TMI Blog2021 (6) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... The appeal is admitted on the following substantial question of law: Whether on the facts and circumstances of the case, the Tribunal is right in law in setting aside the disallowance made under section 40(a)(ia) of the Act on commission payments made to non residents agents by holding that the said services are not in the nature of technical services and does not come under purview of section 9(2) of the Act without considering that the same is covered in under clause (vii) of subsection (1) of section 9 of the Act ? 2. Heard the learned counsel for the parties at length. 3. Learned counsel for the appellants-assessee has drawn the attention of this Court towards the judgment delivered in ITA No.223/2018 (Pr. Commissioner of Income Tax-5 and another v. M/s. Puma Sports India P., Ltd.,). 4. This Court in the aforesaid judgment has held as under: 4. Heard the learned Counsel appearing for the parties and perused the record. 5. Learned Counsel for the appellants-Income Tax department has placed reliance upon a judgment delivered by the Hon ble Supreme Court in case of GVK INDUSTRIES LTD. AND ANOTHER VS. INCOME TAX OFFICER AND ANOTHER reported in 371 SC ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute Resumption Panel proceeded in the matter on the basis of the situs in India because right to receive the commission accrued in India when the assessee receives the imported goods. In the present case, the Associated Enterprises have rendered services outside India in the form of placing the orders with manufacturers and the commission to Associated Enterprises was remitted to them abroad. 8. The commission that becomes payable after receipt of goods accrued when services were rendered in the form of placing orders with the manufacturers. Therefore, the Tribunal was justified in holding that the income of income of the non-residents by way of commission cannot be considered as accrued or arisen or deemed to accrue or arise in India as the services of such agent were rendered/utilized outside India and the commission was paid outside India. It is nobody s case that the Associated Enterprises rendered services inside India in the form of placing orders with the manufacturers. Undisputedly, the services were rendered outside India and the commission was paid outside India and therefore, the Tribunal was justified in holding that the TDS is not deductible from commission payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in respect of services utilised in a business or profession carried on by such person in India or for the purposes of making or earning any income from any source in India : [Provided that nothing contained in this clause shall apply in relation to any income by way of fees for technical services payable in pursuance of an agreement made before the 1st day of April, 1976, and approved by the Central Government.] [Explanation 1.-For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date.] [Explanation 2.-For the purposes of this clause, fees for technical services means any consideration (including any lump sum consideration) for the 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 or consideration which would be income of the recipient chargeable under the head Salar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erica. The United Nations that was formed after the Second World War, initially had 51 members. Presently, it has 193 members. With the efflux of time, there has been birth of nation States which enjoy political independence and that has led to cross-border and international trade. The State trade eventually has culminated in formulation of principles pertaining to international taxation jurisdiction. It needs no special emphasis to state that the said taxation principles are premised to promote international trade and to allocate taxation between the States. These rules help and further endeavour to curtail possibility of double taxation, tax discrimination and also to adjudicate resort to abusive tax avoidance or tax evasion practices. The nation States, in certain situations, resort to principle of tax mitigation and in order to protect their citizens, grant benefit of tax abroad under the domestic legislation under the bilateral agreements. 24. The two principles, namely, Situs of residence and Situs of source of income have witnessed divergence and difference in the field of international taxation. The principle Residence State Taxation gives primacy to the count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... akes us to section 9 of the Act. It is urged that the commission amounts should be treated as incomes deemed to have accrued or arisen in India as they, according to the Department, had either accrued or arisen through and from the business connection in India that existed between the non-resident assessees and the statutory agent. This contention overlooks the effect of clause (a) of the Explanation to clause (i) of sub-section (1) of section 9 of the Act which provides that in the case of a business of which all the operations are not carried out in India, the income of the business deemed under that clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the operations carried out in India. If all such operations are carried out in India, the entire income accruing therefrom shall be deemed to have accrued in India. If, however, all the operations are not carried out in the taxable territories, the profits and gains of business deemed to accrue in India through and from business connection in India shall be only such profits and gains as are reasonably attributable to that part of the operations carried out in the taxable territo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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