2012 (8) TMI 1139 - AT - Income Tax

Summary

Issues involved: Challenge to deletion of addition of commission payment without deducting TDS u/s 40(a)(ia) of the I.T. Act, 1961.

Facts and Decision:
- The assessee, a partnership firm, engaged in the export business, made commission payments to a foreign party, M/s AV International, New Zealand, without deducting TDS u/s 194H.
- The Assessing Officer disallowed the commission payment u/s 40(a)(ia) for non-deduction of TDS.
- Assessee contended that no TDS was required as the foreign agent had no business activity in India and relied on case law to support the claim.
- CIT(A) deleted the addition, stating that no TDS was warranted as the services were rendered outside India, and the non-resident agent had no PE in India.
- The department appealed against the CIT(A)'s order, but the Tribunal upheld the deletion of the addition, finding the CIT(A)'s reasoning sound and convincing.
- The Tribunal dismissed the department's appeal, affirming the CIT(A)'s decision.

This judgment addressed the issue of whether TDS u/s 40(a)(ia) was required on commission payments made by the assessee to a non-resident overseas agent. The Assessing Officer disallowed the commission payment for non-deduction of TDS, but the CIT(A) deleted the addition, emphasizing that no TDS was necessary as the services were rendered outside India, and the non-resident agent had no Permanent Establishment in India. The Tribunal concurred with the CIT(A)'s decision, finding the reasoning sound and dismissing the department's appeal.