TMI Blog2015 (7) TMI 1402X X X X Extracts X X X X X X X X Extracts X X X X ..... untries. AO has disallowed commission payment u/s 40(a)(i) since there was no TDS made on this payment. As is evident from the assessment order, excepting this inference by the AO, there is nothing on record to suggest that the income is chargeable to tax in India or the payment has been received by the non-resident agents in India or by any other person on their behalf. There is also no finding by the AO that the non-resident agents have a permanent establishment in India or have any business connection in India, by virtue of which the payment of commission would have accrued or arose in India. The facts available on record clearly suggest that the non-resident agents did not carry out any business operations in India and has acted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue. - ITA No. 501/Mds/2015 - - - Dated:- 31-7-2015 - Shri N.R.S. Ganesan, Judicial Member And Shri Chandra Poojari, Accountant Member For the Appellant : Shri P. Radhakrishnan, JCIT. For the Respondent : Shri S.A. Balasubramanian, CA. ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal by the Revenue is directed against the order of the Commissioner of Income-tax(Appeals) dated 22.12.2014. 2. The ground raised by the Revenue, in this appeal is that the Commissioner of Income-tax(Appeals) has erred in deleting the addition towards disallowance u/s.40(a)(i) of the I.T. Act, 1961, by following the order of the Tribunal in the case of Faizan Shoes (P) Ltd. (58 SOT 425). 3. The brief facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of section 195 are not are not applicable. In the circumstances, we sustain the order of the Commissioner of Incometax( Appeals) in deleting the disallowance made under 40(a)(i) of the Act. Aggrieved by this, the Revenue is in appeal before us. 5. The Ld. DR submitted that the selling agent in this case though had rendered services abroad, was entitled to receive the commission for the services rendered to the assessee and received the amount through or from business connection which it had in India and source of income is in India. Being so, the income shall be deemed to accrue or arise in India. Since the source of income of the non-resident, who is the agent of the assessee, it earned commission from the business activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of the Assessing Officer. The opening of letters of credit for the purpose of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non-resident agent did not provide technical services for the purposes of running of the business of the assessee in India. Therefore, the commission paid to the non-resident agents would not fall within the definition of fees for technical services and the assessee was not liable to deduct tax at source on payment of commission . He also relied on the judgment of the Jurisdictional High Court in the case of CIT v. Kikani Exports Pvt. Ltd. (369 ITR 97), wherein it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct forming part of the gross sum of money payable to the non-resident. 6.2 The Ld. AR further submitted that income though accrued in India, as per this agreement, the services were rendered to the assessee abroad and the payments were also received by him abroad, therefore, no income would arise under the provisions of sec. 9(1) of the Act. The Ld. AR relied on the order of the CIT(A) and submitted that there is no question of deduction of TDS on the above payments made to the nonresident agent. 7. We have heard the parties and perused the record. At the outset, certain provisions of the Act needs to be looked into section 40(a)(i) which reads as under:- 40 Not withstanding ............. (a) In the case of any assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive countries. The AO has disallowed commission payment u/s 40(a)(i) since there was no TDS made on this payment. 9. As is evident from the assessment order, excepting this inference by the AO, there is nothing on record to suggest that the income is chargeable to tax in India or the payment has been received by the non-resident agents in India or by any other person on their behalf. There is also no finding by the AO that the non-resident agents have a permanent establishment in India or have any business connection in India, by virtue of which the payment of commission would have accrued or arose in India. The facts available on record clearly suggest that the nonresident agents did not carry out any business operations in India and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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