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TMI Blog2020 (5) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... agent is from non-resident. In our view, 52% of the revenue would not make the agent falling in the category of the working mainly for the non-resident. Reliance is also placed on the circular no.23/1969 dated 23.7.1969. See HINDUSTAN SHIPYARD LIMITED [ 1975 (4) TMI 9 - ANDHRA PRADESH HIGH COURT] We find merit into the contention that under the facts of the present case, it cannot be considered that the agent was mainly working for the non-resident. Moreover, the assessee has furnished various documents to demonstrate that agent was a general commission agent. He therefore, has no liability for deduction of tax cannot be fastened on the assessee. Therefore, we set aside the order declaring the assessee as assessee in default and direct the A.O. to delete the additions so made. Hence, ground No.1 of assessee's appeal is allowed. - IT And TP NO. 198 (IND.) OF 2018 - - - Dated:- 28-1-2020 - Kul Bharat, Judicial Member And Manish Borad, Accountant Member For the Appellant : Aashish Goyal and N.D. Patwa, ARs. For the Respondent : Smt. Ashima Gupta, D.R. ORDER KUL BHARAT, JUDICIAL MEMBER . This appeal filed by the assessee is directed against ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult u/s. 201(1), 201(1A) of the Act for non-deducting tax u/s. 195 of the Act on various payments made to different non-residents. In response thereto, the A.R. of the assessee appeared and filed detailed reply. However, the A.O. did not accept the explanation of the assessee and proceeded to hold the assessee in default for the assessment year under appeal. The A.O. made addition of ₹ 12,88,887/- and interest thereon of ₹ 2,12,097/-. Hence, demanded tax of ₹ 15,00,984/-. 3. Aggrieved against this, the assessee is in appeal before this Tribunal. Ld. Counsel for the assessee reiterated the submissions as made in the written synopsis. For the sake of clarity, submissions of the assessee are reproduced as under: SYNOPSIS Business Trading Activity of yellow Peas, Grains Order U/s 201(1)/201(1A) 01.03.2016 TDS Default u/s 195 leading to demand u/s. 201(1)/201(1A). C1T(A)-13, Ahmedabad 20.12.2017 CIT(A) confirmed tax demand as stated in the table below. The pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was treated as in default in respect of inter-alia above payments; which were confirmed by ld. CIT(A) The specific transactions are discussed as under: 1. Transaction with PKT Associates (Agent Ashapura Commodities):- (a) Assessee purchased yellow peas from PKT Associates, USA. (b) PKT associates does not have business connection in India. They are assessed to tax in USA. This fact is confirmed by them. PB 28. (c) Agent is a general commission agent and having independent status. He does not have business connection with PKT Associates. He acts as such agent for other traders also. He does not stock goods on behalf of PKT Associates. This fact is confirmed by them. PB 29. (d) At pg 29 of the ld AO, he conducted inquiry from agent. The reply of the agent is important and demonstrates that PKT Associates have no business connection in India. (e) The invoice issued by PKT Associates is placed at pg. 33 of the order of ld AO. It is signed by authorised person of PKT associates, USA; and is on the letter head of PKT Associates, USA. (f) The appellant submits that the agency clause under Explanation 2 to section 9(1)(i) is clearly not attracted as: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any other agent having an independent status is acting in the ordinary course of his business. In present case: (a) The agent has stated that he is a general commission agent having independent status. His confirmation at pg. 29 of Assessment order is clear. He acts on a principal to principal basis and is not controlled by the non-resident. No evidence to show that he is controlled by the non-resident is brought on record. (b) The agent acts in the ordinary course of business. There is no specific contract between PKT Associates, USA and the agent. No space is provided to PKT Associates. Like they are procuring order for others, they are doing it for PKT Associates. II. Transaction with AST Enterprises (Agent Ashapura Commodities):- (a) Assessee purchased Ethiopian Niger Seeds from AST Enterprises Inc., Dubai, UAE. (b) AST Enterprises does not have business connection in India. This fact is confirmed by them. AO pg. 34 (bottom). (c) Agent is a general commission agent and having independent status. He does not have business connection with AST Enterprises. He acts as such agent for other traders also. He do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xception to the rule of business connection. Proviso Provided that such business connection shall not include any business activity carried out through a broker, general commission agent or any other agent having an independent status, if such broker, general commission agent or any other agent having an independent status is acting in the ordinary course of his business. In present case: (a) The agent has stated that he is a general commission agent having independent status. His confirmation at PB 30 is clear. He acts on a principal to principal basis and is not controlled by the non-resident. No evidence to show that he is controlled by the non-resident is brought on record. (b) The agent acts in the ordinary course of business. There is no specific contract between AST Enterprises , UAE and the agent. No space is provided to AST Enterprises. Like they are procuring order for others, they are doing it for AST Enterprises . is further submitted as under: 1. In light of the Circular 23/1969 dated 23.07.1969, the specific instances were quoted regarding applicability of Provisions of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorities below and submitted that no case is made out for interference in the finding of the authorities below. 