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TMI Blog2017 (9) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee : Shri Piyush Kaushik, Adv. For The Department : Shri Arun Kumar Yadav, Sr.DR ORDER PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 07.07.2014 of CIT(A), Noida relating to assessment year 2010-11. 2. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of manufacturing and export of plain and studded Gold and Silver jewellery. It filed its return of income on 29.09.2010 declaring taxable income of ₹ 2,83,03,490/-. During the course of assessment proceedings, the Assessing Officer observed that the assessee has debited expenses under the head Foreign Agency Commission amounting to ₹ 62,12,609/-. The Assessing Officer asked the assessee to furnish the details regarding this commission expenses to which the assessee submitted that an amount of ₹ 4,60,523/- was paid to M/s TWC, 2 Route De Cillers Le Lac, Les Chauchets, Les Fins 25,500/-, France and ₹ 57,52,086/- were paid to M/s Newtechno SA, Rue Des Fontaines 2 2087, Cornaux Ne, Switzerland as foreign agency commission for promoting the sale all over Europe. The assessee also furnished the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Only they acted as selling agents outside India. The commission amount which were earned by the non-resident agent for services rendered outside India could not be deemed to be the income accrue or arise to them India. 6. Referring to provision of section 195(1) of the I.T. Act it was argued that the person responsible for paying any sum to non-resident is liable to deduct tax at source if the said sum is chargeable under the provisions of this Act. The expression chargeable under the provisions of the Act in section 195(1) of the I.T. Act shows that the remittance has got to be of a trading receipt, the whole or part of which is liable to tax in India. If tax is not so assessable, there is no question of tax at source being deducted. 7. However, the Assessing Officer was not satisfied with the explanation given by the assessee. He observed that the commission has been remitted to the foreign agent only after realisation of proceeds by the assessee from the customers solicited by the agents. Further, it is explicitly stated in point 4 of the agreement that in case of any losses/interest etc. being not paid by the customers on account of delay in payment, the same will be ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enhanced amount of business income resulting from the aforesaid disallowance of agency commission. That the appellant craves leave to Add to and / or Amend, modify or withdraw the grounds outlined above before or at the time of hearing of the appeal. 10. Ld. counsel for the assessee did not press ground no.3 for which ld. DR has no objection. Accordingly, the ground no.3 is dismissed as not pressed. 11. Ground no.4 is an alternate ground of ground no.3. Ld. counsel for the assessee did not press the same. Therefore, ground no.4 is also dismissed as not pressed. 12. So far as ground no.1 and 2 are concerned, ld. counsel for the assessee strongly challenged the order of the CIT(A). He submitted that the agents are based in Switzerland and France who have procured business for the assessee abroad. Referring to the decision of the Co-ordinate Bench of the Tribunal in the case of DCIT (International Taxation) vs. Welspun Corporation Ltd. reported in 77 taxmann.com 165, he submitted that the Tribunal in the said decision has held that the services of the nature rendered by non-resident commission agents cannot be treated as fees for technical services any way and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to have a business connection in India and the commission payments to them cannot be said to have been either accrued or arisen in India. 17. He accordingly submitted that the order of the CIT(A) be reversed and the grounds raised by the assessee should be allowed. 18. Ld. DR on the other hand heavily relied on by the order of the CIT(A). 19. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer made addition of ₹ 62,19,609/- u/s 40(a)(i) on the ground that assessee has not deducted tax from the foreign agency commission paid as per the provisions of section 195 of the I. T. Act. While doing so, the Assessing Officer relied on the decision of the AAR in the case of SKF Boilers and Driers Pvt. Ltd. (supra) and the decision in the case of Rajiv Malhotra (supra). We find the ld. CIT(A) while upholding the action of the Assessing Officer held that income arising to the agent on account of export commission very much falls within the ambit of provisions containe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n tobacco in India, purchased tobacco and exported it to Japan and France through non-resident sales agents, a Japanese company and a French business house respectively. Under the terms of the agreement, the Japanese company, which was appointed as exclusive sales agent in Japan for tobacco exported by B, was entitled to a commission of 3 per cent. of the invoice amount. The sale price received on the sale in Japan was remitted wholly to B in India and B debited his commission account and credited the amount of commission payable to the Japanese company in his account books and later remitted the amount to the Japanese company. There was a similar agreement with the French business house in relation to the corresponding area and similar credit and debit entries and subsequent remittance of the commission were made. The question was whether the commission earned by the non-resident sales agents could be taxed in India, treating B as representative assessee under s. 161 of the I.T. Act, 1961: Held, (i) that it could not be said that the making of the entries in the books of B amounted to receipt, actual or constructive, by the non-resident sales agents as the amounts so credite ..... X X X X Extracts X X X X X X X X Extracts X X X X
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