2014 (6) TMI 643 - AT - Income Tax

Disallowance u/s 40(a)(i) of the Act Non-deduction of TDS u/s 195 Held that - No evidence has been placed on record to allege any misreading of evidence by the CIT(A) - assessee s overseas agents do not have any permanent establishment in India - The assessee and its agents had executed agreements for procuring export orders and furnishing of upto date information about fashion and market trends - Services have been rendered outside India - The reimbursements in the nature of export commission have also been paid overseas -neither any services nor payment have taken place in Indian territory - no evidence proving that the agents had provided or made available any technical services has been filed - the Revenue s mere plea that the assessee s obligation of export commission attracts 9 r.w.s 195 does not deserve acceptance relying upon Commissioner of Income Tax Versus M/s. T. Abdul Wahid & Company, M/s. Farida Leather Company 2014 (6) TMI 463 - ITAT CHENNAI Decided against Revenue.

Summary

Issues:
1. Disallowance under section 40(a)(i) for non-deduction of TDS.
2. Applicability of Sec.9 rws Sec 195 on commission payments to overseas agents.
3. Interpretation of technical services under Sec.9(i)(vii)(b).
4. Tax liability on commission payments to overseas agents.

Analysis:

1. The appeal pertains to the disallowance under section 40(a)(i) for non-deduction of TDS by the Assessing Officer in the assessment order. The Commissioner of Income Tax (Appeals) deleted the disallowance, leading to the Revenue's challenge.

2. The Assessing Officer noted commission payments made to overseas agents without TDS deduction. The assessee argued that the payments were for procuring export orders and did not attract TDS under Sec.9 rws Sec 195. The Assessing Officer disagreed, citing technical services provided by the agents, leading to the disallowance under section 40(a)(i).

3. The CIT(A) referenced case law to determine that if the recipient is not taxable for commission payment, no TDS disallowance arises. He concluded that the agents' activities did not amount to technical services under Sec.9(i)(vii)(b), resulting in the deletion of the disallowance.

4. The Tribunal analyzed the nature of services provided by overseas agents and the absence of a permanent establishment in India. It found that services were rendered outside India, and payments were made overseas, negating the applicability of Sec.9 rws Sec 195. Relying on previous decisions, the Tribunal upheld the CIT(A)'s findings, dismissing the Revenue's appeal.

In conclusion, the Tribunal upheld the deletion of the disallowance under section 40(a)(i) based on the absence of technical services and the overseas nature of the transactions, leading to the dismissal of the Revenue's appeal.