2024 (6) TMI 810 - AT - Income Tax

Taxability of Sales Commission - FTS - whether the sales commission received by the assessee from ASPL qualifies as Fees for Technical Services (FTS) under the Act and the India-USA DTAA? - HELD THAT - We hold that the income received towards the sale commission does not satisfy the definition FTS both under the Act and under DTAA. It was also noted that the payer (ASPL) it is already held that commission payment is not taxable the same findings are applicable in the present assessee who is being a recipient. We allow the ground No.3 in favour of the assessee in all these appeals holding that sales commission is not taxable.

Summary

Issues Involved:
1. Validity of reassessment proceedings u/s 147.
2. Taxability of sales commission.
3. Interest levied u/s 234A, 234B, and 234C.

Summary:

1. Validity of Reassessment Proceedings u/s 147:
The lower authorities issued a notice u/s 148 and passed the order without 'reason to believe' that income had escaped assessment. The assessee argued that the notice and subsequent order were based on mere suspicion and conjecture, lacking a 'live link' between the material relied upon and the formation of belief. Consequently, the assessment order was claimed to be invalid and bad in law. However, during the hearing, the assessee did not press this ground, leading to its dismissal as not pressed.

2. Taxability of Sales Commission:
The core issue was whether the sales commission received by the assessee from ASPL qualifies as Fees for Technical Services (FTS) under the Act and the India-USA DTAA. The Tribunal, referencing its own decision in the assessee's case for AY 2012-13, held that the assessee was not providing technical, managerial, or consultancy services but was engaged as a business partner to market and promote ASPL's products. The Tribunal reiterated that the sales commission does not fall within the ambit of FTS under Section 9(1)(vii) of the Act and the DTAA. The Tribunal also noted that the payer (ASPL) had already been adjudicated that commission payments were not taxable, thus applying the same findings to the recipient (assessee). Consequently, the sales commission was ruled not taxable in India.

3. Interest Levied u/s 234A, 234B, and 234C:
The assessee contested the levying of interest amounts u/s 234A, 234B, and 234C, arguing that the returned income was nil and that the interest charged was excessive. The Tribunal did not provide specific details on this issue in the summarized judgment, implying that it was either not pressed or not separately adjudicated.

Conclusion:
The Tribunal concluded that the sales commission received by the assessee is not taxable in India under both the Act and the India-USA DTAA. The reassessment proceedings issue was dismissed as not pressed. The appeals filed by the assessee were partly allowed.