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TMI Blog2019 (4) TMI 1888X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld.CIT(A) is set aside and remit the matter back to the file of the Assessing Officer to examine the genuineness of the payments made to the foreign agents and other relevant details and pass necessary orders in accordance with law after giving affordable opportunity of hearing to the assessee. - Decided in favour of revenue for statistical purposes. - ITA Nos. 541 to 543/VIZ/2018, C.O.Nos. 11 to 13/VIZ/2019 (Arising out of ITA Nos. 541 to 543/VIZ/2018) - - - Dated:- 30-4-2019 - SHRI V. DURGA RAO, HON BLE JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, HON BLE ACCOUNTANT MEMBER For the Assessee : Shri G.V.N. Hari Advocate. For the Department : Smt. Suman Malik Sr.DR ORDER PER V. DURGA RAO, JUDICIAL MEMBER These appeals by the Revenue and the cross objections by the assessee are directed against the separate orders of Commissioner of Income Tax (Appeals)-1, Guntur, all dated 09/08/2018 for the Assessment Years 2012-13 to 2014-15. Since issues and facts involved in these appeals are common, clubbed and heard together and disposed of by way of this consolidated order. ITA No. 541/VIZ/2018 (A.Y. 2012-13) 2. Facts of the case, in brief, are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have any permanent establishment in India. The commission was charged on the exports made hence, the nexus proved. The debit notes raised by the agents clearly prove the fact that the parties to whom the exports were made upon the persuasion by the agents. All the decisions relied upon by the appellant has been perused and found that they are in favour of the appellant and held that no TDS should be done to the payments made to non-residents on account of commission paid for the services rendered outside India. On identical facts, the Hon'ble ITAT, Hyderabad in the case of Priyadarshini Spinning Mills (P.) Ltd. (25 taxmann.com 574) held that commission paid to foreign agents who acted as selling agents of assessee outside India would not be liable to tax deduction under section 195. The relevant para of the order is as under: 14. In the case of Hyderabad Industries Ltd. (supra) also ITAT, Hyderabad Bench held the similar view. In the present case, the AO has failed to bring any material on record on the basis of which it could be concluded that commission paid to foreign agents is chargeable to tax in India. Unless the income is chargeable to tax in India, then tax is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the assessee to the foreign parties without deducting tax under s. 195 of the Act; The contention of the assessee was that s. 195 would be applicable only where the payment to the non-resident is wholly income chargeable to tax as it provides that any person responsible for paying to a non resident 'any sum chargeable under the provisions of this Act', shall, at the time of payment, deduct income tax thereon at the rates in force. In other words, the contention was hat when the payments made to the non-resident were not entirely income, but a trading receipt, there is no question of deduction of income tax at the source as the section does not provide for it. To this contention, the Supreme Court answered that the assessee who made the payments to the non residents was under an obligation to deduct tax at source u/s 195 of the Act in respect of the sums paid to them under the contracts entered into. It further held that the obligation of the assessee to deduct tax u/s 195 is limited only to the appropriate proportion of income chargeable under the Act. Thus, it can be seen that the said judgment in fact helps the assessee. The second question answered by the Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or arisen in India requiring deduction of tax u/s 195(1) of the Act. We are also fortified by the decision of the ITAT Bombay Bench discussed above. In the aforesaid view of the matter, we fully agree with the finding of the CIT (A) that no disallowance u/s 40(a)(i) could be made. We therefore uphold the order of the CIT (A) and dismiss the ground raised by the department. The Hon'ble ITAT, Chennai in the case of Capricorn Food Products India Ltd. (38 taxmann.com 158) considering circular nos. 786/2000, 7/2009 and 23/69 and also sec. 195 of the IT Act held that sum paid to non-resident for canvassing business abroad is not taxable in India even after amendment to section 9(2) by Finance Act, 2010. The relevant para of the order is as under: 7. We have perused the orders and heard the rival submissions. The A.O. had made disallowance under Section 40a(i) for a reason that assessee could not take benefit of Circular No. 786 dated 7.2.2000. However, the subsequent Circular No. 712009 dated 22.10.2009, which allegedly withdrew the benefits given to an assessee under Circular No.786 dated 7.2.2000 and Circular No.23 dated 23.7.1969, were not there, when assessee made paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... source while making payments in question. The Hon'ble ITAT, Delhi in the case of Divya Creation (86 taxmann.com 276) held that where assessee-firm made payments of commission to those agents, since those agents had their offices situated abroad and, moreover, services were also rendered by them outside India, assessee was not required to deduct tax at source while making payments in question. The relevant para is reproduced as under: 20. We find identical issue had come up before the Ahmedabad Bench of the Tribunal in the case of Welspun Corpn. Ltd. (supra). The Tribunal in the said decision has held that the payments made by the assessee for services rendered by non-resident agents could not be held to be fees for payment for technical services. These payments were in nature of commission earned from services rendered outside India which had no tax implications in India. The Tribunal while deciding the issue has also considered the two decisions of the AAR which has been relied on by the Assessing Officer as well as the CIT (A). The Hon'ble ITAT, Hyderabad in the case of IVAX Paper Chemicals Ltd. (44 taxmann.com 173) held that where assessee-company made payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t invoices, allowed the ground raised by the assessee. We find that when the assessee has not filed written agreement entered into by the assessee with the foreign agents, which is very much necessary to decide the genuineness of the payment made to the foreign agents, the ld. CIT(A) ought to have called the remand report in respect of other details field before him. Instead that, he simply considered the details filed by the assessee and allowed the ground raised by the assessee, in our opinion, the order passed by the ld. CIT(A) cannot survive. Therefore, the order of the ld.CIT(A) is set aside and remit the matter back to the file of the Assessing Officer to examine the genuineness of the payments made to the foreign agents and other relevant details and pass necessary orders in accordance with law after giving affordable opportunity of hearing to the assessee. 8. So far as Assessment Years 2013-14 2014-15 are concerned, facts and issues are similar, therefore in view of our decision above, the orders passed by the ld. CIT(A) are set aside and directed the Assessing Officer to re-adjudicate the issue in the lines as indicated in the A.Y. 2012-13. 9. So far as Cross Objec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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