2014 (4) TMI 1247 - AT - Income Tax

TDS u/s 195 - non-deduction of tax at source by the assessee on payment of overseas commission - HELD THAT - Tribunal in DCIT Vs. M/s.Macmillan India Ltd. 2012 (3) TMI 639 - ITAT CHENNAI shows that the identical issue in the case of the assessee has been decided by the Tribunal in favour of the assessee. Moreover, the Hon ble Supreme Court of India in the case of GE Technology Centre P. Ltd. Vs. CIT 2010 (9) TMI 7 - SUPREME COURT has held that mere remittance to non-residents does not automatically make the person liable to deduct tax at source. The duty to deduct tax at source arises only if remittance contains wholly or partly taxable income in India. In view of the well settled law and the facts of the case, the appeal of the Revenue is dismissed being devoid of merit.

Summary

Issues:
Non-deduction of tax at source on payment of overseas commission.

Analysis:
The case involves an appeal by the Revenue against the Commissioner of Income Tax(Appeals)-IV, Chennai's order for the Assessment Year 2005-06, focusing on the non-deduction of tax at source by the assessee on payment of overseas commission. The Assessing Officer disallowed the commission paid to foreign agents without tax deduction under section 40(a)(i) of the Income Tax Act, 1961. The Assessing Officer contended that the payments fell within the purview of section 9(1)(vii), requiring tax deduction at source, and that the assessee should have obtained a certificate under section 195(2) for non-deduction of tax on overseas commission payments.

The assessee, a company engaged in printing and publishing, argued that the payments to non-resident agents were for procuring orders from overseas customers and warehousing goods sent abroad, with the agents handling delivery and payment collection outside India. The assessee emphasized that the non-resident agents did not provide technical services and had no Permanent Establishment in India. The assessee cited a previous Tribunal decision in its favor for the same issue in different assessment years.

The CIT(Appeals) upheld the reassessment proceedings' validity but ruled in favor of the assessee on the merits, following the Supreme Court's judgment in GE Technology Centre P. Ltd. Vs. CIT and deleting the addition made under section 40(a)(ia) of the Act. The Tribunal concurred with the CIT(Appeals) and the previous Tribunal decision, emphasizing that the non-resident agents operated outside India, provided marketing and business promotion services abroad, and did not have a Permanent Establishment in India. The Tribunal highlighted that the duty to deduct tax at source arises only if the remittance contains taxable income in India, dismissing the Revenue's appeal as lacking merit.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the decision in favor of the assessee based on established legal principles and the specific facts of the case.