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TMI Blog2013 (11) TMI 907X X X X Extracts X X X X X X X X Extracts X X X X ..... ication to assessee's case - In the present case, the assessee paid certain amounts to overseas agents for procurement of export orders. The agents have not provided any managerial/technical services. The payments received by the non-resident Indian are not taxable in India - section 195 have no application to assessee's case - Following decision of The Commissioner of Income Tax Delhi-IV, New Delhi Versus EON Technology P. Limited [2011 (11) TMI 20 - DELHI HIGH COURT] - Decided against Revenue. - IT Appeal Nos. 359 & 360 (Mds.) of 2013 - - - Dated:- 11-4-2013 - N. S. Saini And V. Durga Rao , JJ. For the Appellant : N. Madhavan For the Respondent : S. Rifaur Rahman ORDER:- PER : V. Durga Rao These two Revenue's appeals in the case of different assessees are directed against separate orders of the Commissioner of Income Tax (Appeals) IX Chennai both dated 27.11.2012 in ITA Nos. 80/11-12/A.IX and 89/11-12/A.IX; respectively, for assessment year 2008-09, in proceedings under section 143(3) of the Income Tax Act 1961 [in short the Act ]. As common issues are involved in these two appeals filed by the Revenue, they were heard together ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments thereof were directly remitted to overseas agent through swift transfer/TT and the payment was not received by them or its behalf in India and hence such non-resident was not liable to tax in India on these commission payments. Since such payments cannot be said to have been deemed to accrue or arise in India, the same is not chargeable to tax in India under the provisions of the Act. Unless the income is chargeable in India, there is no obligation to deduct the TDS and submitted that the Assessing Officer has wrongly decided the issue. The assessee has relied on the following case law before the CIT(Appeals): 1. DCIT v. Divi s Laboratories (12 Taxman 103) 2. CIT v. EON Technology Pvt. Ltd. (15 Taxman 391) 3. GE India Technology Centre P. Ltd. v. CIT [327ITR 456 (SC)] 4. CIT v. Toshoku Ltd. [125 ITR 525 (SC)] 6. The CIT(Appeals), while directing the Assessing Officer to delete the addition, after considering the submissions made by the assessee and case law relied thereon, has held that the commission received by the non-resident agent cannot be said to have accrued in India and therefore, the assessee company is not under obligation to withholding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Therefore, the law related to withholding of tax under section 195 of the Act has not been changed consequent to withdrawal of earlier circulars by the CBDT. 4.5 The appellant further submitted that there is no obligation on the part of the appellant company to deduct the taxes on the sales commission payments on the overseas agents, due to the fact that such services rendered outside India; hence, the appellant company did not deduct the tax at source on the overseas sales commission. Therefore, the action of the AO in disallowing the such payments u/s 40(a)(ia) of the Act, on the ground that the appellant company did not deduct taxes on these overseas sales commission, is not warranted. And also the appellant submitted that the decision of the Hon'ble ITAT, Hyderabad in the case of Dy. CIT v. Divi's Laboratories (12 Taxman103) and decision rendered by the Hon'ble Delhi High Court in the case of CIT v. EON Technology (15 Taxman 391) are in favour of the appellant as these decisions were rendered after considering all the case laws / circulars, directly on this issue, which are cited by the AO while disallowing the expenditure u/s 40(a)(ia) of the Act. 4.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the commission income could not be said to have accrued to the non residents in India and hence the assessee is not liable to deduct tax at source from payment of commission to non residents. 4.7 Since the facts of the appellant case are similar to that of the cases mentioned supra, respectfully following the decisions in the above cases, I am of the opinion that the commissions received by the non resident agents cannot be said to have accrued in India and therefore the appellant company is not under obligation for withholding of tax u/s 195. Therefore the AO is not justified in making the disallowance of ₹ 5,62,13,826/- u/s 40(a)(ia) of the Act and hence the AO is directed to delete the addition of ₹ 5,62,13,826/- made to the returned income. This ground of appeal is allowed. 7. On being aggrieved, the Revenue is in appeal before the Tribunal. 8. At the time of hearing, the ld. Counsel for the assessee has submitted that the issue involved in this appeal is squarely covered by the decision of the Coordinate Bench of ITAT Chennai in the case of Prakash Impex v. Asstt. CIT [IT Appeal No. 8 (Mds.) of 2012, dated 30-3-2012]. He also relied on the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, it had paid commission to its British parent/holding company ETUK on sales and amounts realized on export contracts procured by ETUK for assessee - Assessing Officer held that commission income earned by ETUK had accrued in India or was deemed to accrue in India and, therefore, assessee was liable to deduct tax at source therefrom and as there was failure, said expenditure should be disallowed under section 40(a)(ia) - Whether when ETUK was not rendering any service or performing any activity in India itself, commission income could be said to have accrued, arisen to or received by ETUK in India merely because it was recorded in books of assessee in India or was paid by assessee situated in India - Held, no - Whether for applying section 9 Assessing Officer was required to examine whether said commission income was accruing or arising directly or indirectly from any business connection in India - Held, yes - Whether since facts found by Assessing Officer did not make out a case of business connection as stipulated in section 9(1)(i), commission income could not be said to have accrued to ETUK in India and, therefore, assessee was not liable to deduct tax at source from payme ..... 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