2023 (7) TMI 561 - AT - Income Tax

TDS u/s 195 - foreign commission paid to foreign agents without deducting TDS u/s 40(a)(i) - scope of operation carried out by the non-resident commission agent in India - HELD THAT - As in the case of CIT vs. Toshoku Ltd. 1980 (8) TMI 2 - SUPREME COURT commission agent who does not carry out any business operation in India and acts as a selling agent outside India is not chargeable to tax in India and that the receipt in India of the sale proceeds remitted by the purchasers from abroad did not amount to an operation carried out by the non-resident commission agent in India as contemplated by clause (a) of the Explanation to Section 9(1)(i) - commission amounts which were earned by the non-resident for services rendered outside India could not be deemed to be income which had either accrued or arisen in India. Thus no reason to deviate from the stand taken by the Coordinate Bench which was passed in favour of the assessee by confirming the order passed by the Revenue in assessee s own case for A.Ys. 2010-11 2011-12 2021 (5) TMI 479 - ITAT AHMEDABAD - Decided against revenue.

Summary

Issues involved:
The judgment involves appeals against orders passed by the National Faceless Appeal Centre regarding addition of foreign commission without TDS under Section 40(a)(i) of the Income Tax Act for Assessment Years 2012-13, 2013-14, and 2014-15.

A.Y. 2012-13:
The assessee, engaged in Export Trading of Cotton Yarn, paid commission to a non-resident foreign agent without deducting TDS. The AO disallowed the commission expenses under Section 40(a)(ia) of the Act, but the CIT(A) deleted the addition based on the judgment in CIT vs. Toshoku Ltd. The ITAT upheld the CIT(A) order, citing the Supreme Court's decision that non-resident commission agents not conducting business operations in India are not taxable in India.

The ITAT considered the Supreme Court's ruling and the Co-ordinate Bench's decision, concluding that the commission earned by non-residents for services outside India is not taxable in India. Therefore, the Revenue's appeal was dismissed as it lacked merit.

The decision for A.Y. 2012-13 also applies to A.Ys. 2013-14 & 2014-15, resulting in the dismissal of all three appeals filed by the Revenue.

This Order was pronounced on 12/07/2023.