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TMI Blog2018 (11) TMI 1644X X X X Extracts X X X X X X X X Extracts X X X X ..... Talati, A.R. ORDER PER Ms. MADHUMITA ROY - JM: The instant appeal has been preferred before us by the revenue against the order dated 30.11.2017 passed by the Commissioner of Income Tax(Appeals)-2, Ahmedabad under section 143(3) of the Income Tax Act, 1961 arising out of the order dated 17.10.2016 passed by the Dy. Commissioner of Income Tax, Circle-2(1)(2), Ahmedabad for the Assessment Year 2014-15. 3. In this particular case, the revenue has challenged the deletion of disallowance of commission to foreign agents amounting to ₹ 2,93,56,350/- paid by the assessee in the absence of lead evidence to prove the factum of actual rendering of services by such recipients particularly when such disallowance was made u/s 40(a)(ia) of the Act on export commission payments made to the Non-resident Agents. The revenue has also questioned the impugned order which was passed without appreciating the fact that in terms of the provision of Section 9(1)(vii) of the Act such payments are chargeable to tax and therefore assessee is required to deduct TDS on such remittances. 4. The assessee an Indian Company and engaged in the business of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n India. In the absence of any activity being carried out in India by a non resident commission agent the commission does not accrue or arise in India and therefore is not taxable in India. The representative of the assessee relied upon the judgment passed by the Coordinate Bench in ITA No. 2503/Ahd/2016 for assessment year 2013-14 which was delivered on the issue identical to the instant case. 7. The assessee further submitted before us that the identical claim of the assessee was accepted and ultimately allowed by the First Appellate Authority for A.Y. 2012-13. The said fact was also brought to the notice of Learned Assessing Officer who however did not consider the same in its proper prospective. The Learned AR prays for rejection of this appeal preferred by the Revenue before us. 8. We have heard the Learned counsel appearing for the parties, we have perused the relevant materials available on record. We find while coming to the conclusion in respect of liability to deduct tax at source by the assessee the Learned Assessing Officer came to a finding that the identity of commission agents has not been proved by the assessee, neither the agreements been submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracting LLC. P.O. Box 96255, Dubai, U.A.E., on export sales and an amount of ₹ 20385850/- is paid to Vibgyor International F.Z. LLC, an overseas agent, having their office situated at P.O. Box : 34632, Rak Investment Authority. U.A.E. Statement showing the complete such details of all transactions of export sales and commission part thereon to Stone Hill Mechanical Contracting and Vibgyor International F.Z. LLC, is enclosed as per Annexure. It is submitted that such commission have been paid by our company to overseas agents against their services rendered towards procurements of orders, follow up for payments from, abroad, co-ordination for execution of supply, etc. i.e. wholly exclusively for the purpose of business. This type of commission to overseas agents on export sales have been paid in earlier years, a/so and same was accepted in the earlier years scrutiny asst. made u/s. 143(3) upto A. Y. 2011- 12. by oil earlier assessing office/s Overseas agent to whom commission is paid is not having any business establishment or set up in India and his income is not at all liable to tax in India, has provisions of Section 195 is not applicable. From (he details of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complied with the provisions of the Income Tax Act, 1961 and the DTAA and accordingly was not under an obligation to make any withholding tax in terms of the beneficial provisions of Section 90(2) of the Act. The First Appellate Authority particularly observed that all the evidences including bank payment details, bank certificate for export realization, company payment advances, form no.15CA, 15CB, credit notes to overseas agent, invoices for export by the company with commission amount were duly furnished for consideration of the issue in justifying the commission of overseas agents by the assessee before the Assessing Officer which was not being controverted. He thus concluded that the commission payment made by the assessee was genuine; the same was paid through banking channels on export orders procured and were made for business purpose in prudent way to increase export and increase customer bills for foreign country. He further observed as follows: 2.8. With regard to the provisions of section 9(1)(i), it was submitted that the overseas agent was not doing any business in India. It was merely providing export orders to facilitate appellant. Further, the overseas a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be said that the income has been derived from sales which has been made from India. The income has been derived from the activity of soliciting the sales on behalf of the appellant company. The agent has carried out all the activity on the foreign soil and none of its activity is in India therefore, it cannot be said that the income ahs accrued or arisen in India and the source of income was in India. There is no fact brought out by the AO in the order das well as observed by me during the course of appellant proceedings to indicate that the services have been rendered in India. 