TMI Blog2018 (2) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 Sumit Kr . Verma, Sr . D . R . For The Assessee : Shri S . N . Divetia, A . R . ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER :- This Revenue s appeal for A.Y. 2010-11, arises from order of the CIT(A)- VIII, Ahmedabad dated 30-09-2014, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The revenue has raised following grounds of appeal:- 1 . The Ld . CIT ( A ) has erred in law and on facts in deleting the disallowance of Rs . 51,99,991 /- u / s 40 ( a )( ia ) , in respect of commission expenses to overseas agents . The Ld . CIT ( A ) has erred in law and on facts in holding that the commission paid to overseas agents is not to be deemed to accrue or arise in India and thereby not chargeable to tax in India and liable to deduction of tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 main findings,that the appellant had also failed to prove the commissions paid to the agents were genuine and justified . The appellant on the other hand, in its detailed written submission, - has claimed that the Provisions of Section 5 ( 2 )( b ) read with section 9 ( l )( i ) of Income Tax Act were not applicable in its case . The income has been earned abroad and is therefore, not taxable in India . It has also given detailed evidences to prove that the commission paid was genuine . The issues which are to be examined and decided are : - 1 . Whether the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, 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 the assessing officer has also not pointed out any such fact in its order which indicate that there was any such office which attracts the deeming provisions . Further the observation that the source of income was in India, is also not proper as it has clearly been discussed in the preceding paragraphs that none of the services have been rendered in India and sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as 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 obligation to deduct tax at source on any part of thereof . While deciding the case the honourable Bench has considered several cases which were relevant to the issue . In the present case the appellant did not deduct the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 .) Ltd . ( 2012 ) 18 Taxmann 325 and Rajive Malhotra ( 2006 ) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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