TMI Blog2024 (1) TMI 1075X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there is no evidence on record to show that any services by these agents was rendered in India. As considering in the case of Toshoku Ltd. [ 1980 (8) TMI 2 - SUPREME COURT] commission income earned by such agents cannot be termed to have incurred or arisen in India, and therefore, was not taxable in India - there was no liability on the assessee to deduct any TDS of such commission income. The disallowances therefore made are uncalled for - Decided in favour of assessee. - Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member For the Assessee : Shri Dhinal Shah, And Shri Bhadresh Gandhakwala, AR For the Revenue : Shri Sanjay Kumar, Sr.DR ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER The above four appeals have been filed by the assessee against orders passed by the Ld. Commissioner of Income- Tax(Appeals),National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as ld.CIT(A)of even dated i.e. 18.10.2022 under section 250(6) of the Income Tax Act, 1961 ( the Act for short) pertaining to Assessment Years 2012-13 to 2014-15 and 2017-18. 2. It was common ground that the issue involved in all the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16-01-2021 giving detailed reasons for wrong addition of foreign commission. The learned CIT(A) has erred in not granting opportunity to make submission through Video Conferencing facility and thereby not followed principles of natural justice and guidelines issued by CBDT. 7. We have heard both the parties and have also gone through the orders of the AO as well as the ld.CIT(A). 8. The finding of the ld.CIT(A) while confirming the disallowance of commission expenses is identically worded in all years impugned before us, and for the sake of convenience, we reproduce the finding in Asst.Year 2012-13 from para 6.5 to 6.13 of the order as under: 6.5 I have seen the assessment order and the submissions of the appellant. The appellant has given documentary evidences like : [a] Export Invoice No. [b] Name of the foreign customer ' - [c] Country of the foreign customer [d] Date of export invoice. [e] Bill amount in US$ [h] Percentage of commission. [g] Commission in US$ [h] Exchange rate [i] Commission amount in Indian Rupees. [j] Name of the foreign agent. [k] country to which he belongs to 6.6 From the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has also not been exhibited by the appellant that the commission has been shown by the agents in their foreign income tax return. Hence the amount paid by the assessee is chargeable to- tax in India and the assessee is liable to deduct TDS and consequently the provisions of Section 40(a)(i) of the IT Act could be invoked for making the disallowance. 6.12 In the present case it is not proved from the material submitted by the appellant that the commission has been paid to non-resident outside India for the services rendered outside India will fall in the category of the income received or deemed to be received in India as well as accrues or arises or is deemed to accrue or arise in India. 6.13 Thus, insufficient documentary evidence has not been able to prove that the payment of sales commission is exempt from TDS, making payment chargeable to tax under Section 195(1) of the IT Act and the provisions of Section 40(a)(i) has been rightly applied. Hence, the action of the A.O is correct and needs no interference. 9. Perusal of the above would reveal that, broadly the reasons for confirming the disallowance of commission expenditure by the ld.CIT(A) was that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tories, 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 territories. If no operations of business are carried out in the taxable territories, it follows that the income accruing or arising abroad through or from any business connection in India cannot be deemed to accrue or arise in India (See CIT v. R.D. Aggarwal and Co. [1965] 56 ITR 20 (SC) and Carborundum Co. v. CIT [1977] 108 ITR 335 (SC) which are decided on the basis of s. 42 of the Indian I.T. Act, 1922, which corresponds to s. 9(1)(i ) of the Act). In the instant case, the non-resident assessees did not carry on any business operations in the taxable territories. They acted as selling agents outside India. The receipt in India of the sale proceeds of tobacco remitted or caused to be remitted by the purchasers from abroad does not amount to an operation carried out by the assessees in India as contemplated by cl. (a) of the Explanation to s. 9(1)(i) of the Act. The commission amounts which were earned by the non-resident assessees for ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sought report from the AO on the same. In this regard, our attention as drawn to the remand report of the AO placed before us at PB Page no.334. Our attention was drawn to para-7. The ld.counsel for the assessee pointed out that the AO acknowledged the filing of the following documents by the assessee in relation to the commission paid to the foreign agents being agreement executed with them, certificate of service registration of the foreign agents in their countries, and certificate furnished by them to the effect that they had no business connection in India, and bills/debit notes raised by the agents, as also Form NO.15CB furnished by the CA. He further pointed out that even the AO acknowledged the fact that agreement mentioned that all the sale orders in the territories awarded to the agents was to be procured and assigned to the agents for payment of commission to them. Our attention as drew attention to para-5 to 7 of the remand report of the AO, which reads as under: 5. The appellant is producing now following as additional evidences: i. Agreement executed between the appellant company and the foreign commission agent. ii. Certificate of registration for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for making any disallowance of said commission expenses under section 40(a)(ia) of the Act. The ld.counsel for the assessee therefore pleaded that the disallowance so made in all the years impugned before us be deleted. 14. The ld.DR on the other hand, was unable to controvert the factual contentions made by the ld.counsel for the assessee before us. He heavily relied on the order of the ld.CIT(A) pointing out that the assessee was unable to prove that it had been charged to tax with respect to the commission income in the country of its jurisdiction. 15. Considering the factual contentions made by the ld.counsel for the assessee before us, supported with the documentary evidences referred to before us, we find that the assessee had sufficiently demonstrated that services rendered by the foreign agents were all outside India for procuring the sale orders for the assessee with the agreement clearly pointing out that foreign agents required to procure sales from the respective territories outside India for the assessee. The certificates furnished by these agents demonstrated that they had no place of business in India and invoices of exports, as also invoices raised by the comm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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