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TMI Blog2019 (5) TMI 1819X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,68,19,775/- without appreciating the fact that as per amended provision of section 195, the assessee has to file an application before the AO for determination of sum and rate of tax at which tax would be deducted on such foreign remittances and the said exercise has not been carried out by the assessee. 2. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting addition of Rs. 27,39,215/- u/s 68 of the I.T. Act, 1961 relying on the additional evidences filed by the assessee during the course of appellate proceedings without giving an opportunity to the AO, which is in contravention to rule 46A of I.T.Rules 1962." 3. "The appellant prays that the order of CIT(A) on the above grounds be set aside and that of the Assessing Officer be restored". 4. "The appellant craves leave to amend or alter any ground or add a new ground which may be necessary". 3. The assessee is engaged in the business of dealing in Drugs & Pharmaceuticals. The first issue raised by revenue in its appeal is concerning deletion made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce payments against sales. The assessee submitted that it did not give substantial advance payments to the suppliers for importing the produces for which it involved services of the traders and agents who took care of the same and also arrange for supplies of the raw material directly from these companies. It was submitted that these agents and traders charge their commission as the overseas MNC companies as matter of their policy do not give them commission. The assessee submitted that these commission or agency charges includes expenses incurred by the overseas agents which included registration , vendor approval, quality approval, technical documentation, local analysis etc., which is maximum in the first year as all the registration and formalities have to be undertaken. It was submitted that prices or value generated is also on higher side in the first year in order to cover up the expenses mentioned above. The assessee submitted that these commission or agency charges also included out of pocket expenses which is the responsibility of the overseas agents to be incurred by them. It was also submitted that these overseas commission were paid to overseas agents only after comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges did not have any link with amount of sales . The AO thus observed that overseas commission paid to these four agents were found not to be reasonable and rather excessive , the AO show caused assessee as to why these overseas commission be not restricted to 6.25%. The assessee reiterated its arguments as were advanced earlier before the AO. It was observed by the AO that the out of four agents to whom overseas commissions are payable , the assessee did not made payment to two agents. The AO observed that it has also casted doubt on the claim of genuineness of the claim of these commission expenses. The AO also observed that the confirmations are not original and rather they are Xerox and E-mails received by the assessee. The AO also observed that these confirmations do not give the relevant details such as invoice number, date of sale , description of item , sale value and basis of computation of commission charged. The AO observed that these confirmations are nothing but self serving documents obtained by the assessee during the course of assessment and all are dated December 2011. The AO held that these overseas commissions are not allowable expenses and are thus disallowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal services' or Article 7 relating to ‗Business Profits' , thus such commission shall be taxable in the country of residence of the recipients and not in the country of source i.e. India. The assessee submitted that these payments are not liable to be taxed in India but in the countries to which these parties belong to. The assessee submitted that it has requested these foreign agents to provide proof of their residences and also confirm that these overseas commission are taxable outside India. The assessee submitted that no tax was deductible at source on these payments and the bankers also did not ask for proof of deduction of income-tax at source before making payments to these overseas agents for commission , which itself shows that no income-tax was deductible at source on these payments. The assessee relied upon the decision of Hon'ble Supreme Court in the case of G.E. India Technology Centre Private Limited v. CIT reported in (2010) 193 Taxman 234(SC) to contend that only if the payee is taxable in India, then only Section 195 can be invoked. Thus, prayers were made by assessee that Section 195 read with Section 40(1)(i) of the 1961 Act has no applicability to the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the case of the assessee. 