2018 (11) TMI 991 - AT - Income Tax

TDS u/s 195 - Disallowance on account of commission payment in foreign currency - withholding of tax - proof of payments having tax implications in India - Held that - As decided in assessee s own case uphold well reasoning findings of the learned CIT(A) that the commission payments made to the non-resident agents did not have any taxability in India, even under the provisions of the domestic law i.e. Section 9. Once we come to the conclusion that the income embedded in these payments did not have any tax implications in India, no fault can be found in not deducting tax at source from these payments or, for that purpose, even not approaching the Assessing Officer for order under section 195. In our considered view, the assessee, for the detailed reasons set our above, did not have tax withholding liability from these payments. Assessee is engaged in manufacturing of steel billets, wire rods, bright bars etc. They have been exporting these products to foreign countries. They have certain agents who have procured orders outside India and the assessees have paid commission on such orders. Therefore, respectfully following order of the ITAT in the case of Welspun Corporation Ltd. (2017 (1) TMI 1084 - ITAT AHMEDABAD) as well as orders in the assessee s own case, we are of the view that no interference is called for in the order of the ld.CIT(A) - decided in favour of assessee.

Summary

Issues:
Validity of order deleting disallowance of commission payment in foreign currency.

Analysis:
1. The appeal was filed by the Revenue against the order passed by the CIT(A) deleting the disallowance of commission payment in foreign currency. The assessee, engaged in steel manufacturing and sales, claimed expenditure of commission payment in foreign currency without deducting tax at source.

2. The AO disallowed the commission payment and added it to the total income of the assessee. However, the CIT(A) deleted the disallowance based on submissions and evidence provided by the assessee. The CIT(A) noted that the foreign agents had no permanent establishment in India and had rendered services in their respective countries for the assessee.

3. The CIT(A) relied on previous decisions and the provisions of section 195 of the Income Tax Act. The assessee's case was found to be similar to earlier assessment years where such disallowances were deleted. The Co-ordinate Bench's decision in a related case also supported the non-taxability of such payments made to non-resident agents.

4. The Tribunal considered the arguments of both parties and the previous decisions. It upheld the CIT(A)'s order based on the consistent findings that the commission payments to non-resident agents did not have tax implications in India. The Tribunal emphasized that tax withholding was not required if the sum paid was not assessable to tax in India.

5. The Tribunal concluded that no interference was necessary in the CIT(A)'s order based on the identical facts of the case and the precedent set by previous decisions. Consequently, the Revenue's appeal was dismissed, affirming the order passed by the CIT(A).

This detailed analysis of the judgment highlights the key legal aspects and reasoning behind the decision to dismiss the Revenue's appeal regarding the disallowance of commission payment in foreign currency.