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Issues involved: Non-deduction of tax on payment to a foreign company as agency commission.
Summary: The appeal was filed by the revenue against the order of the Income Tax Appellate Tribunal regarding non-deduction of tax on payment to a foreign company as agency commission. The assessing officer disallowed the agency commission amount as it was not fully paid and not an allowable deduction. The Commissioner of Income Tax (Appeals) held that tax should have been deducted on such payments in the foreign country. However, the Tribunal found that since the payment was to be made in a foreign country in foreign currency, it cannot be considered as income accrued in India, following the Supreme Court judgment in GE Technology Centre (P.) Ltd. v. CIT [2010] 327 ITR 456 (SC). The Tribunal referred to the responsibilities under the contract which stated that the work was to be done outside the country and payment to the agent was to be made in a foreign country. The Tribunal held that no part of the income of the foreign company is taxable in India. The Supreme Court's interpretation of Section 195(1) was also considered, emphasizing that the payer becomes an assessee in default only when failing to fulfill the statutory obligation. The Tribunal found that the assessee was not liable to deduct tax on the transaction with the foreign company. The Delhi High Court in CIT v. EON Technology (P.) Ltd. [2012] 343 ITR 366 also supported a similar view. Since the payment in question related to the assessment year 2007-08, the amendments made by the Finance Act, 2012 were deemed inapplicable. The appeal was dismissed as no substantial question of law arose for consideration.
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