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TMI Blog2018 (5) TMI 1840X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the assessee in assessment year 2010-11 as categorically held that the commission/brokerage paid to non-resident agents cannot be termed as fees for technical services. That being the case, the reasoning of the Assessing Officer that the provisions of section 9(1)(vii) of the Act is applicable to the commission paid, is unacceptable. Source rule applies to the payment made by the assessee Assessing Officer’s own admission, the main business of the assessee is export of cotton yarn and the disputed payment is in the nature of commission paid to foreign agents for procuring orders in their respective countries of residences. That being the case, the payment is not in the nature of fee for technical services. the commission paid to non-resident agents are not chargeable to tax in India either u/s. 9(1)(i) or under any other provisions of the Act since the non residents have no business connection in India or permanent establishment in India. That being the case, there was no liability on the assessee to deduct tax at source while paying commission to the non resident agent. The provisions of section 9(2) of the Act are not applicable, as the payment made by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s own case for the preceding assessment years, the Tribunal has deleted the similar disallowance made by the Assessing Officer on account of payment of commission to foreign agents. The Assessing Officer after considering the submissions of the assessee, however, was not convinced with the same. The Assessing Officer held that as per the ruling of the Hon ble Supreme Court in the case of GVK Industries vs. ITO 332 ITR 130 (SC) the commission paid to foreign agents for obtaining export order for exports from India is liable to be taxed in India. Therefore, the assessee was liable to deduct tax at source on the commission paid as it falls within the purview of section 9(1)(i)/9(1)(vii) r.w.s. 195. The assessee having failed to deduct tax at source on such payment, it was liable for disallowance u/s. 40(a)(i) of the Act. In this context, the Assessing Officer also relied upon his reasoning while making similar disallowance in the assessee s case for assessment years 2010-11 and 2011-12. While doing so, though he took note of the fact that the Tribunal in the assessee s own case for assessment year 2010-11 has decided the issue in favour of the assessee, however, he refused to fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired to deduct tax at source on such payment. He submitted, in assessee s own case for assessment years 2010-11 and 2011-12, similar disallowance made by the Assessing Officer was deleted by the tribunal. He submitted, there being no difference in facts in the impugned assessment year. The decisions of the tribunal in the assessee s own case for the preceding assessment years have to be followed. 9. We have carefully considered the rival contentions and perused the materials on record. The basic issue which arises for consideration before us is, whether the commission/brokerage paid to foreign agents are chargeable to tax in India, thereby requiring the assessee to deduct tax at source on such payment in terms of section 195 of the Act. On a perusal of the impugned assessment order, it is evident that the Assessing Officer has accepted the fact that the assessee has paid commission/brokerage to persons/entities located outside India for booking export orders for the assessee. The reasoning of the Assessing Officer for disallowing the payment made is that such payment is chargeable to tax in India, as it falls within the purview of section 9(1)(i)/9(1)(vii) of the Act. At this s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court in the case of GVK Industries (supra) and in fact to apply the said decision, the Assessing Officer has made attempt to rope in the payment made by the assessee u/s. 9(1)(vii). Therefore, at this stage, it is necessary to examine the nature of the payment made by the assessee to non-resident agents. As could be seen, the Assessing Officer himself at more than one place in the assessment order has recorded a finding of fact that the assessee has paid commission to foreign agents for booking/obtaining export orders. Thus, it is very much clear that the payment by the assessee is simply and purely in the nature of commission/brokerage for procuring export orders. Section 9(1)(vii) speaks of payment of fees for technical services. Applying the decision of the Hon ble Supreme Court in the case of GVK Industries (supra), the payment made by the assessee to foreign agents under no circumstances can be brought within the term fees for technical services as prescribed u/s. 9(1)(vii) of the Act. In fact, while examining identical nature of payment made by the assessee in assessment year 2010-11, the coordinate Bench in ITA No. 183/Mum/2014 dated 14.11.2014 has clearly and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rule, the success fee paid to the non resident company is chargeable to tax in India. Facts are completely different in the appeal before us. In Assessing Officer s own admission, the main business of the assessee is export of cotton yarn and the disputed payment is in the nature of commission paid to foreign agents for procuring orders in their respective countries of residences. That being the case, the payment is not in the nature of fee for technical services. Thus keeping in perspective, the aforesaid factual as well as legal position, it needs to be seen whether the provisions of section 195 are applicable. A reading of the said provision makes it clear that while making payment to a non resident, which is chargeable to tax in India, the assessee is required to deduct tax at source as per the said provision. In the facts of the present case, the commission paid to non-resident agents are not chargeable to tax in India either u/s. 9(1)(i) or under any other provisions of the Act since the non residents have no business connection in India or permanent establishment in India. That being the case, there was no liability on the assessee to deduct tax at source while paying comm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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