2011 (8) TMI 1156 - AT - Income Tax

Summary

Issues involved: Appeal against order of CIT(A) regarding disallowance of commission under section 40(a)(ia) for non-deduction of tax at source.

Details of the judgment:

1. Issue 1 - Disallowance of commission under section 40(a)(ia):
- The AO disallowed commission payment under section 40(a)(ia) as tax was not deducted on payment made to a non-resident for services rendered abroad.
- The CIT(A) deleted the disallowance based on the argument that the commission payment was made outside India and hence not liable to tax in India.
- The CIT(A) relied on Circular No. 786, applicable during the relevant assessment year, which stated that no tax was deductible on such commission payments.
- The Revenue contended that the services rendered should be considered as managerial services under section 9, making it liable for tax deduction under section 195.
- However, the counsel argued that since the services were not rendered in India, no tax deduction was required, citing relevant case laws.
- The Tribunal agreed that since no services were rendered in India, the commission payment was not taxable in India, following the decision in GE India Technology Centre P. Ltd. vs. CIT 327 ITR 456.

2. Issue 2 - Application of Circular No. 786:
- The CIT(A) justified the deletion of disallowance by stating that Circular No. 786 was in force during the relevant period and supported the non-deduction of tax on commission payments made outside India.
- The Tribunal upheld this decision, emphasizing that the commission payment was not chargeable in India due to services being rendered abroad, in line with previous rulings.

3. Conclusion:
- The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete the disallowance of commission payment under section 40(a)(ia) for non-deduction of tax at source.
- The judgment was pronounced on 24th August 2011.