TMI Blog2018 (7) TMI 1620X X X X Extracts X X X X X X X X Extracts X X X X ..... ta, Adv ORDER PER SUCHITRA KAMBLE, JM The appeal is filed by the Revenue and the Cross Objection is filed by the assessee against the order dated 23/07/2014 passed by the CIT(A)-XXV, New Delhi for Assessment Year 2011-12. 2. The grounds of appeal are as under:- ITA No. 5806/DEL/2014 1. On the facts and the circumstances of the case the Ld.CIT(A) has erred in deleting the addition of ₹ 1,19,87,105/- made by A.O on account of non-deduction of TDS u/s 40(a) (ia) of the I.T act on Contract Payment and Commission. C.O .No. 115/DEL/2015 1. The Ld.CIT(A) on the facts, in law and in view of the circumstances of the cases, in confirming the addition of disallowance of ₹ 259250/- u/s 40(a)(ia) of the I.T Act for non deduction of TDS on the payments covered by Section 194C of the I.T Act ignoring the authorities cited on behalf of the appellant against the disallowance under reference. 3. During the year under consideration, the assessee is engaged as exporter and importer of Sanitary wares tiles and also wholesale trading of dry fruits and Kirana items. The return of income declaring total income of ₹ 98 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission of ₹ 1,19,91,774/- to an NRI Sh. Sanjay Mehta, a resident of Dubai against the export orders booked by him. There is no dispute about the genuineness and business expediency of this payment. Copy of the agreement was submitted before the authorities below. 2. The AO disallowed the above payment invoking provision of sec 40(a) (i) of IT Act for non deduction of withholding tax on such payment as per provision of sec 195 r.w. sec 9 of IT Act. 3. There is no dispute about the fact that the said payee has no permanent place of business in India and his services has no connection with the property in India and the amount has been directly remitted to Sh. Sanjay Mehta outside India. All his activities for which commission has been provided have been carried out outside India and no part of his activities are attributed to the activities in India. 4. The AO was given the explanation by the assessee in para 2.2.1 page 2 of the assessment order that commission payments to such non-residents are not taxable in India as conditions specified u/s 9(1 )(i) of the Act are not fulfilled. The AO rejected the explanation of the respondent assessee. To support the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctions render by the payee. Similar view was taken by Delhi Bench of ITAT in fhe case of DCIT vs Angelique International Ltd (PB 20-28, relevant page 24 in para 11) approved by Delhi High Court in CIT vs Angelique International Ltd 359 ITR 0009 in para 5 of the order. Various authorities before Ld. CIT(A) in para 1.1.7 at page 7 7 8 of the CIT(A) order. 5. The sec 9(2) is also not applicable on the facts of the case and also considering the restriction contained in Explanation to above section as per which the income under following clauses of sec 9(1) will be deemed to accrue or arise in India by virtue of section 9(2). The relevant clauses are clause (v) {Interest payment}, clause(vi) {Royalty} and clause (vii) {Fee for technical services} which implies that only income through such payments which are made to the non residents will be deemed to accrue or arise in India. Since, the payment in the present case doesn t fall in the above categories, the provisions of section 9(2) too have no application. 6. The AO has also raised the issue of the circular No 7 dated 22.10.2009 through which old Circulars Nos 23 of 1969 and 786 of 2000 stood withdrawn. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to declare what does a particular provision of statute say, and not for the executive. Of course, the Parliament/Legislature never speaks or explains what does a provision enacted by it mean. In view of above, the support derived by the AO to make addition from the circular of the CBDT is not tenable in law when the circular in question is contrary to the interpretation of the provision made by the courts through the judgment relied in before. 8. It was held in the following authorities after considering the Circular No 7 that no additional liabilities is fastened because of the substitution of the old circulars by the new circular No.7 Dated 22.10.2009 ( a) DCITvs Sanjeev Gupta 2011 135 HJ 641 (Lkw) ( b) DCIT vs Divi s Laboratories Ltd 2011 131 ITD 271 (Hyd) ( c) ACIT vs Avon Organics Ltd 2013 55 SOT 263 (Hyd) ( d) Gujarat Reclaim Rubber Products Ltd Vs ACIT ITA No.8868/Mum/2010 ( e) DCIT vs Angelique International Ltd (supra) ITAT Delhi Decision approved by Delhi High Court reported in 359 ITR 0009) (Case Law Compilation pages 20-28) ( f) Farida Shoes P Ltd ITA No.359/Mad/2013 Dated 11.04.2013. ( g) Farida Prime Tannery Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r its persuasive value, it would be of no help to us. Having perused the order of the Advance Ruling Authority, we are not persuaded. 10. Further, Ahmedabad Bench of ITAT in the case of Excel Chemicals India Ltd in ITA No.5/Ahd/2016 Dated 29.07.2016(Case Law Compilation pages 29-33) after considering the ruling of AAR in case of SKF Boilers held that commission remitted abroad to non-resident agents on identical facts was allowed to be made without deduction of tax and it was held in para 6 at page 32 of the Paper Book that the above ruling is not binding on appellate authorities. Further reliance is placed on the decision of the Mumbai Bench of ITAT DCIT vs Boston Solid Group PTE Ltd 93TTJ 293 (Mum). 11. Finally, the Agra Bench of ITAT in the recent decision in the case of ACIT vs M/s Manufax (India) in ITA No.434 446/Agra/2015 Dated 11.04.2018 considered the issue of payment of commission in identical circumstances and held that such income is not taxable in India. The Hon'ble Bench considered the provision of sec 9(1) and 195, all the cases on the issue, the effect of withdrawal of circular No.29 and the AAR ruling in the case of SKF Boilers and Dryers Pvt Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer made addition of ₹ 62,19,609/- u/s 40(a)(i) on the ground that assessee has not deducted tax from the foreign agency commission paid as per the provisions of section 195 of the I. T. Act. While doing so, the Assessing Officer relied on the decision of the AAR in the case of SKF Boilers and Driers Pvt. Ltd. (supra) and the decision in the case of Rajiv Malhotra (supra). We find the ld. CIT(A) while upholding the action of the Assessing Officer held that income arising to the agent on account of export commission very much falls within the ambit of provisions contained in section 5(2)(b) of the I.T. Act as the income has accrued in India when the right to receive the same came into existence. According to him although the non- resident agent has rendered services and procured orders abroad but the right to receive the commission certainly arise in India when the order gets executed by the assessee. According to him, the mere fact that the agent is to render services ITA No.5603/Del/2014 abroad and the commission is to be remitted to him abroad are wholly irrelevant for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and B debited his commission account and credited the amount of commission payable to the Japanese company in his account books and later remitted the amount to the Japanese company. There was a similar agreement with the French business house in relation to the corresponding area and similar credit and debit entries and subsequent remittance of the commission were made. The question was whether the commission earned by the non-resident sales agents could be taxed in India, treating B as representative assessee under s. 161 of the I.T. Act, 1961: Held, (i) that it could not be said that the making of the entries in the books of B amounted to receipt, actual or constructive, by the non-resident sales agents as the amounts so credited in their favour were not at their disposal or control; they could not, therefore, be charged to tax on the basis of receipt of income, actual or constructive, in the taxable territories. ( ii) That the non-residents did not carry on any business operation in the taxable territories : they acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to the remitted by the purchasers from abr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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