TMI Blog2019 (4) TMI 1651X X X X Extracts X X X X X X X X Extracts X X X X ..... iness receipts of the foreign residents are not taxable in India since the agents have no PE in India and therefore, the assessee was not required to make TDS u/s 195 of the Act. Therefore, the assessee s appeals for all the three A.Ys are allowed. - ITA Nos.11, 12 & 1273/2017 - - - Dated:- 24-4-2019 - Smt. P. Madhavi Devi, Judicial Member And Shri S. Rifaur Rahman, Accountant Member For the Assessee : Sri A.V. Raghuram For the Revenue : Smt. N. Swapna, DR ORDER PER Smt. P. Madhavi Devi, J.M.: The appeals in ITA Nos. 11 12/Hyd/2017 are filed by the assessee against the orders of the CIT(A)-5, Hyderabad, dated 31/10/2016 for the assessment years 2012-13 and 2013-14 while ITA No.1273/Hyd/2017 is against the order of the CIT(A)-5, Hyderabad dated 20/06/2017 for the assessment year 2014-15. As the issue involved in all these appeals is common, all the three appeals were heard together and are disposed of by this common and consolidated order. 2. Brief facts of the case are that the assessee-company, engaged in the business of Testing and Analysis of Materials, Environmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orm of soliciting the orders and the commission is also remitted to them abroad, it is clear that the income has arisen on account of commission payable to them abroad and therefore, is deemed to accrue or arise in India, and is taxable under the Act in view of the specific provision of section 5(2)(b) r.w.s 9(1)(i) of the Act. Thus, he held that the provisions of section 195 would apply and made the disallowance u/s 40(a)(ia) of the Act and brought it to tax. 5. Aggrieved, assessee preferred an appeal before the CIT(A), who confirmed the order of the A.O. and further held that the services rendered by the foreign agents are in the nature of fees for technical services and therefore, it is taxable even under the DTAA and hence, the assessee-company was liable to deduct tax u/s 195 of the Act. Against this order of the CIT(A), assessee is in appeal before us by raising the following grounds of appeal: 1. On the facts and in the circumstances of the case, the order of the Ld. CIT(A) is erroneous, illegal and unsustainable on facts and in law. 2. The CIT(A) erred in sustaining the action of the A.O. in disallowing the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the A.O. and the order of the CIT(A) needs to be set aside. 7. Learned Departmental Representative, on the other hand, supported the orders of the authorities below and particularly para 14 of the order of the CIT(A) and submitted that the services rendered by the foreign agents are in the nature of fees for technical services and hence the assessee was liable to deduct TDS u/s 195 of the Act and the CIT (A) s should be upheld. 8. Having regard to the rival contentions and the material on record, we find that the AO made the disallowance u/s 40(a)(ia) only on the ground that the assessee ought to have made the TDS u/s 195 of the Act since the income had accrued/arisen to the foreign agent in India. The AO has not held the payment to be fees for technical services or royalty . The CIT (A) has examined the nature of services provided by the foreign agent to the assessee and has come to the conclusion that it is fees for technical services and therefore, liable for TDS. Undoubtedly, the powers of the CIT (A) are co-terminus with that of the AO and therefore, the CIT (A) could have examined the facts of the case if the AO has not done so but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered by the Co-ordinate Bench in the case of CIT Vs. Sri Aurobindo Impex Company, (supra), the Hon'ble Jurisdictional High Court has rendered the judgment following the principles laid down by the Hon'ble AP High Court in the case of Sri Ram Refrigeration Industries Vs. ITO [361 ITR 119] (AP). Further, the Hon'ble the High Court also held that following the principles laid down by the Hon'ble Supreme Court in the case of CIT Vs. Toshoku Ltd., [125 ITR 525] (SC) that making up of the entries in the books of account of assessee cannot be taken into be receipt actual or constructive by the non-resident sales agents. In view of that, prima-facie, the amounts paid from India does not establish that income has accrued or arisen in India as the services are not rendered in India at all and assessee has no business connection. This issue was considered by the Co- ordinate Bench in the case of DCIT Vs. Divi's Laboratories Ltd., [131 ITD 271], wherein it was held as under: The main thrust in such a situation is whether the commission made to overseas agents, who are non-resident entities, and who render services only at such particular place, is asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. (2010) 234 CTR (SC) 153 : (2010) 44 DTR (SC) 201 : (2010) 327 ITR 456 (SC) relied on . 7.1. Similarly in the case of Euroflex Transmissions (India) Pvt. Ltd., Vs. ACIT in ITA No. 1773/Hyd/2014, dt. 01- 04-2015, on similar issue the Co-ordinate Bench has held as under: 7. We have considered the submissions of the parties and perused the orders of the revenue authorities as well as other materials on record. We have also carefully applied our mind to the decisions cited at the bar. On a perusal of the assessment order, it is very much evident that AO has not disputed the fact that commission payments were made to non-resident agents who not only were carrying on their business activities outside India, but, the commission payments were also related to services provided by those agents outside India. It is also not disputed that none of the commission agents have any permanent establishment or permanent business place in India. AO has also not disputed the f act that commission amounts were remitted to non- residents directly outside India. However, AO has held that assessee is liable to deduct tax u/s 195(1) on the reasoning that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pported by the following decisions: 1. CIT Vs. Model Exims Kanpur, [2013] 358 ITR 72 (All.) 2. CIT Vs. Faizan Shoes Pvt. Ltd., [2014] 367 ITR 155 (Mad.) 9. Further, the coordinate bench while examining identical nature of dispute in case of Arobindo Pharma Ltd. (supra) held in the following manner: 25. As far as the amount paid as sales commission is concerned, this issue has already been decided by the Coordinate Bench in assessee's own case for the A.Y. 2002-2003 and 2004-2005 in ITA.No.415 999/Hyd/2007 by order dated 25.06.2010. the Coordinate Bench has held as under : 2. . . .. . We find that as per Circular 786 dated 17.2.2000, commission paid by the assessee company directly to non-resident agents for rendering services abroad are not liable for deduction of TDS under section 195 of the Act. Accordingly, the provisions of section 40(a)(ia) of the Act are not applicable. The case law relied on by the learned Departmental Representative in the case of Transmission Corporation of A.P. Limited reported in 239 ITR 587 (SC) and the decision of this Tribunal in the case of Cheminor Drugs vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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