2013 (7) TMI 951 - AT - Income Tax

TDS u/s 195 - Disallowance of overseas agents commission paid without deducting tax at source - Held that - It is not disputed that assessee had produced declarations from the concerned agents stating that they were not having any establishment in India. It seems Assessing Officer disbelieved such declaration for a reason that it did not have a government authentication. In our opinion, there is no such requirement under the Act. When assessee had obtained confirmation from the non-resident agents that they were not having any establishment in India, it could be disbelieved only if there were any circumstances, which would negate such assertion. In any case, there is no dispute that the agents were canvassing sales for the assessee for customers abroad. Assessee had every reason to hold a bona fide belief that the payments made to the non-resident were not chargeable to tax under the provisions of the Act. It could not be fastened with consequences arising out of a non-deduction of any such tax. - Decided in favour of assessee

Summary

Issues Involved:
Disallowance of overseas agents commission paid without deducting tax at source under Sec.40(a)(i) of the Income Tax Act, 1961.

Analysis:

Issue 1: Disallowance of Overseas Agents Commission
- The Revenue appealed against the deletion of disallowance by CIT(A) for overseas agents commission paid without tax deduction at source.
- Assessing Officer disallowed the claim under Sec.40(a)(i) of the Act as tax was not deducted on the commission paid.
- Assessee clarified that overseas agents procured orders abroad on commission basis and did not have any establishment in India.
- CIT(A) deleted the disallowance, emphasizing that services by foreign agents were outside India, citing relevant case laws.
- Revenue contended that lack of proof of agents not having an establishment in India and absence of tax residency certificates led to error in deletion.
- Assessee argued that similar payments by sister concerns were allowed, and no technical services were rendered by foreign agents.
- Tribunal upheld CIT(A)'s decision, noting that the agents' declarations sufficed, and the commission payments were not taxable in India as per relevant precedents.
- The Tribunal dismissed the Revenue's appeal, affirming that the non-resident payments were not subject to tax deduction under section 195 of the Act.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the arguments, decisions, and reasoning provided by the authorities involved in the case.