TMI Blog2006 (7) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... r-II, New Delhi. The applicant is engaged in the organization of India International Food Wine Shows (IFOWS) for which purpose he is intending to organize "4 th India Food Wine Show" and for this participation of foreign concerns, undertakings and Govt. Departments is desired. The applicant wants to appoint agents abroad to furnish information about terms conditions to foreign participants in respect of their participation in the Food Wine Show in India and for booking space in the exhibition. It has been stated by the applicant that the agents would be rendering services abroad in the territory allotted to them and would be entitled to receive commission abroad for the services so rendered to foreign participants. Since the services are rendered by non-resident agents outside India and according to the terms of the agency agreement, the payment is also receivable by the agent abroad, the agent is not liable to tax, in view of the provisions of Section 5(2) read with section 9(1) of the Act. The terms conditions with the agent are set out in the agreement form annexed to the application along with General Regulations for foreign exhibitors. It has been stated by the appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the question framed by the applicant did not clearly state as to whose "tax liability" was being referred to, the learned counsel for the applicant vide his application dated 6.2.2006 has reframed the following questions of law and requested for their substitution in place of the original question: 1) Considering the fact that non resident would be rendering services outside India and also getting payment outside India, whether he will be liable to income tax in India on account of his being agent of resident in India? 2) In case answer to the above is negative, whether T.D.S. is to be deducted from payment which will be remitted by resident to the non resident agent. The request for reframing the questions has been accepted. 3. The jurisdictional commissioner, in his comments has stated that in the case law relied on by the applicant the issues involved were different. Further it is not clear from the application whether the applicant himself is an 'Agent' of the person with whom he is entering into agreement i.e. " Agence Delalande Fleuri". 4. In the rejoinder to the written submissions, it has been stated by the applicant that there is absolutely no differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or arises or is deemed to accrue or arise to him in India during such year. Sub clause (b) of clause (2) of section 5, which deals with the scope of total income of a non-resident under the Act, states that subject to the other provisions of the Act, total income of any previous year of a non-resident, includes all income from whatever source derived, which accrues or arises, or is deemed to accrue or arise to him in India during such previous year. The scope of the deeming provision is given in section 9(1) which is extracted below: 9(1) The following incomes shall be deemed to accrue or arise in India : - (i) all income accruing or arising, whether directly or indirectly, through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India , or through the transfer of a capital asset situate in India. [Explanation 1] - For the purposes of this clause - (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent in such cases will be 7%. The terms of payments will remain the same as in Clause 5.(a) above. • The AGENT will not be entitled to receive any commission in case the exhibition is cancelled due to unforeseen circumstances. It is, therefore, clear that source of income for the Agent is participation by the exhibitors in exhibition/Food Wine Show in India and the Agent will not be entitled to receive any commission for services rendered in case the exhibition is not held due to unforeseen circumstances. No doubt the Agent renders services abroad and pursues and solicits exhibitors there in the territory allotted to him, but the right to receive the commission arises in India only when the exhibitor participates in India International Food Wine Show (to be held in India), and makes full and final payment to the applicant in India. The commission income would, therefore, be taxable under the Act in view of the specific provisions of section 5(2)(b) read with section 9(1)(i) of the Act. The facts that the Agent renders services abroad in the form of pursuing and soliciting the participants and that the commission is remitted to him abroad are wholly irrelevant for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with section 9(1) of the Act and does not grant any further benefit to a Treaty resident of a contracting state (France) who is having commission income arising in the other contracting state (India) which may be taxed in the other Contracting state (India). 8. In question No.2 the applicant has stated whether tax has to be deducted at source from payments, which will be remitted by the applicant to the non-resident Agent. In this regard the basic provision for deduction of income tax at source is contained in sub-section(2) of section 4 of the Act and the charging provisions are contained in sub-section(1). The relevant provisions relating to deduction of tax at source are extracted below:- Charge of income tax. 4. (1) xx xx • In respect of income chargeable under sub-section (1), income tax shall be deducted at the source or paid in advance, where it is deductible or payable under any provision of this Act. It is seen that sub-section (2) clearly states that in respect of income chargeable under sub-section (1), income tax shall be deducted at source, where it is so deductible under any provision of the Act. The provision which relates to deduction of tax at source in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SA where developed software was supplied and payment received in foreign exchange, which was subsequently repatriated to India . Therefore, reliance placed in the above case is of no help to the applicant. Reliance has also been placed on para 4 of Circular No.23 dated 23.7.1969 and Circular No.786 dated 7.2.2000 and the case of 72 TTJ 702 (Mad). Both the Circulars and the case of ITAT Madras 'A' Bench pertain to the exemption of tax granted to foreign Agents of Indian exporters who operate in their own country and no part of the commission income arises in India . These circulars are, therefore, not relevant and of no help in the case of the applicant since the commission payable to the non-resident Agent in the present case arises in India as discussed supra. The applicant has also placed reliance on the case of Siapem SPA 88 ITD 213 (Delhi) wherein it was held that whether it be the case of a resident or that of a non-resident, it is necessary to decide whether a particular receipt or item of income is liable to be included in total income vis-à-vis section 5. This issue has already been dealt with in detail supra and commission income receivable by the Agent forms part of the t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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