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2020 (11) TMI 372 - AT - Income TaxTDS u/s 195 - payment of agency commission outside India for promotion of export sales outside India - addition u/s. 40(a)(i) - HELD THAT - As decided in assessee's own case 2018 (6) TMI 1724 - ITAT DELHI wherein relying WELSPUN CORPORATION LIMITED AND VICE-VERSA 2017 (1) TMI 1084 - ITAT AHMEDABAD held that on payments made by assessee for services rendered by non-resident agents could not be held to be fees for payment for technical services, these payments were in nature of commission earned from services rendered outside India which had no tax implications in India. As in the case of CIT vs. Kikani Exports Pvt. Ltd. 2014 (9) TMI 96 - MADRAS HIGH COURT wherein it was held that the services rendered by the non-resident agent could at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services and, therefore, section 9 was not applicable and, consequently, section 195 did not come into play. Therefore, the disallowance made by the AO towards export commission paid by the assessee to the non-resident was rightly deleted. - Decided against revenue.
Issues:
1. Tax withholding on agency commission paid outside India for promotion of export sales. 2. Disallowance of agency commission under section 40(a)(i). 3. Allowability of foreign agency commission without tax withholding under section 195. Issue 1: Tax Withholding on Agency Commission The appeal challenged the order regarding tax withholding on agency commission paid outside India for export sales promotion. The assessee argued that the lower authorities erred in holding the payment subject to tax withholding under section 195. The counsel referred to a previous ITAT decision for the same assessee in a different assessment year, where the issue was decided in favor of the assessee. The Division Bench's order from 2018 was cited to support the claim that the agency commission payment did not accrue or arise in India, thus not subject to tax withholding. Issue 2: Disallowance under Section 40(a)(i) The second ground of appeal related to the disallowance of the agency commission under section 40(a)(i) based on the tax withholding requirement under section 195. The assessee contended that the disallowance was unjustified, echoing the argument made in the first issue. The Division Bench's decision from a previous year was crucial in establishing the non-applicability of tax withholding on the commission payment. Issue 3: Allowability of Foreign Agency Commission The third issue revolved around the assessee's claim for the allowability of foreign agency commission without tax withholding under section 195. The counsel emphasized that the case law and precedents supported the assessee's position that the commission payment to overseas agents did not have tax implications in India. Various decisions, including those from the ITAT, High Courts, and the Delhi ITAT, were cited to demonstrate that payments to non-resident agents for services rendered outside India did not attract tax withholding requirements. In conclusion, the ITAT Delhi allowed the assessee's appeal, relying on the precedent set by a Division Bench decision in a previous year. The judgment emphasized that the commission payment to non-resident agents for services outside India did not accrue or arise in India, thereby exempting it from tax withholding obligations. The decision highlighted the importance of considering the specific circumstances and legal provisions to determine the applicability of tax withholding on foreign agency commission payments.
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