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TMI Blog2021 (4) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... Salem VS. Chola Spinning Mills (P.) Ltd. [ 2019 (11) TMI 934 - MADRAS HIGH COURT] the questions of law are decided against the appellant - Revenue and in favour of the respondent assessee - T.C.A.No.299 of 2014 - - - Dated:- 31-3-2021 - Hon'ble Mr. Justice M.Duraiswamy And Hon'ble Mrs.Justice T.V.Thamilselvi For the Appellant : Mr.M.Swaminathan, Senior Standing Counsel assisted by Ms.V.Pushpa, Standing Counsel For the Respondent : Mr.R.Vijayaraghavan JUDGMENT M.DURAISWAMY, J. Challenging the order passed in I.TA.No.555/Mds/2011 in respect of the assessment year 2007-08 on the file of the Income Tax Appellate Tribunal, Chennai, A Bench, the Revenue has filed the above appeal. 2.The above appeal was admitted on the following substantial questions of law: 1)Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the disallowance made u/s 40(a)(i) amounting to ₹ 87.72 lakhs is not proper? 2)Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in not considering the retrospective amendment to the Income Tax Act by Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of an agreement made before the 1st day April, 1976, and approved by the Central Government. Explanation 1. - For the purposes of the foregoing proviso, an agreement made on or after the 1st day of April, 1976, shall be deemed to have been made before that date if the agreement is made in accordance with proposals approved by the Central Government before that date. Explanation 2. - For the purposes of this clause, 'fees for technical services' means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head 'Salaries'. (2) Notwithstanding anything contained in subsection( 1), any pension payable outside India to a person residing permanently outside India shall not be deemed to accrue or arise in India, if the pension is payable to a person referred to in article 314 of the Constitution or to a person who, having b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act ; or (ii) income by way of royalty as set out in section 9(1)(vi) of the Act ; or (iii) income by way of fees for technical services as set out in section 9(1)(vii) of the Act. 10. While dealing with section 9(1) of the Act, the Supreme Court in CIT v. Toshoku Ltd. [1980] 125 ITR 525(SC), on considering a transaction where tobacco was exported to Japan and France and sold through nonresident assessees who were paid commission, held as under: 8. The second aspect of the same question is whether the commission amounts credited in the books of the statutory agent can be treated as incomes accrued, arisen, or deemed to have accrued or arisen in India to the non-resident assessees during the relevant year. This takes us to section 9 of the Act. It is urged that the commission amounts should be treated as incomes deemed to have accrued or arisen in India as they, according to the department, had either accrued or arisen through and from the business connection in India that existed between the non-resident assessees and the statutory agent. This contention overlooks the effect of clause (a) of the Explanation to clause (i) of sub-section (1) of section 9 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is not liable to deduct tax at source when the non-resident agent provides services outside India on payment of commission. 12. In the light of the above said decisions and the finding rendered by us on the earlier issue that the services rendered by the non-resident agent can at best be called as a service for completion of the export commitment and would not fall within the definition of fees for technical services, we are the firm view that section 9 of the Act is not applicable to the case on hand and, consequently, section 195 of the Act does not come into play. In view of the above finding, the decision of the Supreme Court in Transmission Corporation of A. P. Ltd.'s case, referred to supra , relied upon by the learned standing counsel for the Revenue is not applicable to the facts of the present case. We find no infirmity in the order of the Tribunal in confirming the order of the Commissioner of Income-tax (Appeals). 8. The above decision of this Court in Faizen Shoes (P.) case (supra) is squarely applicable to the facts of the present case. 9. In the result, this Court finds no reason to interfere with the order passed by the Tribunal. No ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, the profits and gains of an eligible business to which the provisions of Sub-Section (1) apply shall, for the purposes of determining the quantum of deduction under that Sub-Section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. In the above sub-section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term 'initial assessment year'. It has been represented that some Assessing Officers are interpreting the term 'initial assessment year' as the year in which the eligible business/manufacturing activity had commenced and are considering such first year of commencement/operation etc. itself as the first year for granting deduction, ignoring the clear mandate provided under Sub-Section (2) which allows a choice to the assessee for deciding the year from which it desires to cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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