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TMI Blog2018 (2) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... ion agents had rendered services outside India and they were not having P E in India therefore, we uphold the decision of the ld. CIT(A) that the assessee was not liable to deduct tax on the commission paid to foreign agents - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... e arising on account of commission payable to overseas agents was deemed to accrue or arise in India and was accordingly taxable under the Provisions of section 5 (2)(b) read with section 9 (1)(i) of Income Tax Act. It has further been observed by the AO that the appellant company had failed to comply with the Provisions of section 195 (2). He has also held, without prejudice to the main findings,that the appellant had also failed to prove the commissions paid to the agents were genuine and justified. The appellant on the other hand, in its detailed written submission, -has claimed that the Provisions of Section 5 (2)(b) read with section 9 (l)(i) of Income Tax Act were not applicable in its case. The income has been earned abroad and is therefore, not taxable in India. It has also given detailed evidences to prove that the commission paid was genuine. The issues which are to be examined and decided are: - 1. Whether the commission paid to foreign agents is taxable in India by virtue of the provisions of sections 5 (2)(b) read with section 9 (1) (i) of Income Tax Act. 2. Whether the provisions of section 195(2) were applicable on the appellant and it should have deducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the observation of the AO that the income is deemed to accrue or arise in India by applying the provisions of section 9 (1)(i) it is seen that there is no fact on record to indicate that any of the agents had any permanent establishment in India. All the agents had their offices on the foreign soil and the correspondence which has been placed before me do not indicate that they had any PE in India. Further the assessing officer has also not pointed out any such fact in its order which indicate that there was any such office which attracts the deeming provisions. Further the observation that the source of income was in India, is also not proper as it has clearly been discussed in the preceding paragraphs that none of the services have been rendered in India and source of income cannot be said to be in India as the source of income is the services rendered and not the sales. There is no business connection in India from which the income has been earned, there is no property through or from which the income has been earned. Therefore, the provisions of section 9(1)(i) also cannot be applied. The appellant has rightly placed reliance on the judgement of honourable Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by various courts. The special bench of Chennai ITAT in the case of Prasad Productions reported in 125 ITD 263 has held in para-35 of the order that in if the assessee has not applied to the Assessing Officer under section 195(2) for deduction of tax at a lower or nil rate of tax under a bona fide belief that no part of the payment made to the non-resident is chargeable to tax, then he is not under any statutory obligation to deduct tax at source on any part of thereof. While deciding the case the honourable Bench has considered several cases which were relevant to the issue. In the present case the appellant did not deduct the tax or approached the AO for low/no deduction of tax certificate as there are several judicial pronouncements in support of the appellant which have been relied by it in the written submission. It has submitted that the commission paid to nonresident agent was not liable to tax under the Provisions of the Act when the services were rendered outside India, services were used outside India payments were made outside India and there was no permanent establishment or business connection in India. The submission given by the appellant clearly demonstrates its b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of some commission agents pertaining to the current period also. In view of these evidences, I am of the considered opinion that the appellant has also furnished sufficient evidence to prove that the services have also been rendered by the agents to whom commission payment has been made. The AO has also placed reliance on the decision of Hon'ble Authority of Advance Rulings in the case of SKF Boilers and Driers (P.) Ltd. (2012) 18 Taxmann 325 and Rajive Malhotra (2006) 284 ITR 564 (Delhi). The judgements are not applicable to the present facts as there are several other decisions which hold that such kind of commission is not taxable in India and accordingly no liability to deduct tax was there. Further the decision of honourable Supreme Court of India in the case of Hon'ble Supreme Court in the case of CIT vs. Toshoku Limited 125 ITR 525, still prevails as on date and is the law of the land as regards applicability of TDS provisions to commission paid to overseas/non-resident agents by Indian Exporters. In view of the preceding discussion, it is clear that the appellant was not liable to deduct tax on the commission paid foreign agents. Therefore, the disall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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