TMI Blog2017 (12) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... prove that it was sales commission towards procurement of orders from abroad. Accordingly, the entire issue is remitted back to the file of the AO for fresh consideration and the AO is directed to make necessary enquiry regarding the nature of services rendered by the nonresident agent and the payments made thereof. With these observations, the appeal of assessee is allowed for statistical purposes. - I.T.A. No. 2318/Mds./2017 - - - Dated:- 7-12-2017 - Shri Chandra Poojari, Accountant Member Appellant by : Mr.N.Vijay Kumar, C.A Respondent by : Mr.B.Sagadevan, JCIT, D.R ORDER Per Chandra Poojari, Accountant Member This appeal is filed by the assessee, aggrieved by the order of the Learned Commissioner of Income Tax( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011. The case was selected for scrutiny assessment and order u/s.143(3) of the Act was passed on 31.10.2014 ,thereby determining the total income at ₹ 36,04,800/-. Further, the AO noticed that the assessee had debited a sum of ₹ 8,77,013/- as foreign agent commission without deducting tax at source in violation to the provisions of the section 195 r.w.s.40(a)(i) of the Act. In view of insertion of Explanation 4 to Sec.9(1)(i) with corresponding introduction-of Explanation 2 to Section 195(1), both by the Finance Act, 2012 with retrospective effect from 01.04.1962, the assessee was liable to deduct tax at source on commission payments of ₹ 8,77,013/- to foreign agents which the assessee failed to do so thereby violating th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not taxable in India, hence, there is no question of deduction of tax at source from that payment and no assessment of recipient has been made in India. Further, he submitted that only when the income of the agent is chargeable to tax under the provisions of the Act, then only the assessee is liable to deduct TDS as per sec. 195C of the I.T. Act. The person paying the commission to a non-resident is not liable to deduct tax if such services are not chargeable to tax under the Act. Sec. 195 contemplates not merely amounts, the whole of which are pure income payments; it also covers composite payments which have an element of income embedded or incorporated in them. The obligation to deduct tax at source, is however, limited to appropria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeds to be looked into section 40(a)(i) which reads as under: 40 Not withstanding (a) In the case of any assessee (i) Any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938) royalty, fees for technical services or other sum chargeable under this Act, which is payable A. Outside India B. In India to a non-resident, not being a company or to a foreign company, On which tax is deductible at source under Chapter VIIB and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200: 7. The aforesaid clause makes it clear t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut examining these details, I am not in a position to decide the nature of services rendered by the non-resident agent. Therefore, it is appropriate to remit the entire issue back to the file of the AO with direction to the assessee to prove that it was sales commission towards procurement of orders from abroad. Accordingly, the entire issue is remitted back to the file of the AO for fresh consideration and the AO is directed to make necessary enquiry regarding the nature of services rendered by the nonresident agent and the payments made thereof. With these observations, the appeal of assessee is allowed for statistical purposes. 9. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 07. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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