assessing Officer to proceed for 'non-deduction of tax at source', while making payments; (b) the Assessing Officer had to establish that the payee had tax liability in respect of the income embedded in the impugned payment; (c) the non-resident agents were only procuring orders for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e services of certain non-resident foreign agents for the purpose of procuring export orders and the assessee was paying commission for them. It is equally not disputed that even though they are rendering services to the assessee (Indian company), these services are rendered totally outside the country. 4. Under such circumstances, whether the commission payment made to such agents are liable to be taxed in India, is the main issue to be decided in this appeal. 5. The main contention of the learned counsel for the assessee / respondent is that the agency commission / sales commission paid by the assessee to non-resident agents, for the services rendered by them, outside India, in procuring export orders for the assessee, would not attract or partake the character of "fees for technical services" as explained in the context of 9 (1) (vii) of the Act and therefore, there is no scope for the application of the provisions of Section 195 of the Act (Tax Deducted at Source). It is also contended that as the non-resident agents have neither business connection in India nor they have permanent establishment in India, they are liable to be taxed in India. 5.1. Yet another contention of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a) thirty per cent of any sum payable to a resident, on which tax is deductible at source under Chapter XVIIB and such tax has not been deducted or, after deduction, has not been paid on or before the due date specified in sub-section (1) of section 139. Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in subsection (1) of section 139 thirty per cent of, such sum shall be allowed as a deduction in computing the income of the previous year in which such tax has been paid. Provided further that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum but is not deemed to be an assessee in default under the first proviso to sub-section (1) of section 201, then, for the purpose of this sub-clause, it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee referred to in the said proviso." (ii) Explanation 2 to Section 195 (1) of the Act :- "Section 195 - Other sums: (1) Any person respons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Act deals with interest and other sums payable outside India. The provisions of this sub-clause made applicable to interest have been extended to payment of royalty, technical fees and any other sum chargeable under this Act. The section provides that the sums covered by the sub-clause, which are chargeable under the Act and are payable outside India, shall not be allowed as an expenditure to the assessee, unless tax is paid thereon or is deducted therefrom under Chapter XVII-B of the Act. 7.3. Section 195 (1) of the Act deals with deduction of tax from payment to non-residents and foreign companies. Section 195 (1) of the Act comes into play at a stage where the payer, who is enjoined to deduct the tax, either credit such income to the account of the payee or make payment thereof, whether in cash / cheque / draft or any other mode. The taxability of such amount in the hands of the payee or occasioning of the taxable event is alien for the purpose of Section 195 (1) of the Act. 7.4. Section 195 (2) is an enabling provision, enabling an assessee to file an application before the Assessing Officer to determine the appropriate proportion of the sum chargeable and upon such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered other than the above. Sourcing orders abroad, for which payments have been made directly to the non-residents abroad, does not involve any technical knowledge or assistance in technical operations or other support in respect of any other technical matters. It also does not require any contribution of technical knowledge, experience, expertise, skill or technical know-how of the processes involved or consist in the development and transfer of a technical plan or design. The parties merely source the prospective buyers for effecting sales by the assessee, and is analogous to a land or a house / real estate agent / broker, who will be involved in merely identifying the right property for the prospective buyer / seller and once he completes the deal, he gets the commission. Thus, by no stretch of imagination, it cannot be said that the transaction partakes the character of "fees for technical services" as explained in the context of Section 9 (1) (vii) of the Act. 12. As the non-residents were not providing any technical services to the assessee, as held above and as held by the Commissioner of Income Tax (Appeals), the commission payment made to them does not fall into the categ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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