Commission paid to non-residents for services rendered abroad is not taxable in India

Income deemed to accrue or arise in India– Under section 9(1)(i)– Commission paid to non-residents for services rendered abroad

Facts:

Assessee-bank launched foreign currency denominated Resurgent India Bonds Scheme (RIBS) and made payment towards law charges, advertisement and commission to non-residents. AO disallowed said payments under section 40(a)(i) for assessee not having deducted tax at source.

Held:

Discussion in assessment order clearly pointed out that expenditure in question had been incurred towards services in connection with the issue of RIBS and payments were in the nature of commission paid to non-residents for services of mobilizing deposits, etc. showing that services had been rendered abroad. It was also not the case of AO that any of the non-residents ad any business operation in India. Therefore, commission earned by non-resident for services rendered abroad could not be construed as incomes accrued or arisen in India and accordingly disallowance made by AO by invoking section 40(a)(i) was set aside.