TMI Blog2017 (5) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... eived in India and no details were forthcoming to establish that the Indian entity received the same for onward transmission to Hong Kong. The inevitable conclusion in law is that the commission payments are liable to tax in India. The liability to deduction of tax at source is in terms of section 40(a)(i) of the Act. The argument of the learned counsel as well as the substantial question of law sought to be raised appear to be a clever afterthought, particularly since this argument was not raised either at time of assessment or first appeal but for the first time before the Tribunal even though all earlier orders were passed after the insertion of sub clause (ia) of section 40. Thus the commission payments have been received by the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to entities situated outside India, and in the absence of a business connection, there was no liability to taxation in this regard. The assessing officer accepted the submission as regards the overseas commission agents, however adding back the amount of commission paid to Textile Services, Delhi, for non-compliance of the provisions of section 40(a)(i) of the Act. 2. The order of assessment dated 31.3.2005 was assailed in appeal before the Commissioner of Income Tax (Appeals) ( CIT (A )). In appeal, the appellant produced an agreement executed between itself and M/s. Textile Services Limited, Hong Kong, pursuant to which, commission was paid for exports booked through this concern to M/s.Textile Services Ltd, Delhi. The appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent appeal is filed at the instance of the assessee raising the following substantial question of law for determination: Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the commission paid to an agent in India is liable for TDS u/s 40(a)(i) ignoring that sub section ( ia) to Section 40 was introduced only w.e.f. 01.04.2004? 5. We have heard Sri.Vijayaraghavan, learned counsel appearing for the appellant and Sri.M.Swaminathan and K.Sureshkumar, learned counsels appearing for the department. 6. The following facts are not in dispute. An agreement had been entered into by the appellant with M/s.Textile Services Limited, Hong Kong for canvassing of export orders. Commission was pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No tax is therefore deductible under section 195 and consequently, the expenditure on export commission and other related charges payable to a non resident for services rendered outside India becomes allowable expenditure. On being appraised for this position, the Comptroller and Auditor General have agreed to drop the objection referred to above. The commission, in the present case, has been received in India by an agent of the foreign entity. Circular No.786 dated 7.2.2000 is thus inapplicable to the instant case. 8. The argument advanced before us on behalf of the assesseeis to the effect that the provisions of section 40(a)(ia) of the Act, in terms of which the aforesaid disallowance has been effected, has been inserted only w ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
