TMI Blog2018 (3) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... Accountant Member For The Appellant : Shri S. Jhajharia, AR For The Respondent : Shri Arindam Bhattacherjee, Addl. CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-6, Kolkata dated 20.05.2016. Assessment was framed by DCIT, Circle-4, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 22.10.2014 for assessment year 2012-13 and assessee has raised following grounds:- 1. For that in view of the facts and circumstances of the case the Ld. CIT is wholly wrong and unjustified in confirming the arbitrary disallowance of ₹ 15,42,693/- made in the assessment u/s. 40(a)(ia) of the I. Tax Act on a/c of the payment of export commission made by the assessee company to two non-resident agents for services rendered outside India, in relation to export of cotton yarn, without deduction of tax at source u/s. 195 of the Act. 2. For that in view of the facts and circumstances of the case the Ld. CIT is wholly wrong and unjustified in confirming the said disallowance of commission payment without con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) r.w.s 9(1)(i) of the Act. Accordingly, assessee was under obligation to deduct the TDS on the amount of commission paid to the aforesaid parties but assessee failed to do so. Therefore, AO disallowed the same and added to the total income of assessee. 3. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that commission was paid to various parties in connection with direct exports to the parties referred by them. The services were rendered by these agents from their respective countries. Therefore, the commissions earned by them were not chargeable to tax and consequently there was no liability to deduct the tax u/s 195 of the Act. Moreover, the commission was paid to all agents in terms of foreign currency. None of the agents has place of business in India and business connection in India. The AO relied upon the decision of AAR in the case of SKF Boilers and Driers Pvt. Ltd. (2012) 343 ITR 385 was rendered in relation to opinion of the Advance Ruling Authority. Such opinion of advance ruling authority is binding on the concerned party which sought such opinion. The assessee also submitted that the provision of Section 5( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The fact that the agents have received rendered services abroad in the form of soliciting the orders and the commission is to be remitted to them abroad are wholly irrelevant for the purpose of determining the situs of their income. We follow the ruling of this Authority in Rajive Malhotra, In re [2006] 284 ITR 564 / 155 Taxman 101 (Delhi). We therefore hold that the income arising on account of commission payable to the two agents is deemed to accrue and arise in India, and is taxable under the Act in view of the specific provision of Section 5(2)(b) read with section 9(1)(i) of the Act. The provision of section 195 would apply, and the rate of tax will be as provided under the Finance Act for the relevant year. The facts of the instant case are similar. The appellant has stated that the case is not a binding precedent, but as the facts are similar, the ruling, definitely, has a persuasive value. The circular 786 dated 02/02/2007 and circular 23 dated 23.07.1969 of the Board relied upon by the appellant have now been withdrawn by CBDT vide circular no. 7 of 2009 dated 221.10.2009. The appellant has paid Commission to the non-resident agents which have arisen only when the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Delhi ITAT in the case of Divya Creation Vs. ACIT in ITA No. 5603/Del/2014. On the other hand, Ld. DR vehemently relied on the order of Authorities Below. 5. We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, assessee has made payment to various agents based in foreign countries on account of export made to the parties referred by them and no addition was made in respect of those parties based in the country other than Hong Kong in view of the fact that there was DTAA with those countries. However, AO was of the view that the payment made to the foreign agents based on Hong Kong was made without deducting TDS u/s 195 of the Act. As per the AO assessee was liable to deduct TDS on such payment of commission due to the fact that there was no DTAA with Hong Kong. The view taken by AO was subsequently confirmed by Ld. CIT(A). At this juncture, we find important and relevant to reproduce the provision of Section 195 of the Act which reads as under :- Other sums. 71 195. 72[(1) 73Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest 74 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India, or through or from any asset or source of income in India, 70[* * *] or through the transfer of a capital asset situate in India. 71[Explanation 1].-For the purposes of this clause- ( a) in the case of a business of which all the operations72 are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations72 carried out in India ; ( b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export ; 73[* * *] 74[(c) in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines or journals, no income shall be deemed to accrue or arise in India to him through or from activities which are confined to the collection of news and views in India for transmission out of India ;] From the above proposition, we find that income shall be deemed to accrue or arise in India if it fulfils any of the conditions :- i) Busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on agent worked for procuring participation by other non-resident entities in a food and wine show in India, and the claim of the assessee was that since the agent has not carried out any business operations in India, the commission agent was not chargeable to tax in India, and, accordingly, the assessee had no obligation to deduct tax at source from such commission payments to the non-resident agent. On these facts, the Authority for Advance Ruling, inter alia, opined that no doubt the agent renders services abroad and pursues and solicits exhibitors there in the territory allotted to him, but the right to receive the commission arises in India only when exhibitor participates in the India International Food Wine Show (to be held in India), and makes full and final payment to the applicant in India and that the commission income would, therefore, be taxable under section 5(2)(b) read with section 9(1)(i) of the Act . The Authority for Advance Ruling also held that the fact that the agent renders services abroad in the form of pursuing and soliciting participants and that the commission is remitted to him abroad are wholly irrelevant for the purpose of determining situs of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