6.4 To summarize, the Overseas Commission payment is thus not allowable as business expenses due to following reasons:- -The assessee has failed to bring any material evidence on record to establish the nexus between Registration charges and Sales requiring higher commission expenses payable. -The assessee failed to establish that Commission has accrued to the parties/agents, in view of the specific clause in the agreement which warranted fulfilling a target of Sales of respective items over next three years. The contention that Commission on Sales has not been accrued during the year, is evidenced by the fact that Commission to the 2 agents are still outstanding till date of this order. -Without prejudice to the merit of the case as discussed above and ALTERNATIVELY, the Overseas Commission is not admissible as Business expense, as the assessee has violated the provision of section 195 and therefore invoking the provision of section 40(i) of The I. T. Act. 6.5 In view of the above, the entire overseas Commission of Rs. 168,19,755/- is thus disallowed and added back to the total income of the assessee. Penalty proceedings u/s 271(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", - (a) In the case of any assessee - (i) Any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable (A) outside India, or (B) In India to a non-resident, not being a company or to a foreign company, on which tax has not been paid or deducted under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year; or in the subsequent year before the expiry of the time prescribed under subsection (1) of s. 200". 50. The perusal of the above provisions shows that any expenditure which is payable outside India on which tax is deductible at source but has not been deducted or after deduction has not been paid, shall not be allowed as deduction. Thus, these provisions are applicable in respect of the expenditure payable outside India on which either tax are not deducted or if deducted, not paid. We submit that in order to invoke the said provisions, it is necessary to make the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the country of source i.e. India. As such these payments shall be liable to tax not in India but in the countries to which these parties belong to. 54. In view of the above, we submit that these charges are not subjected to tax in India. This is also established in view of the fact that even at the time of making the payment/remittance of the commission; no deduction of tax was enforced by the bankers which itself proves that the payment is not subjected to tax. 55. Once it is established that these agents are not taxable in India, the provisions of TDS u/s. 195 of the Act shall not be applicable. It is categorically held by the Hon'ble Supreme Court in the case of GE India Technology Centre Pvt Ltd v. CIT [327 ITR 456] wherein it is held that only if, the payee is taxable in India, section 195 can be invoked. Thus, in view of the settled position, we submit that the provisions of section 195 and 40 (a) (i) cannot be made applicable in the case of the appellant, 56. The above submissions were also made before the Assessing Officer at the time of assessment proceedings. However, in the assessment order, the Assessing Officer has objected to the said submission on the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable ". 59. The above provisions clearly shows that s. 195(2) of the Act would be applicable only in a case where the assessee, making payment to a non-resident, considers that the whole such sum would not be the income of the recipient, an application should be made to the Assessing Officer to determine the proportion of the total amount which can be subjected to TDS. The said s. 195(2) of the Act clearly proves that it is only applied to a situation where the amount payable to the non-resident is taxable in India and the quantum of income out of the total amount payable to the non-resident cannot be ascertained reasonably. In other words, s. 195(2) would be applicable only in a case where the amount payable by the appellant to the overseas agents is otherwise liable to TDS. In order to invoke s. 195(2) of the Act, it is necessary to establish that the amount payable to the non-resident is otherwise liable to tax in India. It is only if the amount is liable to tax- in India, the provisions of s. 195(2) have to be invoked to determine the quantum of income embedded in the income on which TDS is to be deducted. 60. In the present case, admittedly the amount is not liable t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... miciled in India and are domiciled in their respective countries. b) Neither they can be termed as an associated enterprises with the appellant. D.T.A.A. WITH GERMANY: a) It is issued in the notification No.GSR-836 (E) dated 29.11.1996. On perusal of article 4 (1) r/w article 7 (1) and article 14 (1) they are not required to pay any tax in India as stated in the D.T.A.A agreement entered by India with Germany. D.T.A.A WITH U.S.A. a) The said agreement is reproduced in the notification bearing No.GSR 990(E) dated 20.12.1990. On perusal of the clause article 4(1), 7(1), 15 (1) and 23 (1) it will clearly reveal that the abroad non resident commission agent is not required to pay tax in India vide the said agreement. D.T.A.A WITH U.K a) The said agreement is being reproduced in the notification No.GSR 19 (E) dated 11.02.1994. On perusal of the article 7 (1) and article 15 (1) it will clearly reveal that the transaction is clearly covered under the said notification and D.T.A.A. agreement entered by India with U.K. and the non resident commission agent is not required to pay the taxes in India, b) On perusal of circular No. 786 dated 07.02.2000 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled law that the circulars issued by the Central Board of Direct taxes are binding upon the Income Tax Authorities u/s 119. The above contentions are supporting by the following judgments reported in: 55 ITR 198, 237 ITR 889, Based on the above submission and since the payment was subsequently remitted to the respective parties through Banking channels this clearly established the genuinely of the transaction and the Ld. Assessing Officer has not discharged his burden of proof." Thus, in nut-shell the assessee prayed before learned CIT(A) that additions made on account of expenditure incurred for overseas commission on the grounds of non deductibility of income-tax at source u/s 195 read with Section 40(a)(i) of the 1961 Act by the AO , be deleted. 