2015 (1) TMI 311 - AT - Income Tax

TDS u/s 195 - Disallowance under section 40(a)(i) - overseas agencies commission paid to non-residents without deduction of tax at source - Held that - From the scope of services of the agreement, we do not find any managerial/technical services are to be provided to the assessee by the overseas agent M/s. James Druchas, USA so as to attract the provisions of section 195 of the Act. However, this agreement which was entered into on 5.6.2008 is relevant to the assessment year 2009-10 and the assessment year under appeal now before us is 2007-08. Neither the assessee nor the Revenue placed an agreement relevant for the assessment year under consideration. In such circumstances, we are not able to decide the issue. Therefore, we are of the considered view that this matter has to be re-examined by the Assessing Officer with reference to the agreement prevailing for the assessment year 2007-08 and the conditions mentioned thereon for the relevant assessment year i.e. 2007-08. Therefore, we restore this issue to the file of the Assessing Officer to examine afresh with reference to the agreement and the case laws relied on this issue. - Decided in favour of Revenue.

Summary

Issues involved:
Revenue's appeal against the deletion of disallowance under section 40(a)(i) for overseas agencies commission paid to non-residents without TDS deduction.

Analysis:

1. Disallowance under section 40(a)(i):
The Revenue contended that overseas agents provided technical services, justifying the disallowance under section 40(a)(i) for non-deduction of TDS. The Departmental Representative cited previous Tribunal decisions and the nature of services provided by the agents to support this argument. They highlighted the obligations of the overseas agents, emphasizing technical services provided for commercial finalization, obtaining product approval, logistics, customer interaction, and industry updates. The Departmental Representative argued that the services fell under the purview of section 195, warranting TDS deduction.

2. Assessee's defense:
The assessee, however, argued that the agreement with the overseas agent was limited to identifying new business opportunities and sales commission for marketing outside India, with no provision for technical services. They compared the scope of the current agreement to previous years, asserting that the services rendered were solely related to sales and marketing, not technical or managerial.

3. Tribunal's analysis:
Upon reviewing the agreements and previous Tribunal decisions, the Tribunal found that the scope of services in the current agreement did not include managerial or technical services. The Tribunal noted that the agreement in question was for a later assessment year, not the one under consideration. As neither party presented an agreement relevant to the assessment year in question, the Tribunal decided to remand the matter to the Assessing Officer for a fresh examination based on the agreement applicable to the relevant assessment year.

4. Conclusion:
The Tribunal allowed the Revenue's appeal for statistical purposes, directing a reassessment by the Assessing Officer with reference to the agreement relevant to the assessment year in question. The Tribunal stressed the importance of providing the relevant agreements and ensuring both parties have the opportunity to present their case adequately during the reassessment.

This detailed analysis of the judgment provides a comprehensive overview of the issues raised, arguments presented by both parties, and the Tribunal's decision to remand the matter for further examination based on the relevant agreement for the assessment year in question.