2024 (11) TMI 73 - AT - Income Tax

TDS u/s 195 - commission paid to non-resident agents - assessee states to have hired agents in foreign countries where he does not have physical presence, to assist in procuring these contracts - HELD THAT - As pointed out on behalf of the assessee, the commission payments have been made to non-resident agents for services rendered outside India and therefore, not chargeable to tax in India. In the absence of chargeability to tax, the provisions of Section 195 of the Act are not attracted as rightly held by the CIT(A) in the present case. The action of the CIT(A) granting relief to the assessee is in sync with the view expressed by the Tribunal in assessee s own case in the Assessment Year 2017-18. We thus see no perceptible reason to interfere with the view expressed in the impugned appellate order passed by CIT(A). Hence, the contentions on behalf of the Revenue are unfounded on facts and law. Decided against revenue.

Summary

Issues:
Appeal by Revenue against CIT(A) order, Cross Objections by assessee, TDS deduction on commission paid to non-resident agents, applicability of Section 40(a)(ia) and Section 195 of the Income Tax Act, 1961, source of income in India, CIT(A) and Tribunal's decisions, relief granted to assessee, withdrawal of Cross Objections.

Analysis:
The Revenue filed an appeal along with Cross Objection against the CIT(A) order regarding the addition made on commission paid to non-resident agents without TDS deduction, citing violations of Section 40(a)(ia) and Section 195 of the Income Tax Act, 1961. The Revenue contended that the source of income in India determines tax liability, not the source of receipt. The assessee, a proprietor of a consultancy firm, argued that the commission paid to foreign agents for procuring contracts outside India did not attract withholding tax under Section 195 as the income did not accrue in India. The CIT(A) favored the assessee, citing similar precedents and upheld by the Tribunal, leading to the deletion of the disallowed commission expenses.

The Revenue, dissatisfied with the relief granted, approached the Tribunal. The Revenue relied on the Assessment Order, emphasizing the non-deduction of TDS on commission payments. In defense, the assessee justified the non-deduction, stating the services were rendered outside India by agents without a Permanent Establishment in India. The assessee also argued against the necessity of Tax Residency Certificate (TRC) and provided documentation to support the genuineness of the transactions. The Tribunal upheld the CIT(A)'s decision, emphasizing that the commission payments were for services outside India and not taxable in India, aligning with the previous Tribunal's ruling in a similar case for the assessee.

Ultimately, the Tribunal dismissed the Revenue's appeal, finding no grounds to interfere with the CIT(A)'s order. The assessee's Cross Objections, seeking to support the CIT(A)'s decision, were withdrawn, leading to their dismissal. In conclusion, both the appeal by the Revenue and the Cross Objections by the assessee were dismissed by the Tribunal.