4.3 The learned CIT(A) was pleased to delete the additions as were made by the AO on merits vide appellate order dated 29.10.2012 passed by learned CIT(A) , by holding that these are business expenses which are incurred wholly and exclusively for the purposes of the business of the assessee. There is no dispute as to it as Revenue has accepted this part of the appellate order dated 29.10.2012 passed by learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to deduct income-tax at source on these payments made to overseas agents towards commission but still the assessee is required to approach AO u/s 195(2) to obtain certificate for non deduction of income-tax at source or for deduction of income-tax at source at lower rates than prescribed rates. It was submitted that decision of Hon'ble Supreme Court in the case of G.E India Technical Centre P. Ltd.(supra) is a decision prior to amendments being made in Section 195 of the 1961 Act , and the assessee in the instant case has failed to comply with the requirements of amended Section 195 of the 1961 Act. It was submitted by Ld. DR that the assessee was required to make application before the AO u/s 195(2) for grant of certificate for no deduction/lower deduction of income-tax at source than prescribed rates but no such application was made by the assessee and hence provisions of Section 195 were clearly infringed leading to infringement of Section 40(a)(i) of 1961 Act. Our attention was also drawn to Sub-section 195(6) of the 1961 Act and it was submitted that vide amended provisions , the assessee has clearly defaulted by nondeducting income tax at source while making payments for comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action Value (in Rs . ) Overseas Commission Value (in Rs . ) %age of Overseas Commission 2008-09 12,23,22,188.00 1,68,19,755.00 13. 75% 2009-10 16,93,05,845.00 1,05,30,824.00 6.22% 2010-11 6,00,73,432.00 12,01,469.00 2% The assessee had duly submitted copies of agency agreement/contract and exclusivity agreement pertaining to 4 major overseas agents based in USA & Europe as well copies of ledger account of these agents. The four foreign agents to whom aforesaid payment of commission of Rs. 1.68 crore were made are as under: Sr. No. Name of the company Name of the country 1 Regal Rank Ltd UK 2. SRK Pharmachemie (Europe) GmBH Germany 3, NJK Holdings LLC USA 4. Roscio Alassandro Italy The Revenue is not doubting the genuineness of these commissions to overseas agents which was claimed by assessee as business expenses u/s 37(1) as that part of appellate order holding the issue in favour of the assessee has attained finality as Revenue has not challenged the said part of finding of learned CIT(A). The Revenue is mainly aggrieved in this appeal by infringement of Section 195(2) read with Section 40(a)(i) of the 1961 Act. It is also explained by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter completion of registration and other formalities and achievement of sales target in terms of value and volume . The authorities below have perused the agency agreements. It is provided in the agreements that targets as to value and volumes are fixed for overseas agents to get commission and in case the performances are not forthcoming, the assessee will not be liable to pay these commissions. Thus, these commissions paid to overseas agents are linked to performance by way of export orders generated or import of raw material etc facilitated for the assessee. The assessee was new to export business and as this being the first year of exports , hence the assessee was required to get registration done with various authorities/agencies in foreign countries . The said overseas agents assisted assessee in getting itself registered and undertook work for marketing and sales of assessee's products for which necessarily expenses were incurred by these overseas agents but the pith and substance of the agency agreement and the work performed in substance was to generate export orders and to facilitate imports of the products dealt in by the assessee and the work of registration of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Hon'ble Madras High Court in the case of Evolv Clothing Company Private Limited v. ACIT reported in (2018) 407 ITR 72(Mad.), wherein it was held as under: "19. From the judgment and order of the learned Tribunal under appeal, it appears that the Revenue only contended that the payee in question had rendered technical services in the nature of systematic research to the appellant and received fee in lieu thereof, which was liable to be taxed as per Article 13 (Clause 4) of the Indo-Italian Double Taxation Avoidance Agreement (DTAA). 20. The learned Tribunal took note of the agreement between the appellant and the payee which, inter alia, provided as follows: "The SECOND PARTY agrees to undertake and carryout the following services on behalf of the FIRST PARTY: 1. To procure orders for the FIRST PARTY and to negotiate the terms of such orders and contracts with said foreign buyers but the terms thereof shall be subject to prior, written concurrence of the FIRST PARTY. 