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TMI Blog2015 (6) TMI 708X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue heavily relies on the case law of Transmission Corporation of Andhra Pradesh vs CIT - [1999 (8) TMI 2 - SUPREME Court ]. The hon'ble apex court has itself distinguished the said case law in GE India Technology Cen. P. Ltd vs CIT [2010 (9) TMI 7 - SUPREME COURT OF INDIA] in clear terms that section 195 would only apply if the payment in question is taxable as income in India and not otherwise. The said issue stands already decided against the Revenue. - Decided in favour of assessee. - I.T.A.No.1963/Mds/2014 - - - Dated:- 4-2-2015 - SHRI B.R. BASKARAN AND SHRI S.S. GODARA, JJ. For The Appellant : Shri N. Madhavan, JCIT For The Respondent : Mrs. S. Srividya, CA ORDER PER S.S.GODARA, JUDICIAL MEMBER These Revenue s appeals in case of different assessees for assessment year 2010-11, are directed against separate orders of the Commissioner of Income-tax (Appeals)-II Chennai dated 28.1.2014 and 20.1.2014 passed in Appeal Nos. 1852/2013-14 and 1599/2013-14 deleting disallowance u/s 40(a)(i) of ₹ 2,16,29,463 and ₹ 78,54,319/- respectively, in proceedings under section 143(3) of the Income-tax Act, 1961 (in short the Act ). 2. The Revenue s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt Limited relied on by the CITCA), has not reached finality and appeals before the Hon'ble High Court is pending. Parties inform us that the sole identical issue involved in both these cases is deletion of disallowance u/s 40(a)(i)of the Act Therefore, we treat I.T.A.No.1964/Mds/2014 in case of M/s ISIS Exports(P) Ltd. as the lead case. 3. The assessee manufactures shoe leather socks, handbags and key chains. It had filed its return on 15.10.201 admitting income of ₹ 13,19,550/-. The same was summarily processed. The Assessing Officer took up scrutiny . He noticed from the assessee s profit and loss account the impugned sum of ₹ 78,54,319/- classified as commission on export sales without deducting TDS. The said agents are based in Italy, Spain, France and Germany. The Assessing Officer sought to invoke disallowance u/s 40(a)(i). The assessee pleaded that no TDS was required to be deducted since the impugned export commission had not accrued/arisen in India as the services had been rendered in foreign shores. The commission payments were also claimed to have been directly remitted. The Assessing Officer did not agree. He went through the assessee s ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has made certain payments to overseas agents as commission and no TDS deducted. According to the Assessing Officer, the assessees' business is situated in India and the payments were also made from India and according to section 195, the assessee is under obligation to deduct TDS. Therefore, by invoking section 40(a)(i), he has disallowed an amount of ₹ 5, 62,13,826/ - On appeal, the CIT(Appeals) deleted the disallowance on the ground that the commission was paid to non-resident agent and it cannot be said to have been accrued in India and section 195 have no application. The only issue for our consideration is as to whether the assessee is under obligation to deduct the TDS under section 195 or not. The CIT(Appeals), by considering the entire facts and circumstances of the case passed a detailed order by observing that section 195 have no application to assessee's case. In the case of M/ s. Prakash Impex v. ACIT (supra), the Coordinate Bench of ITAT Chennai has considered the very same issue and observed that the commission paid to non-resident agent for the services rendered outside India and such payments are not chargeable to tax India and therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s agent for procuring export orders. The agents have not been provided any managerial/technical services. The relationship between the assessee and the non-resident (agent) was only for rendering non-technical services. Moreover, there was no permanent establishment of the said non-resident in India. Therefore, the commission paid to the non-resident agent did not accrue or arise in India and thus, there was no need for deducting TDS under section 195 of the Act. 14. 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. Taking into consideration of entire facts and circumstances and by following aforesaid decisions, we are of the opinion that the issue involved in this appeal is covered in favour of the assessee and section 195 have no application to assessee s case. Accordingly, the appeal of the Revenue is dismissed. 4.1.3 In the instant case also, the assessee company is engaged in the business of exporting leather goods (in the cases of Farida Shoes P Ltd and Delta Shoes P Ltd also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not arise; it arises only when such remittance is a sum chargeable under Act) i.e., chargeable under sections 4) 5 and 9 Held, yes. Whether section 195(2) is not a mere provision to provide information to ITO(TDS) so that department can keep track of remittances being made to non-residents outside India; rather it gets attracted to cases where payment made is a composite payment in which certain proportion of payment has an element of 'income' chargeable to tax in India and payer seeks a determination of appropriate proportion of sum chargeable Held, yes. Further, under similar facts and circumstances, the Hon'ble ITAT of Chennai, in the case of M/s. Farida Shoes P Ltd, in ITA No.159/Mds/2013 dated 1l.04.2013 (A.Y.2008-09), has examined the issue of commission payments to non-residents for procuring export orders in detail and concluded that the commission payments to the said non-resident agents are not assessable to tax in India and consequently the resident payee company (M/s. Farida Shoes P Ltd) was not under the obligation of deduction TDS on the commission payments u/s.195 of the Act. 4.1.6 In the present appeals of the assessee also the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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