2.12 The judgment of honorable Supreme Court in the case of CIT vs. Toshoku Limited [125 ITR 525 [SCJ] is impotent on the issue, whereby it has been held that commission earned by the non-resident for acting as the selling agent for the Indian exporter, wherein such non-resident was rendering services from outside India does not accrue in India. In the present case before me also, the foreign selling commission agent is resident of foreign county, from where the procurement service had been provided for which the commission has been paid, and therefore, THE ISSUE is directly and squarely cov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as it has not been received in India nor it has accrued or arisen in India directly or indirectly. Therefore, once the income is not taxable there is no liability to deduct tax and therefore, it was not obligatory for the appellant to deduct tax in view of this, there was no violation of the provisions of section 195 and the appellant was also not required to pay no deduction certificate from the AO. 2.17. The last issue which is to be adjudicated is that whether the commission payments were genuine and the services were rendered. The AO has briefly dealt with the issue in his order. The appellant has placed on record several documents which indicate that the agent have rendered services prior In the actual sales as well as subsequently also. It is further observed that the payment have been made through banking channel and are duly documented. The appellant has made commission payment to agent during the year and it has provided copies of agreements. The appellant has given satisfactory evidences in respect of all commission payment, and therefore, considering the overall facts and circumstances the payment made to the agent is taken as genuine. Accordingly, in my consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of A.Y. 2012-13 in assessee s own case in revenues appeal which was ultimately decided in favour of the assessee by dismissing the said appeal. In the said appeal following submissions mad as under: 13. We have considered the judgment cited by the Learned counsel appearing for the assessee passed by the Coordinate Bench in ITA No. 2503/Ahd/2016 for assessment year 2013-14 on the identical issue rejecting the appeal preferred by the revenue the relevant portion whereof is as follows: 10. We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, assessee has made payment to various agents as commission based in foreign countries on account of export made to the parties referred by them. The AO disallowed the same on two grounds, firstly, the identification of the parties, details of payment services rendered by them were not furnished, secondly no TDS was deducted under section 195 of the Act by the assessee on such payment. The view take by the AO was subsequently reversed by the ld. CIT-A. However the issue before us arises with regard to the non-deduction of TDS by the assessee under section 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- Income deemed to accrue or arise in India. 659. 66(1) The following incomes shall be deemed67 to accrue or arise in India :- 68(i) all income accruing or arising, whether directly or indirectly, through or from any business connection69 in India, or through or from any property69 in India, or through or from any asset or source of income in India, 70[* * *] or through the transfer of a capital asset situate in India. 71[Explanation 1].-For the purposes of this clause- (a) in the case of a business of which all the operations72 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 operations72 carried out in India ; (b) in the case of a non-resident, no income shall be deemed to accrue or arise in India to him through or from operations which are confined to the purchase of goods in India for the purpose of export ; 73[* * *] 74[(c) in the case of a non-resident, being a person engaged in the business of running a news agency or of publishing newspapers, magazines o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Driers (P.) Ltd. In re [2012] 343 ITR 385/206 Taxman 19/18 taxmann.com 325 (AAR - New Delhi), we find that this decision merely follows the earlier ruling in the case of Rajiv Malhotra, In re [2006] 284 ITR 564/155 Taxman 101 (AAR - New Delhi) which, in our considered view, does not take into account the impact of Explanation 1 to Section 9(1)(i) properly. That was a case in which the non-resident commission agent worked for procuring participation by other non-resident entities in a food and wine show in India, and the claim of the assessee was that since the agent has not carried out any business operations in India, the commission agent was not chargeable to tax in India, and, accordingly, the assessee had no obligation to deduct tax at source from such commission payments to the non-resident agent. On these facts, the Authority for Advance Ruling, inter alia, opined that no doubt the agent renders services abroad and pursues and solicits exhibitors there in the territory allotted to him, but the right to receive the commission arises in India only when exhibitor participates in the India International Food Wine Show (to be held in India), and makes full and final payment to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of PR CIT Vs. MGM Exports in R/Tax Appeal No. 309 of 2018 vide order dated April 11, 2018. The relevant extract of the order is reproduced below : 7. In the recent order in Tax Appeal No. 290 of 2018, we had dealt with similar situation making following observations: It can thus be seen that while confirming the order of CIT [A], the Tribunal relied on judgment of the Supreme Court in the case of G.E India Technology Centre P. Limited vs. Commissioner of Income-Tax Anr., reported in [2010] 327 ITR 456 (SC) = 2010-TII-07-SC-INTL In such Judgment, It was held and observed that the most important expression in Section 195[1] of the Act consists of the words, chargeable under the provisions of the Act . It was observed that, ..A person paying interest or any other sum to a non-resident is not liable to deduct tax if such sum is not chargeable to tax under the Act, Counsel for the Revenue, however, drew our attention to the Explanation 2 to sub-section [1] of Section 195 of the Act which was inserted by the Finance Act of 2012 with retrospective effect from 1st April 1962. Such explanation reads as under:- Explanation 2 - For ..... X X X X Extracts X X X X X X X X Extracts X X X X
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