Where payments were made by Indian company on account of commission for procuring sales orders to non-resident from parties outside India, tax was not required to be deducted at source under section 195
[2018] 96 taxmann.com 222 (Delhi – Trib.)
IN THE ITAT DELHI BENCH ‘D’
Deputy Commissioner of Income-tax, Circle- 16(1), New Delhi
v.
Taj International (P.) Ltd.*
G.D. AGRAWAL, PRESIDENT
AND SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
IT APPEAL NO. 6140 (DELHI) OF 2014
[ASSESSMENT YEAR 2011-12]
JULY 20, 2018
Section 9, read with section 195, of the Income-tax Act, 1961 and article 7 of OECD Model Convention – Income – Deemed to accrue or arise in India (Business profits) – Assessment year 2011-12 – Assessee-company was engaged in business of manufacturing, trading and marketing of footwear – It paid commission to non-resident agents for procuring orders from parties situated outside India – There was no document on record to effect that non-resident rendered any technical, consultancy or management services – Whether TDS was not required to be deducted from said payment – Held, yes [Paras 4 to 5.4] [In favour of assessee]
FACTS
■ The assessee-company was engaged in the business of manufacturing, trading and marketing of footwear. It had been paying commission to non-resident agents who procured orders from parties situated outside India without deduction of tax at source. The assessee submitted that the commission paid by the assessee to the agents was attributable to the orders booked by them and was not related to any other service and, therefore, the provisions for deduction of tax at source were not attracted.
■ However, the Assessing Officer was of the opinion that in view of section 9(vii)(c), the amount being paid as commission was actually in the nature of fees for consultancy services and, therefore, the income of such parties accrued through a business connection in India. The Assessing Officer invoked section 40(a)(i) and disallowed said amount.
■ The Commissioner (Appeals) allowed the assessee’s appeal by accepting the averments of the assessee that the services provided by commission agents was not in the nature of consultancy services requiring deduction of tax at source.
■ On revenue’s appeal:
HELD
■ The different Benches of the Tribunal have been taking a consistent view in a series of cases that whenever payments are made on account of commission for procuring sales orders to non-resident, tax is not required to be deducted at source. [Para 5.1]
■ Since the Assessing Officer was unable to bring any cogent material on record to establish that the non-resident commission agents had rendered any technical, consultancy or managerial services, the view of the Commissioner (Appeals) who has given a categorical finding to this effect is to be accepted. The assessee had been making similar payments in earlier as well as subsequent assessment years which were accepted by the department in assessment orders framed under section 143(3) and no adverse inference had been drawn by the department in this regard. Accordingly, there is no reason to interfere with the findings of the Commissioner (Appeals).
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