5. We have heard the rival submissions and perused the materials available on record. The moot issue to be considered is whether under the facts and circumstances of the present case the assessee could be treated as assessee in default. For the sake of clarity, the relevant provision of the Act is reproduced as under: Section 201: [(1) Where any person, including the principal officer of a company,-- (a) who is required to deduct any sum in accordance with the provisions of this Act; or (b) referred to in sub-section (1A) of section 192, being an employer, does not deduct, or does not pay, or after so deducting fails to pay, the whole or any part of the tax, as required by or under this Act, then, such person, shall, be an assessee in default in respect of such tax: [Provided that any person, including the principal officer of a company, who fails to deduct the whole or any part of the tax in accordance with the provisions of this Chapter on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for failure to deduct the whole or any part of the tax from a person resident in India, at any time after the expiry of seven years from the end of the financial year in which payment is made or credit is given.] (4) The provisions of sub-clause (ii) of sub-section (3) of section 153 and of Explanation 1 to section 153 shall, so far as may, apply to the time limit prescribed in sub-section (3).] 6. From the above provision of law, it is clear that any person who is required to deduct any sum in accordance with the provisions of Act does not deduct or does not pay the whole or part of the amount so deducted fails to pay, such person should be deemed to be assessee in default. Now the question arises whether assessee was required to deduct tax under the Act. As per assessing officer the assessee was required to deduct tax under section 195 of the Act. The contention of the assessee is that under the facts and circumstances, it is not required to deduct tax. It is contended that the agency clause under explanation (2) to section 9(1)(i) of the Act is clearly not attracted as agent does not conclude contract. Contract is signed by the non -resident only. No evidence brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onness of interest has to be there. It may be by way of management control or financial control or by way of sharing of profits. It may also come into existence in some other manner but there must be something more than of mere transaction or sale and purchase between principal and principal. Reliance is placed on the decision of the Hon'ble A.P. High Court rendered in the case of CIT v. Hindustan Shipyard Ltd. [1977] 109 ITR 158 (A.P.). The reliance also placed on the form No.15CA/15CB issued by the accountant based on the declaration given by the respective parties and their agents. It is further contended that appellant cannot be expected to act on such information, which is imposed to obtain for him. Therefore, the assessee cannot be fastened with the liability of TDS u/s. 195 of the Act and treat the assessee in default u/s. 201 of the Act. 7. We find the Ld. CIT(A) affirmed the action of the A.O. on the ground that as per provisions of the Act, the onus is on the assessee to prove that agents are not securing orders in India mainly or wholly for non-residents. The burden of proving the same always lies on the assessee. We find that the assessee has filed letters dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) is not in confirmity with the law. The agent may be main client, but the law mandates that the non-resident should be the main client of the agent. Therefore, this reasoning of the Ld. CIT(A) cannot be affirmed. The A.O. has also observed that 52% of the revenue of the agent is from non-resident. In our view, 52% of the revenue would not make the agent falling in the category of the working mainly for the non-resident. Reliance is also placed on the circular no.23/1969 dated 23.7.1969. Further reliance is placed on the judgement of the Hon'ble A.P. High Court rendered in the case of Hindustan Shipyard Ltd. (supra). We find merit into the contention that under the facts of the present case, it cannot be considered that the agent was mainly working for the non-resident. Moreover, the assessee has furnished various documents to demonstrate that agent was a general commission agent. He therefore, has no liability for deduction of tax cannot be fastened on the assessee. Therefore, we set aside the order declaring the assessee as assessee in default and direct the A.O. to delete the additions so made. Hence, ground No.1 of assessee's appeal is allowed. 9. Ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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