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TMI Blog2020 (8) TMI 672X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee company. When undisputedly TEI is not having any Permanent Establishment (PE) in India the income of TEI received as commission from assessee company was not chargeable to tax in India as the same was neither accrued in India nor received in India and as such was not required to deduct tax at source u/s 195 of the Act. So the question framed is answered in favour of assessee as the payment made by assessee company to TEI is commission payment and not a fee for technical services . What has been discussed above, we are of the considered view that the AO as well as ld. CIT (A) have merely made addition on the basis of conjectures and surmises because no evidence whatsoever has been brought on record if TEI was having any managerial or technical expertise to provide technical services to the assessee company apart from procuring orders for the assessee company on commission basis as per MOU. So, the AO/ld. CIT (A) have erred in making disallowance / enhancing the disallowance u/s 40(a)(i)of entire commission which is not sustainable in the eyes of law, hence ordered to be deleted. Appeal filed by the assessee stands allowed. - ITA No.9056/Del./2019 - - - Dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as subjected to scrutiny and assessment was framed under section 143 (3) of the Income-tax Act, 1961 (for short the Act ) at ₹ 5,15,93,770/-. Assessing Officer (AO) made addition of ₹ 39,70,224/- being 30% of the amount claimed to have been paid to M/s. Taiyo Enterprises Inc. (for short TEI ) to the tune of ₹ 1,32,34,080/- as commission without deducting the tax at source (TDS) on the ground that u/s 195 of the Act, TDS was required to be deducted on payment made to a non-resident company i.e. TEI and thereby framed the assessment at ₹ 5,15,93,770/-. 3. Assessee carried the matter by way of an appeal before the ld. CIT (A) who has enhanced the income of the assessee by disallowing entire commission paid of ₹ 1,32,34,080/- u/s 40(a)(i) of the Act as against disallowance of 30% i.e. ₹ 39,70,224/- made by the AO. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal. 4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. lower Revenue Authorities and contentions raised by the ld. AR and ld. DR for the parties to the appeal, the sole question arises for determination in this case is :- as to whether payment of $2,09,400 being 6% of $34,90,000 made by the assessee company to TEI without deducting any TDS is to be treated as a commission payment or fee for technical services as has been held by the ld. CIT (A)? 8. Ld. AR for the assessee company challenging the impugned order passed by the ld. CIT (A) contended that services rendered by a non-resident company to the Indian assessee for procurement of export order cannot be treated as managerial/consultancy services and relied upon the order passed by the coordinate Bench of the Tribunal in case of DCIT vs. M/s. Tej International Pvt. Ltd. in ITA NO.6140/Del order dated 20.07.2018 . However, ld. DR for the Revenue relied upon the order passed by the ld. CIT (A). 9. We have perused the order passed by the coordinate Bench of the Tribunal in case of DCIT vs. M/s. Tej International Pvt. Ltd. (supra) bearing identical facts and the Tribunal by relying upon the decision rendered by Hon ble Apex Court in the case of GVK Indust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly when there was a written and signed authorization issued by the respondent-assessee in favour of the non-resident. Thus, the respondent- assessee dictated and directed the non-resident. The Commissioner (Appeals) has also dealt with quantification of the commission and as per agreement, the commission payable was the difference between the price stipulated in the agreement and the consideration that the respondent-assessee received in items of the purchase contract or order, in addition to a predetermined guarantee consideration. Again, an indication contra to the contention that the nonresident was providing management service to the respondent-assessee. [Para 16] The revenue has not placed copy of the agreement to contend that the aforesaid clauses do not represent the true nature of the transaction. The Assessing Officer in his order had not bothered to refer and to examine the relevant clauses, which certainly was not the right way to deal with the issue and question. [Para 17] Further, would be incongruous to hold that the nonresident was providing technical services. The non-resident had not undertaken or performed 'technical services', ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices are rendered for performing management functions and consultancy services relate to provision of advice by someone having special qualification that allows him to do so. In the present case, the aforesaid requisites and required necessities are not satisfied. Indeed, technical, managerial and consultancy services may overlap and it would not be proper to view them in watertight compartments, but in the present case this issue or differentiation is again not relevant. [Para 25] 11. Hon ble Allahabad High Court in case of CIT vs. Model Exims (supra) has dealt with the identical issue by holding that the agreement with non-resident commission agents for procuring orders does not involve rendering of any managerial or technical services and consequently, no tax withholding required on payment of said commission. 12. When we examine the relevant clauses of MOU entered into between assessee company and TEI vide which payment has been made to TEI, it leads to the conclusion that TEI was to procure the order for supplying product of assessee company to some Kenyan buyer for which commission @ 6% of the total order was agreed to be paid in two installments. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence on file if TEI was having any such technical expertise and skills, as its functional profile is not on record nor claimed to have perused by AO/CIT(A), for installation and successful commissioning of cold rolling mill (turnkey project). 16. Furthermore, when we examine clause 3 of the MOU it is categoric enough to explain that all the technical discussion shall be held by the first party (assessee company) directly with the prospective buyer. In case of any problem relating to getting of the order, the first party shall inform the same in writing to the second party. So, the limited role has been assigned to TEI as per MOU to introduce the prospective buyer for getting order for sale of the product of the assessee company. 17. Even otherwise, when undisputedly TEI is not having any Permanent Establishment (PE) in India the income of TEI received as commission from assessee company was not chargeable to tax in India as the same was neither accrued in India nor received in India and as such was not required to deduct tax at source u/s 195 of the Act. So the question framed is answered in favour of assessee as the payment made by assessee company to TEI is commission ..... X X X X Extracts X X X X X X X X Extracts X X X X
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