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TMI Blog2014 (9) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 9 of the Act - The object is to encourage exports thereby the Country can earn foreign exchange - The activities of the assessee in assisting the Indian manufacturer to manufacture the goods according to their specification is to see that the said goods manufactured has an international market, therefore, it could be exported - the whole object of the respondent assessee is giving its services both to the foreign buyer and the Indian purchaser is to export the merchandise to the foreign buyer which results in earning foreign exchange - Merely because the assessee do not place orders for purchase, in law it makes no difference - Without placing an order in its name the assessee is enabling a foreign buyer to place order directly with the manufacturer after the assessee approves the manufacturer and requirement and the assessee takes the responsibility of maintaining quality and dispatch of the goods to the destination - The purchase and export of merchandise takes place and therefore the object with which the provision is inserted is achieved –thus, the assessee is entitled to the benefit of exemption – Decided against revenue. - IT APPEAL NOS. 203 TO 208 OF 2010 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... located at Bangalore. He also recorded the statements of Mr. P.J.Vora, Accounts Supervisor, Mondial Orient Ltd., of Indian Branch, Mr.Nihal Mudalige, Quality Managr, India sub-continent on 12.01.2006 and Mr.David D'Souza, MD of Garden City Fashions P.Ltd., was also recorded on 08.12.2006. 4. On consideration of the aforesaid material the assessing officer held that the assessee's activities were not confined to liaison activities alone, but it consisted of substantial business activities also. The Indian Branch Office was doing the quality inspection services as per the agreement entered into between the assessee and the Indian Office. The assessee was only receiving cost + 5% on the services rendered to the Branch offices in India. The Branch office in India was reimbursed for the cost of administration expenditure incurred by it. The assessee was only rendering certain services and certain quality inputs and received charges for the same for the services rendered. The said receipt is attributable to the activity in India and accordingly, taxable in India. Aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in India to him (to such nonresident) through or from operations which are confined to the purchase of goods in India actually for the purpose of exports. In other words not only the purchase of goods as such but if the assessee does the operations which are limited to the purchase of goods in India for the purpose of export is exempted. Then they referred to explanation 3 of Section 9(1)(i) of the Act and held that income earned by the assessee is exempted from tax and accordingly allowed the appeal of the assessee, dismissed the appeal of the revenue. Aggrieved by the said order the revenue has preferred these appeals. 8. The appeals are admitted to consider the following substantial question of law. Whether the Tribunal was correct in holding that the activity of a. Trading of most reliable, qualified suppliers of Textile products, b. Checking and expediting the production of merchandise, c. Attending upon buyers and other representatives of the buyers, d. To follow-up of orders, e. To provide quality assurance, f. To arrange for inspection and g. To arrange for logistics and export as contended by the assessee, would amount to purchase of goods in India for the purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their suitability to clients/buyers. Most of the times the suppliers approach the assessee through email or letters. Depending on information of suppliers, the quality technicians of the assessee and the merchandiser visit the factory premises and gives a report to the Office Manager. The Office Manager thereafter discusses with the Country Manager. After evaluation by the Country Manager, if found proper and suitable, the information is passed on to the Sourcing Product Manager who cross-verifies the information with the merchandiser and depending on client's requirements, the supplier is either approved or rejected or kept in the panel for future reference and use. Thereafter when the buyer makes an enquiry either with the SPM or with the merchandiser the merchandising team of the branch office will decide on the appropriate supplier for the client, discuss the price and delivery period with the supplier and communicate the same either directing to the buyer with the copy marked to the SPM. If the terms are accepted, order is confirmed to the supplier. At this stage the order placement is completed. After this the merchandiser follows up the order to ensure that the delivery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es the responsibility of finding out the manufacturer, getting the merchandise manufactured according to the specifications and they also assure the quality of the goods manufactured and in the end, they also take the responsibility of seeing that the goods reach the destination. It is for these services the asessee is paid by the foreign buyer. It is in this background let us look at Section 9 of the Act which deals with the income deemed to accrue or arise in India. It reads as under: Income deemed to accrue or arise in India 9. (1) The following incomes shall be deemed to accrue or arise in India :- (i) all income accruing or arising whether directly or indirectly through or from any business connection in India, or through or from any property in India, or through or from any asset or source of income in India [***] or through the transfer of a capital asset situate in India. [Explanation 1] For the purposes of this clause- (a) in the case of a business of which all the operations are not carried out in India, the income of the business deemed under this clause to accrue or arise in India shall be only such part of the income as is reasonably attributable to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of goods in India for the purpose of export and the income so accrued or arising out of such transactions are exempted from payment of income tax. The whole object of this provision being to encourage export of merchandise from India which enables Indian manufacturer to earn and when it is exported the country would earn foreign export. An incentive is given to a nonresident to carry on business in India. Otherwise the explanation would have no meaning and that is precisely what the Tribunal has held. 14. Reliance is placed on a judgment of this Court in the case of Commissioner of Income Tax International Taxation v. Nike Inc reported in [2013] 217 Taxman 1 (Karnataka) where a non-resident assessee was placing order with an Indian customer for purchase of goods which were supplied by the Indian manufacturer not to the non-resident assessee but to its affiliates. It was contended that the benefit of this provision was given because the non-resident assessee was placing orders directly for purchase of goods. In the instant case as there is no order placed for purchase of goods by the nonresident assessee he is not entitled to the said benefit. We do not find any substance in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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