9911796707
TMI Blog2022 (4) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... export orders as the services rendered by the said foreign entity included, inter alia, assisting the assessee in protecting patent & other intellectual property rights of the assessee, assisting the assessee's service personnel, informing the assessee about its competitors' activities etc. and therefore, the services rendered were in the nature of managerial, technical and consultancy/advisory services within the meaning of section 9(1)(vii) of the Act read with the relevant DTAAs." 3. Briefly stated, the assessee is engaged in the manufacturing of customized gears, synchronizers, transmission components and transaxles for automotive industry. The assessee filed its return of income on 29.11.2014 declaring total income of Rs. 134,25,86,070/-. The assessee's case was selected for scrutiny. The Ld. Assessing Officer ("AO") completed the assessment under section 143(3) of the Income Tax Act ("Act") vide assessment order dated 13.12.2017 on total income of Rs. 137,33,51,853/- including therein addition of Rs. 3,07,65,783/- on account of non-deduction of tax deducted at source ("TDS") on payment of export commission to Oerlilkon Graziano SPA, Italy ("SPA"). 3. During the previous ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. 5. On appeal, the Ld. CIT(A) after considering the facts of the case in the light of the submissions made by the assessee deleted the addition made by the Ld. AO by recording the following findings :- "6.2.1 It is noted that the commission has been paid for procuring export orders for which the services were provided outside India. In order to examine whether appellant was required to deduct tax in term of provisions of section 195 of the Act, while making payments for commission, it is required to examine if the amount paid was chargeable to tax in India in the hands of the commission agent. Scope of total income of non residents is defined u/s 5(2) of the Act. The income of non residents is taxable in India if it is received or deemed to be received in India or if it accrues or is deemed to accrue or arise in India. It is not the case of the AO that the income was received or deemed to be received in India by the foreign agent. As foreign agent operates outside India for booking export orders and goods in pursuant to such orders are also sold outside India, no part of the income can be said to accrue or arise in India. As held by Hon'ble jurisdictional High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/Del/2014 given on 12.01.2015, after going through various aspects regarding the chargeability of commission income paid to non residents for procuring export orders held that the income of foreign agent of Indian exporter for procuring export order where no part of services was rendered in India and the goods were sold outside India, no part of the income can be said to accrue or arise in India, in the absence of any business connection in India. 6.3 I also find that similar issues have been decided in the case of CIT vs. Farida Leather Company [2016] 238 taxman 0473 & CIT, Coimbatore vs. Kikani Exports (P) Ltd. [2014] 49 taxman.com 601 (Madras) by the Hon'ble High Court of Madras in which it has been held that commission paid to a non-resident for completion of exports commitment would not fall within the definition of fees for technical services and explanation 2 to s. 195(1) and explanation below S. 9(2) makes no difference to the law. 6.4 It was also brought to my notice that CIT(A) in the appellate orders for A.Ys. 2010-11, 2011-12 and 2013-14 in the case of the appellant itself on the same issue have held that the services provided by the commission agent are not te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its knowledge. Graziano India about current and newly introduced - legal regulations in the Territory which may have an impact on the sale of Graziano India's products. These may include, without limitation, the provision of the reservation of title, on custom duties, taxes, fees and charges. The agent however does not take responsibilities for decisions or unawareness of Graztano India. (ii) Clause 2.16 of the agreement:- The agent shall assist Graziano India in protecting patent and other intellectual property rights of Graziano India with respect to the products as well as in defending against unfair completion by third parties, and shall immediately inform Granziano India upon becoming aware of occurrences of infringement or unfair competition. These clearly shows that the agent i.e. SPA was not merely acting as sales/commission agent and the services that it was rendering qualifies to be called as technical services and thus liable for deduction of TDS as per the provision of the I.T. Act." The Ld. DR further submitted that the Ld. CIT(A) has arrived at erroneously recorded that the AO has not examined the presence of business connection of SPA in India which accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not as fee for technical services. However in assessment year 2014-15 under consideration the Ld. AR has raised an objection to this contention of the Ld. AR. We have perused the order passed by the Hon'ble coordinate bench of the ITAT for earlier assessment years. The relevant extract of the Hon'ble ITAT's order is reproduced below:- ITA No. 2575/Del/2016 Assessment Year 2010-11 "5.2 As regards ground no. 2 relating to disallowance of Rs. 88,91,816/- is concerned, after perusing the duties and obligations as mentioned at page no. 44 to 46 of the impugned order, we find that the agent is not providing any technical services to the assessee. The agent is acting only commission agent and procuring the orders for the assessee and to inform the assessee for any infringement of rights. Even if the same is considered as business income of the commission agent same is not taxable in India as the foreign entity does not have any PE or BC in India. The commission is being entertained in the foreign company in the foreign country. No part of its income accrue or arise in India. Nor it is making available any technical knowledge, experience, skill, knowhow etc. to the assessee. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order, assessee appealed before the Ld. CIT[A), who vide his impugned order dated 04.2.2016 has allowed the appeal of the assessee. Aggrieved with the impugned order, Revenue is in appeal before the Tribunal." Findings: "5.2 As regards ground no. 2 relating to disallowance of Rs. 88,91,816/- is concerned, after perusing the duties and obligations as mentioned at page no. 44 to 46 of the impugned order, we find that the agent is not providing any technical services to the assessee. The agent is acting only commission agent and procuring the orders for the assessee and to inform the assessee for any infringement of rights. Even if the same is considered as business income of the commission agent same is not taxable in India as the foreign entity does not have any PE or BC in India. The commission is being entertained in the foreign company in the foreign country. No part of its income accrue or arise in India. Nor it is making available any technical knowledge, experience, skill, knowhow etc. to the assessee. Hence, Ld. CIT(A) has rightly held that the case of the assessee is identical to the decision of the Hon'ble Delhi High Court in the case of DIT vs. Guy Carpente ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
