TMI Blog2012 (12) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... No.136/Bang/2012 2. Stay petition is filed by the assessee seeking stay of the outstanding demand of ₹ 13,52,063/-. As the appeal is heard and disposed of by the order even dated, the stay application is dismissed. ITA N0.26/Bang/2012 3. In this appeal, the assessee is aggrieved by the order of the CIT(A) 1) sustaining the disallowance made by the AO of i) The commission paid to M/s Misc. Maldives Pvt. Ltd., for the services rendered by it in respect of receiving the materials, weighing them and getting them cleared from customs and delivering them to customers of the assessee at Maldives, holding that it has the character of technical services under explanation to sec. 9[1][vii] of the Act, warranting d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sec. 9[1][vii] and explanation to sub sec. (2) of sec. 9 of the Income-tax Act and held that the income has accrued to the payee from the payments made by the assessee. Since according to the AO, the income has accrued to the payee from the payments of the assessee and no TDS was made, he applied the provisions of sec.40a(i) of the Act and disallowed the said expenditure of commission/fees for technical services and added back a sum of ₹ 29,19,389/- to the returned income of the assessee and completed the assessment accordingly. 6. Aggrieved, the assessee preferred an appeal before the CIT(A) contending that both M/s Misc. Maldives Pvt. Ltd., and Mr. Hussain Shiham are non residents and are rendering services out side India and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accrues to non residents in India and, as there is no income accruing or arising to the non-resident in India, the provisions of sec. 194 are not applicable. 8. The CIT(A) after considering the assessee s submissions examined whether the services rendered by assessees s associates and agents at Maldives can be categorized as technical services. He held that the payments by the purchaser of the items are made to the agents at Maldives and they remit the balance amount to the assessee after deducting their dues and in the case of tour operators, the local associates receives the assessee s clients at the airport and facilitate their stay at the resorts/hotels and a fee of $15 per client is collected directly from the clients at Maldives a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Circular No.786 dated 7th Feb, 2000 to hold that business income of non residents can be deemed to accrue or arise in India only if there is business connection in India and if there is failure to establish business connection in India then tax need not be deducted at source and disallowance u/s 40a(i) is not called for. 2. DCIT Vs. Sanjiv Gupta reported in (2011) 50 DTR Tribunal orders, wherein the Circular No. 7 of 2009 dated 22/10/2009 withdrawing the Circular No.23 July 1969 and Circular No.786 of 2000 has been considered and it has been held that Circulars which are in force during the relevant assessment years are the Circulars that have to be applied and subsequent circulars either withdrawing or modifying the earlier circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no liability on the assessee to deduct tax at source while making the payment. 11. The learned DR on the other hand supported the orders of the authorities below and also placed reliance upon the decision of the; (1) Authority for Advance Ruling in the case of Wallace Pharmaceutical Pvt. Ltd., reported in 278 ITR 97 (AAR Delhi), wherein it has been held that the consultancy fee payable under the agreement by the assessee falls within the meaning of fees for technical services as per explanation to clause (vii) of sub sec. 1 of sec. 9; and (2) Hon ble Supreme Court in the case of Transmission Corporation of Income-tax Vs. CIT reported in 239 ITR 587 (SC), wherein it was held that the assessee who makes payment to nonresidents un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this whole exercise, there is no application of mind by the agent and no independent decision taken with regard to the goods to be delivered. In such circumstances, it cannot be said that technical services have been rendered by the agent at Maldives. Therefore, the income earned by the said agent outside India is to be considered as his business income and as held by the Hon ble Delhi High Court in the case of EON Technology Pvt. Ltd., (cited Supra) the business profits of a non-residents cannot be brought to tax until and unless there is a PE in India. Therefore, this ground of appeal is allowed. 13. As regards the payment made by Gemini International Tours and Travels is concerned, we find that the agent receives the clients and leav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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