2. To carry out systematic market research with regard to the needs of the products in the territory and to send to the FIRST PARTY reports and suggestions for adopting necessary measure in order to increase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether or not the nonresident has rendered services in India is attracted in the facts and circumstances of this case? 23. The first question necessarily and obviously has to be answered in favour of the appellant/assessee and against the Revenue, the question being covered by the judgment of Supreme Court in Toshoku Ltd., supra. The issue before the learned Tribunal was whether the appellant/assessee had paid for systematic research or for procuring export orders. It was all along the contention of the appellant/assessee that the foreign agent was paid for procuring orders and assessing the market. The learned Tribunal erred in concluding that there was no issue between the parties that the assessee had paid for systematic research. For the sake of convenience, the second, the third and the fourth questions are dealt with together. 24. The learned Tribunal found, on facts, on perusal of the agreement copies filed by the appellant/assessee that commission was paid to the foreign agents for (i) marketing the products of the assessee company; (ii) to procure orders for the assessee company; and (iii) for systematic market research with regard to the needs of the products, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) Circular No.786, dated 7.2.2000, dealing with payment of export commission, opining that withdrawal, being procedural in nature, would apply to proceedings pending; and (ii) Circular No.23 of 1969, which exhaustively dealt with subject of "Non residents Income accruing or arising through or from business connection in India - Liability to tax - Section 9 of the Income Tax Act, 1961". 29. From the Service Agreement with the agents abroad, it is clear that the service rendered is essentially brokerage service. The very first clause of the agreement states "to procure orders". The reference to market research abroad or co-ordination with the supplier or to ensure timely payment or making available its office space for visit by the suppliers, were ordinarily things which any agent or broker undertook incidental to brokerage service. 30. There is no finding that any of the commission agents had any place of business in India. Explanation 1 to Section 9(1)(i) of the IT Act would attract liability to Indian tax for a non-resident with business connections in India, only in respect of income attributable to his operations in India. In this case, there is nothing which shows that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction at source. 33. Under Section 9(1)(vii)(b), income by way of fees for technical services payable by a person, who is a resident, is taxable income except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India. In view of Explanation (2) to Section 9(1)(vii), technical services means any consideration, including lumpsum consideration, for rendering of any managerial, technical or consultancy services, including the provision of services of technical or other personnel, but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient. Service of market survey only to ascertain the demand for the product in the market is incidental to the function of a commission agent of procuring orders and is, in any case, not managerial, technical or consultancy service. 34. In GE India Technology Centre P. Ltd., supra, the Supreme Court clearly held that no tax is deductible under Section 195 of the IT Act on commission payments and consequently the expenditure on export commission pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal is allowed and the questions framed are answered in favour of the assessee against the Revenue. No costs. Consequently, connected miscellaneous petition is closed." The aforesaid is the decision of Hon'ble Madras High Court in the case of Evolv Clothing Company Private Limited(supra) for AY 2009-10 wherein the Hon'ble Madras High Court has referred to decision of Hon'ble Supreme Court in the case of GE Technology Centre Private Limited v. CIT (2010) 327 ITR 456(SC) , wherein Hon'ble Supreme Court held that what is relevant is the sum chargeable to income-tax under the provisions of the 1961 Act before provisions for deduction of income-tax at source u/s 195 come into service. Thus merely because the assessee has not made an application u/s 195(2), it will not bring the said sum chargeable to income-tax which otherwise is not chargeable to income-tax within provisions of the 1961 Act and provisions of Section 40(a)(i) cannot be invoked to disallow the expenses. The assessee in any case has produced before the AO form no. 15CA and 15CB certified by CA that no income tax was required to be deducted on these commissions paid to overseas agents and it is not shown by the AO as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Appellate Tribunal dated 19.04.2018 raising following questions for our consideration: "A. Whether the Appellate Tribunal had erred in law and on facts in upholding the order of the CIT(A) deleting the addition made on account of disallowance u/s. 40(a)(ia) of the Act for non deduction of tax on commission payable to foreign agents of Rs. 1,20,72,972/-? B. *** " 2. Question A pertains to disallowance made by the Assessing Officer under section 40(a)(ia) of the Income-tax Act, 1961 ['the Act' for short] for the failure of the assessee to deduct tax at source on exemption paid to foreign agents. This issue has been considered in Tax Appeal No. 1232 of 2018 in following manner: "1. The issue arises in relation to assessment year 2011-12. