2024 (2) TMI 1384 - AT - Income Tax

TDS u/s 195 - commission paid to foreign agent - assessee, after receiving export orders from the agents stationed outside the territory of India, exports its products outside India, for which services of agents, the assessee paid commission - assessee paid commission to those parties, who were the residents of country where the India had entered into DTAA - HELD THAT - We note that there is no dispute that the services for which commission has given by assessee were rendered by non-resident agents outside India i.e. for procuring export orders from customer outside India . The payment to such non-resident agents are made outside India on account of sale percentage and that the non-resident does not have any geographical or Permanent Establishment in India. As noted that Tax Treaty exists with the country of residents of nonresident, i.e, residents of non-resident, residents of Italy, France, Greece Lebanon. AR has drawn our attention to the order of this Tribunal in assessee s own case for AY. 2010-11 and AY. 2012- 13 2019 (5) TMI 2010 - ITAT MUMBAI and brought to our notice that in those years, the Ld. CIT(A) had examined the agreements with the non-resident agents which disclosed that the foreign agents procured export order from foreign customers based on the price agreed by the assessee; and based on the export orders procured by the Agents, assessee fixed percentage of commission to the agent at the FOB value of the invoice and foreign currency after the fully payment has been received from the foreign customers. Thus as noted that nature of services rendered by non-residents agent was for procuring export order of products of assessee and the payments made by assessee to them are in the nature of commission which was specifically mentioned in the agreement. In the light of the aforesaid facts/agreement between assessee and foreign agents for earlier years in assessee s own case, on this issue Tribunal upheld the action of Ld. CIT(A) as held that commission earned by non-resident agent who carried on the business of selling Indian goods outside India cannot be said to have deemed to be income which has accrued or arise in India. Decided against revenue.

Summary

Issues involved: Appeal by revenue against deletion of addition for commission paid to foreign agent.

Summary:
The appeal was filed by the revenue against the order of the Ld. Commissioner of Income Tax/NFAC for the assessment year 2016-17. The main issue raised was the deletion of the addition in respect of commission paid to a foreign agent amounting to Rs.1,61,90,101/-. The assessee, engaged in manufacturing and exporting, filed its return of income declaring a total income of Rs.7,74,27,070/-. The AO made an addition of Rs.1,61,90,101/- under section 143(3) of the Income Tax Act, 1961. The Ld. CIT(A) deleted the addition based on previous Tribunal decisions and a High Court ruling. The revenue appealed this decision.

Upon hearing both parties, it was noted that the assessee paid commission to agents outside India for procuring export orders. The AO contended that tax should have been deducted under section 195 as the agents were providing consultancy services. The Ld. CIT(A) deleted the addition, citing agreements with non-resident agents and previous Tribunal decisions. The Tribunal upheld the Ld. CIT(A)'s decision based on legal precedents and lack of change in facts or law. The revenue's appeal was dismissed, affirming the action of the Ld. CIT(A) and referencing previous court decisions. The AO for a subsequent year also allowed the commission payment without TDS. Ultimately, the appeal of the revenue was dismissed, and the order was pronounced on 29/02/2024.