TMI Blog2020 (12) TMI 395X X X X Extracts X X X X X X X X Extracts X X X X ..... dia. Considering the facts and circumstances of the case and also the consistent view taken by the co-ordinate Bench in the case of M/s. Turbo Energy Ltd. [ 2017 (5) TMI 1749 - ITAT CHENNAI] we are of the view that the export commission paid to foreign agents for rendering services outside India is not liable for deduction of tax at source u/s.195 and consequently, no disallowance could be made u/s.40(a)(i) for non-deduction of TDS. CIT(A) after considering the relevant facts and also by following the decision of the Hon ble High Court in the case of Faizan Shoes Pvt.Ltd, [ 2014 (8) TMI 170 - MADRAS HIGH COURT] has rightly deleted the addition made towards disallowance of export commission made to non-resident agents - Decided in favou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsultancy service and also fit into the definition of Royalty and Technical Service as per article 12 clause 2 and article 13 clause 3 of India-Hong Kong DTAA. 3. Brief facts of the case are that the assessee is engaged in the business of manufacture of components for automobiles and filed its return of income for the assessment year 2009-10 disclosing total income of ₹ 2,18,19,518/-. The assessment has been originally completed u/s.143(3) of the Income Tax Actm1961 (hereinafter referred to as the Act ) determining total income of ₹ 18,61,46,990/-. For the relevant assessment year 2009-10, the Tribunal had remitted the appeal back to the file of the Assessing Officer to consider the issue of determination of export turnov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to deduct TDS u/s.195 of the Act . The learned CIT(A) after considering the facts and also taken support from his predecessor CIT(A) order for the assessment year 2010-11 deleted the additions made by the Assessing Officer towards disallowance of export commission paid to non-resident agents u/s.40(a)(i) of the Act on the ground that commission payment to non-resident agents for services rendered outside India is not taxable in India, consequently assessee is not required to deduct TDS u/s.195 of the Act and hence, no disallowance could be made u/s.40(a)(i) of the Act for non-deduction of TDS. Aggrieved by the order passed by the learned CIT(A), the Revenue is in appeal before us. 5. The learned DR submitted that learned CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is consistently making payments of commission to non-resident agents right from assessment year 2006-07 to assessment year 2013-14 and the department has accepted the said commission payments as deductible without deduction of tax at source u/s.195 of the Act for the assessment year 2006-07 to 2008-09 and 2010-11. Further, although the Assessing Officer has disallowed commission payment for assessment year 2012-13 and 2013-14, but the learned CIT(A) has allowed relief to the assessee and the department has accepted the findings of the CIT(A) without any further appeal, but for the year under consideration, the department has challenged the disallowances even though the learned CIT(A) has allowed relief by following the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties and perused the material placed on record. The Ld.AR argued that the services rendered by the foreign agent was to canvass the assessee's products outside India and no managerial and consultancy services were rendered by the foreign agents. The entire services were rendered outside India and the party does not have any permanent establishment or business connection in India. The nature of services rendered was examined by the Ld.CIT(A) and given a finding that the services do not fall under the category of managerial services to be taxed u/s 9(1)(vii) of IT act as FTS. On similar facts in the case of M/s.Brakes India Ltd., in ITA No.266/2012 dated 22.03.2013, the ITAT, Chennai has decided the issue in favour of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. The explanation to section 9(2) was introduced by Finance Act 2010. w.e.f.1976 and as on the date of assessment there was no such provision to tax the FTS rendered outside India and hence we agree with the Ld.A.R that no tax is deductible u/s 195 and consequent disallowance is not called for. 8. In this case, on perusal of the facts available on record, we find that the assessee has made payment to M/s.Biggleswade Ltd., Hong Kong, a non-resident agent who rendered services to the assessee outside India for marketing the products of the assessee. Further, the assessee has filed necessary evidence to prove that although the agreement between the parties specifies various services but payment made for the impugned assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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