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had paid payment of Rs. 1.20 crore (rounded off) to non-resident out of the total commission of Rs. 1.49 crores (rounded off) paid during the year. On such commission paid to non-residents, the assessee had not deducted any tax at source. The Assessing Officer therefore, inquired with the assessee, who responded by suggesting that all serv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (1) of section 9 provides that in following incomes, contained in various clauses therein, shall be deemed to accrue or arise in India. Clause (i) of sub section (1) provides that all income accruing or arising, whether directly or indirectly, through or from any business connection in India or through or from any property in India or through or from any asset or source of Income in India or through the transfer of a capital asset situate in India shall be deemed to accrue or arise in India. 6. In the present case, as noted, admitted facts are that the non-resident agents appointed by the assessee for procuring export orders do not have permanent establishment in India. Their agents are situated outside India. Their activities as commission agents are being carried out outside India. The Tribunal therefore correctly held that there was no liability on the assessee to deduct tax at source. Merely because a portion of the sale to the overseas purchasers took place in India, would not change situation vis-avis the commission agents. 7. In the result, Tax Appeal is dismissed." 3. This question is therefore not entertained." Attention is also drawn to decision of Hon'ble Gujar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was held that section 195 gets attracted in cases where payment made is a composite payment in which a certain proportion of payment has an element of income chargeable to tax in India and prayer seeks a determination of appropriate proportion of sum chargeable. We are of the considered view that the assessee has paid commission to non-residents in respect of services rendered abroad and the non-residents has not carried any business operation in India, therefore, we find that the assessee is not liable to deduct tax at source. We have also noticed that the assessing officer has not controverted the claim of the assessee that commission was paid to non-residents in respect of services rendered abroad. After looking to the fact as stated supra and judicial finding, we consider that disallowance of commission paid to the aforesaid nonresidents under the above circumstances is not appropriate under the provisions of Section 40(a)(ia) of the Act. Therefore, the appeal of the revenue is dismissed." 4. It can thus be seen that while confirming the order of CIT [A], the Tribunal relied on judgment of the Supreme Court in the case of G.E India Technology Centre (P.) Ltd. v. CIT [2010] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Madars High Court in CIT v. Farida Leather Company in Tax Case Appeal No. 484 of 2015 , wherein Hon'ble Madras High Court decided the appeal in favour of the taxpayer on the ground that even if the taxpayer has not applied for certificate from AO u/s 195(2) but since the sum paid to non resident is not chargeable to incometax under the provisions of the 1961 Act, no disallowance u/s 40(a)(i) is warranted, by holding as under: "2.4 Aggrieved over the order of the Income Tax Appellate Tribunal, the Revenue has preferred this Appeal, raising the following substantial questions of law:- "1. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that no disallowance can be made as per Section 40(a)(i) of the Act with respect to payment of commission to non-resident foreign agents without deduction of tax at source? 2. Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the disallowance cannot be made by following the decision G.E India Technology Cen. (P.) Ltd., v. CIT [2010] 327 ITR 456 (SC), inspite of insertion of Explanation 4 to Section 9(1)(i) and Explanation 2 to Section 195(1) of the Act, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/226 Taxman 115/48 taxmann.com 48 (Mad.), the assessee is not liable to deduct tax at source, when the non-resident agent provides services outside India on payment of commission. 5.2 The contention of the Revenue is that such services are attracted by Explanation (2) to Section 9 (1) (vii) of the Act and therefore TDS certificate is essential. 6. Whether this contention is correct, is the issue to be decided. 7. In order to appreciate this contention, it is necessary to consider the relevant provisions of the Act:- (i) Section 40(a)(i) of the Act :- "Section 40 - Amounts not deductible: Notwithstanding anything to the contrary in sections 30 to 38, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", - (a) in the case of any assessee - (i) any interest (not being interest on a loan issued for public subscription before the 1st day of April, 1938), royalty, fees for technical services or other sum chargeable under this Act, which is payable,- (A) outside India; or (B) in India to a non-resident, not being a company or to a foreign company, on which tax is deductible at source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode : Provided further that no such deduction shall be made in respect of any dividends referred to in section 115-O. [Explanation 1] :............... [Explanation 2.- For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction thereunder applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has- (i) a residence or place of business or business connection in India; or (ii) any other presence in any manner whatsoever in India." Explanation 4 to Section 9 (1) (i) of the Act:- "Section 9 - Income deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, in the case of G.E.India Technology Centre (P.) Ltd. (supra), in which, it is very categorically held that the tax deducted at source obligations under Section 195(1) of the Act arises, only if the payment is chargeable to tax in the hands of the non-resident recipient. 