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TMI Blog2018 (2) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Assessing Officer. 4. It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent." 3. The brief fact of the issue in appeal is that return of income declaring income of Rs. 33,65,540/- was filed on 28th September, 2010. On scrutiny during the course of assessment proceedings, the assessing officer has noticed that assessee has debited commission expenses to the amount of Rs. 60,20,990/- to the P & L account which included an amount of Rs. 52,99,258/- as commission paid to overseas agents of different countries. On questioning by the assessing officer the assessee explained that it has paid commission to non-resident agents for services performed in foreign countries and no service was performed in India. He further stated that non-resident agent has neither any business collection in India nor have any permanent establishment in India, therefore, the provision of section 195 is not applicable. The assessing officer has not accepted the explanation of the assessee and stated that section 195 of the act cast an obligation on the person to deduct tax at source while making a payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a no deduction certificate from the AO. And 3. Whether the commission paid was genuine and the services have been rendered. 2.3.1 Regarding the first issue it is noted from the evidences given by the appellant as well as noted by the AO in his order that the services have been rendered by the foreign agents outside India. The sales were booked by them in their country or for the country for which they have been appointed as commission agents. None of the activity of soliciting the clients and procuring the orders is in India. The goods are being delivered by the appellant company in the other country. The activities of procuring the payment on behalf of the appellant company are also done abroad. The AO was therefore, not right in holding that the source of income lies in India as the sales have been made from India. The provisions of Income Tax Act clearly provide that the tax would be deducted on the income which is taxable in India. The activity of earning the income is not the sale but soliciting the sales by commission agents. Though this activity is linked to the sales of the company but it cannot be said that the income has been derived from sales which has been mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 ITR 456. In a recent judgement of honourable ITAT Chennai bench in the case of I M Gears Private Limited, 49 taxmann.com 175 it has been held that no tax was deductible at source on commission payment to overseas agent for procuring orders, as said services not being in nature of technical services, payments in question were not taxable in India. In the present case also the services rendered by the agents of the appellant to whom the commission payment has been made, are in the nature of soliciting orders for the appellant and no other services, which can be categorized as technical services, have been offered. The appellant has also rightly placed reliance on the judgement of Honourable Gujarat High Court in the case of Vinayak Exports (supra) and the judgement of Bangalore Bench of ITAT Exotic Fruits Pvt Ltd (supra). Therefore, in view of the preceding discussion the AO was not justified to hold that the commission payable to the overseas agents was deemed to accrue or arise in India and is taxable under the Act in view of the specific Provisions of sections 5 (2)(bj read with section 9 (1)(i) of Income Tax Act. 2.3.2 Regarding the issue of obtaining no deduction certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no liability on the part of the appellant to deduct tax under section 195 or approach the I.T. Authorities for no deduction tax certificate. 2.3.3 The last issue which is to be adjudicated is that whether the commission payment was genuine and the services were rendered. The AO has briefly dealt with the issue in para- 5 of his order. The appellant, during the course of appellate proceedings, has submitted evidences which could not be produced during the course of assessment proceedings. The evidences were in the nature of various correspondences which were undertaken by the appellant with various commission agents regarding the payments and also the bills in respect of which commission has been paid. It has also submitted various debit notes issued by different agents to whom the commission have been paid. Various evidences submitted by the appellant were forwarded to the AO for its comments an observation. The report given by the AO vide its letter dated 25/08/2014 has been reproduced in the preceding pages of this order. As discussed earlier the evidence submitted by the appellant has been admitted as sufficient opportunity was not given during the course of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to be deleted." 5. We have heard the rival contentions and perused the material on record carefully. The assessing officer has disallowed the claim of the assessee on the ground that the assessee was under obligation to deduct tax at source as envisaged u/s. 195 of the act from the payment made to non-residents towards the services rendered by them. In this connection we have perused the material on record and observed that the asssessee has paid commission to the overseas parties in respect of services rendered by them at abroad. The ssessing officer failed to establish that the overseas parties were having business connection or PE in India. The assessee has furnished evidences of payment of impugned commission through the bank on the basis of debit notes raised by the payees and stated that none of the activities of soliciting the customers or procuring orders were carried out in India. The assessee had not deducted TDS according to provisions of section 195 of the act since income was not raised in India because the payee had no permanent establishment or any business connection in India. The provision of section 5(2)(b) r.w.s. 9(1)(i) of I.T. Act are not applicable a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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