TMI Blog2018 (11) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... aised in similar set of circumstances, and hence both appeals were heard together and disposed off by way of this consolidated order. 2. The grounds of appeal raised in ITA No. 2726/del/2015 for assessment year 2006-07 are reproduced as under: On the facts and circumstances of the case, the Ld. CIT(A) erred in- 1. Deleting the disallowance of ₹ 1,87,00,000/- u/s 40(a)(ia) read with section 195 of the IT ACT on account of non deduction of TDS on payment of foreign commission. 2. Deleting disallowance merely on the basis that one of the six commission agents not resident vide order 4.7.2013 by Addl Commissioner (International Taxation: Range-3, New Delhi. 3. Ignoring the Board's circular No. 7/2009 dated 22.10.2009 and order of AAR in Appeal No. 983 and 984 of 2010 dated 22.2.2012in the case of SKF Boilers and Driers Pvt. Ltd and other judgements stated in the assessment order of A.0. 4. Ignoring explanation 2 of the Section 195 of the Income Tax Act. 5. The appellant craves leave for reserving the right to add, alter, modify, amend or forego any ground(s) of appeal at any time before or during the hearing of this appeal. 3. Briefly sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor she may make an application to the Assessing Officer for non-deduction of tax at source. According to her, in the instant case no such certificate has been obtained either by the payer or the payee of the commission. In view of the above arguments, according to her the assessee was liable to deduct tax at source and failure into do so, the disallowance under section 40(a)(i) of the Act has rightly been made by the Assessing Officer. 6. On the contrary, the Ld. Counsel of the assessee submitted that expenditure has been incurred for procuring export orders from foreign countries using services of the foreign agents in foreign countries. No part of the services have been rendered in India. According to him, the foreign agents are not having any permanent establishment in India and, therefore , sum of foreign commission paid to them is not chargeable to tax in India and accordingly the assessee is not liable to deduct tax at source in terms of section 195 of the Act and consequently no disallowance can be made under section 40(a)(i) of the Act in respect of the expenditure on foreign commission. The Ld. Counsel submitted that identical addition was made in assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission agreement have been entered into and the appellant has produced the copies of such agreement as sample of similar terms and conditions held by the appellant with them during the year under consideration. It has further been pointed out that the ITO(TDS) himself has granted exemption to M/s Kiwi Enterprises (P) Ltd. in respect of withholding of tax U/S 195(2) of the Act in respect of payments of commission to M/s Sarl Oren of France (vide orders dt. 04.07.2013 and 09.05.2014) and MIs Linea Moda Di Rita Caravita (vide order dt. 09.05.2014) certifying that such income would be taxable only in France. 8.7. On considering the details filed by the appellant, it is observed that the activities undertaken by the foreign agents precisely related to facilitate the sale of the appellant. The decisions of Hon'ble Jurisdictional High Court of Delhi in the case of CIT Vs. Eon Technology (P) Ltd (supra) and other decisions as discussed by Ld. CIT(A)-XXIV, in appellant's case for AY 2010-11, are directly applicable in appellant's case, which are not being repeated here for the sake of brevity. The services are not technical in nature and these services are rendered by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 23 of 1969, CBDT clarified that the payment made to non-resident commission agents was not liable to income-tax in India. Such clarification of CBDT was based on the provisions of sections 5,7,9, 195 and other relevant provisions of the Act. The question for consideration is when there is no relevant change in sections 5,7,9, 195 then as to how the withdrawal of Circular No. 23 of 1969 of CBDT will make the commission paid to such non-resident commission agents taxable in India. I am of the considered view that even after the withdrawal of Circular No. 23 of 1969, the position will remain the same i.e., the commission paid to non-resident agents is not liable to tax under the provisions of I T. Act when the services were rendered outside India, services were used outside India, payments were made outside India and there was no permanent establishment or business' connection in India. It cannot be accepted that by virtue of CBDT Circular No. 23/1969, the commission paid to 'nonresident agents become not liable to income-tax in India and on such withdrawal of Circular by the CBDT, such commission paid to non-resident agents become liable to income-tax in India. Irresp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A). Consequently, the appeal filed by the Revenue is hereby dismissed. 9. Thus respectfully following the above finding of the Tribunal , the sum paid to the foreign agents for commission is not chargeable to tax in their hands in India and accordingly said expenditure is not liable to deduction of tax at source. Hence, in our opinion order of the Ld. CIT(A) on the issue in dispute is well reasoned and we do not find any error in the same . The disallowance made under section 40(a)(i) is thus accordingly directed to be deleted. The grounds raised by the Revenue are accordingly dismissed. 10. In the result, the appeal filed by the Revenues is dismissed. 11. The grounds raised in ITA No. 2727/del/2015 for assessment year 2011-12 are reproduced as under: On the facts and circumstances of the case, the Ld. CIT(A) erred in - 1. Deleting the disallowance of ₹ 2,03,15,895/- u/s 40(a)9ia) read with section 195 of the IT Act on account of non deduction of TDS on payment of foreign commission 2. Deleting disallowance merely on the basis that one of the six commission agents not resident vide order 4.7.2013 by Addl Commissioner (International Taxation) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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