9.1 Therefore, merely because a person has not deducted tax at source or a remittance abroad, it cannot be inferred that the person making the remittance, namely, the assessee, in the instant case, has committed a default in discharging his tax withholding obligations because such obligations come into existence only when the recipient has a tax liability in India. 9.2 The underlying principle is that, the tax withholding liability of the payer is inherently a vicarious liability on behalf of the receipient and therefore, when the recipient / foreign agent does not have the primary liability to be taxed in respect of income embedded in the receipt, the vicarious liability of the payer to deduct tax does not arise. This vicarious tax withholding liability cannot be invoked, unless primary tax liability of the recipent / foreign agent is established. In this case, the primary tax liability of the foreign agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contention of the learned counsel for the Revenue is that the Tribunal ought not to have relied upon the decision G.E.India Technology's case, cited supra, in view of insertion of Explanation 4 to Section 9(1)(i) of the Act with corresponding introduction of Explanation 2 to Section 195(1) of the Act, both by the Finance Act, 2012, with retrospective effect from 01.04.1962. 15. The issue raised in this case has been the subject matter of the decision, in the recent case, CIT v. Kikani Exports (P.) Ltd. [2014] 369 ITR 96/[2015] 232 Taxman 255/49 taxmann.com 601 (Mad.) wherein the contention of the Revenue has been rejected and assessee has been upheld and the relevant observation reads as under:- '... the services rendered by the non-resident agent could at best be called as a service for completion of the export commitment and would not fall within the definition of "fees for technical services" and, therefore, section 9 was not applicable and, consequently, section 195 did not come into play. Therefore, the disallowance made by the Assessing Officer towards export commission paid by the assessee to the non-resident was rightly deleted.' 16. When the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uter generated ledger account of the assessee in the books of accounts of said party namely the said party namely M/s Chikhloli Chemicals Pvt. Ltd but as per said ledger account , the said party has shown to have made sales to the assessee on 23.09.2008 to the tune of Rs. 23,94,000/- , while the assessee was contending to have made purchases to the tune of Rs. 27,39,215/- . Thus, there was also an difference in the balance as is appearing in books of accounts of the assessee and the balance as was appearing in books of accounts of the said party. The said copy of ledger account was signed by some third party one M/s Purva Inorganics Private Limited and hence this piece of evidence being confirmation from said party filed by the assessee was discarded by the AO. The assessee could not file proper reconciliation statements/certificates from the said party before the AO which led to additions been made by the AO vide assessment order dated 29.12.2011 passed by the AO u/s 68 of the 1961 Act. 7.2 The assessee being aggrieved by the additions as were made by the AO vide assessment order dated 29.12.2011 passed u/s 143(3) of the 1961 Act filed first appeal with learned CIT(A). During the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is comments and verification as no remand report was called by learned CIT(A) from the AO. The learned DR submitted that learned CIT(A) did not called for remand report from the AO on the additional evidence by way of confirmation from M/s Chikhloli Chemicals Private Limited filed by the assssee before learned CIT(A) for the first time and clearly there is an breach of Rule 46A of the 1962 Rules. It was submitted that under these circumstances , the matter need to go back to the file of the AO for fresh adjudication so that necessary verifications of these additional evidences can be done by the AO. The Ld. Counsel for the assessee on the other hand submitted that that it was merely an clerical error wherein wrong stamp of sister concern of the assessee namely M/s Purva Inorganics Pvt. Ltd., was engrossed on the confirmation given by M/s Chikhloli Chemicals Private Limited which was filed before the AO and it was only due to shortage of time as the matter was getting time barred, the fresh confirmation from M/s Chikhloli Chemicals Private Limited could not be filed by the assessee before the AO during the course of assessment proceedings. 7.4 We have considered rival contentions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther than the evidence produced by him during the course of proceedings before the [Assessing Officer], except in the following circumstances, namely :- (a) where the [Assessing Officer] has refused to admit evidence which ought to have been admitted ; or (b) where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the [Assessing Officer] ; or (c) where the appellant was prevented by sufficient cause from producing before the [Assessing Officer] any evidence which is relevant to any ground of appeal ; or (d) where the [Assessing Officer] has made the order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. (2) No evidence shall be admitted under sub-rule (1) unless the [Deputy Commissioner (Appeals)] or, as the case may be, the Commissioner (Appeals)] records in writing the reasons for its admission. (3) The [Deputy Commissioner (Appeals)] [or, as the case may be, the Commissioner (Appeals)] shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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