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2018 (2) TMI 968

on 5(2)(b) r.w.s. 9(1)(i) of I.T. Act are not applicable as the payee has not earned any income in India as the services by the foreign agents have been rendered outside India without having any PE or business connection in India.The Hon’ble Apex Court in the case of Toshoku (1980 (8) TMI 2 - SUPREME Court) held that commissions earned by the non-resident acting as selling agent for the Indian exporter wherein such non-resident was rendering services from outside India doses not accrue in India. Further the decision of the Hon’ble Supreme Court in the case of G.E. India Technology Centre P. Ltd. Vs. CIT ( 2010 (9) TMI 7 - SUPREME COURT OF INDIA ) has rightly supported the case of the assessee that tax is not deductible in the case of the assessee. - Thus the non-resident commission agents had rendered services outside India and they were not having P E in India therefore, we uphold the decision of the ld. CIT(A) that the assessee was not liable to deduct tax on the commission paid to foreign agents - Decided in favour of assessee - ITA No. 3298/Ahd/2014 - Dated:- 8-2-2018 - Shri S. S. Godara, Judicial Member And Shri Amarjit Singh, Accountant Member For The Revenue : Shri Sum .....

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able to the overseas agents is deemed to accrue and arise in India and is taxable under this act in view of the specific provision of section 5(2)(b) r.w.s 9(1)(i) of the act. Provision of section 195 would therefore squarely be applicable to the case of the assessee company. Consequently, the expenditure claimed under the head commission expenses amounting to ₹ 51,99,991/- was disallowed and added to the total income of the assessee u/s. 40(a)(ia). 4. Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the appeal of the assessee by observing as under:- 3.3 Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The AO has disallowed the commission paid to foreign agents by holding that the income arising on account of commission payable to overseas agents was deemed to accrue or arise in India and was accordingly taxable under the Provisions of section 5 (2)(b) read with section 9 (1)(i) of Income Tax Act. It has further been observed by the AO that the appellant company had failed to comply with the Provisions of section 195 (2). He has also held, without prejudice to the ma .....

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fact brought out by the AO in the order as well as observed by me during the course of appellate proceedings to indicate that the services have been rendered in India. The appellant has rightly relied on the judgement of honourable Supreme Court in the case of Tosho/cu (supra) wherein it has been held that commission earned by the non-resident for acting as the selling agent for the Indian exporter, wherein such nonresident was rendering services from outside India does not accrue in India. In the present case before me also, the foreign selling commission agent is resident of foreign country, from where the procurement service has been provided for which the commission has been paid, and therefore, the issue is directly and squarely covered by the Apex Court decision. Regarding the observation of the AO that the income is deemed to accrue or arise in India by applying the provisions of section 9 (1)(i) it is seen that there is no fact on record to indicate that any of the agents had any permanent establishment in India. All the agents had their offices on the foreign soil and the correspondence which has been placed before me do not indicate that they had any PE in India. Further .....

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ent was not the interest. It has to be seen whether the payment is covered under the term "any other sum chargeable under the provision of this Act". It has been observed in the preceding discussion that income was not chargeable to tax as it has not been received in India nor it has accrued or arisen in India directly or indirectly. Therefore, once the income is not taxable there is no liability to deduct tax and therefore, it was not obligatory for the appellant to deduct tax in view of this there was no violation of the provisions of section 195 and the appellant also was not required to pay no deduction certificate from the AO. The issue whether the payer has to apply for a certificate under section 195 if some payment has been made, has been considered by various courts. The special bench of Chennai ITAT in the case of Prasad Productions reported in 125 ITD 263 has held in para-35 of the order that in if the assessee has not applied to the Assessing Officer under section 195(2) for deduction of tax at a lower or nil rate of tax under a bona fide belief that no part of the payment made to the non-resident is chargeable to tax, then he is not under any statutory obliga .....

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d to the banks and bank information regarding those commission payments. It is noted from the details submitted by the appellant during the course of appellate proceedings, that it has given various types of information in support of the claim of the rendering of services. In some of the cases copies of e-mail exchanges have been produced. In other cases it has produced debit notes in the form of letters received from those parties. It is noted that the commission payment have been sent through banking channel and are duly supported by various evidences. It is noted that the appellant is also doing business with the help of these commission agents during the current year and in the later period also as the appellant has given copies of e-mail correspondence in respect of some commission agents pertaining to the current period also. In view of these evidences, I am of the considered opinion that the appellant has also furnished sufficient evidence to prove that the services have also been rendered by the agents to whom commission payment has been made. The AO has also placed reliance on the decision of Hon'ble Authority of Advance Rulings in the case of SKF Boilers and Driers (P .....

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