ACIT, NEW DELHI vs. M/S. RAJINDER KUMAR AGGARWAL (HUF), NEW DELHI
In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the commission paid to a foreign agent for procuring export orders outside India is business income and not Fee for Technical Services. Therefore, it is not liable for TDS under Section 195, and consequently, the disallowance under Section 40(a)(i) is not sustainable.
What were the facts?
The assessee, an HUF, paid commission to a non-resident agent in France for procuring export orders. The Assessing Officer treated this commission as Fee for Technical Services (FTS) and disallowed it for non-deduction of TDS. The CIT(A) deleted the addition, holding it as business income not liable for TDS.
What were the issues?
Whether commission paid to a foreign agent for procuring export orders constitutes Fee for Technical Services and is subject to TDS? Whether such disallowance under Section 40(a)(i) is justified if no TDS was deducted?
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
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- DIT v. Panalfa Autoelektrik Ltd.29 citing378 ITR 205 · 2014 · HC
Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI N. K. BILLAIYA & MS SUCHITRA KAMBLE
PER SUCHITRA KAMBLE, JM
This appeal is filed by the Revenue against the order dated 27/03/2015 passed by CIT(A)-XVIII, New Delhi for Assessment Year 2010-11.
The grounds of appeal
are as under:- “The CIT(A) has erred in deleting the addition of Rs.88,15,790/- by not treating the commission paid on export sales as fee for technical services u/s 9. (1)(vii).”
The assessee is a Hindu Undivided Family (‘HUF’) and is engaged in the business of export of leather footwear mainly in France under the name and style of M/s. Regency Impex. The assessee appointed M/s Ace Trading Company, France (ACE Trading), a non-resident of India as its agent in France for assistance in procuring export orders for the assessee in France. For such services to be provided by ACE Trading to the assessee, vide Agreement dated 01.4.2009, the assessee agreed to give 8% commission FOB Mumbai on sales to parties introduced by ACE in France for the period 01.4.2009 to 31.3.2010. In terms of the said Agreement, the assessee paid commission of Rs.88,15,790/- for the export to parties introduced by ACE Trading in FY 2009-10 by submitting following documents which were produced before the Assessing Officer during the Assessment Proceedings: � Ledger account of Commission paid on Export Sales � Ledger account of M/s ACE Trading Co � Sample invoices issued by M/s ACE Trading Company and corresponding shipping bills
The commission was paid to ACE Trading, a non-resident agent (payee) who is a tax resident of France. The payee was simply assisting in procuring export orders for the Assessee in his ordinary course of business in France. The commission was paid for activities of the payee outside India and the amount is received by the payee outside India through normal banking channels. Section 5(2) states that total income of a person, who is a non- resident, includes income from all sources which (a) is received or deemed to be received in India; (b) accrues or arises in India; or (c) is deemed to accrue or arise in India. In the present case, the commission income paid to the foreign agent neither accrued in India nor deemed to be accrued in India as per deeming provisions of section 9 and nor the same was received nor deemed to be received in India. The Assessing Officer disallowed the said commission paid to ACE Trading on the ground that the services of ACE in relation to procurement of export orders are in the nature of Fee for Technical Services (FTS) both under the provisions of the Act and DTAA with France. Accordingly, it was held that the said amount of commission of Rs.88,15,790/- is liable to TDS u/s 195 and disallowed the same by invoking provisions of section 40(a)(i) as no TDS was deducted thereon.
Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) after considering the submissions of the assessee supported by documents filed and settled legal position based on judicial precedents, held that the said commission paid to foreign agent for procurement of export orders is in the nature of business income of the foreign agent and not FTS, thus not liable to TDS and deleted the addition, thereby allowing the appeal of the assessee.
The Ld. DR submitted that the CIT(A) has not at all given any independent finding of its own but reproduce the contentions raised during the appellate proceedings by the assessee. The CIT(A) should have at least given the distinguishing factors for the observations of Assessing Officer in the assessment order of CIT(A). Thus, the Ld. DR submitted that on this ground itself, the order of the CIT(A) will not sustain.
The Ld. AR submitted that the CIT(A) has rightly accepted the contentions of the assessee as the issue is squarely covered in favour of the assessee by various decisions of the Jurisdictional High Court as well as Tribunal. Therefore, the Ld. AR relied upon the order of the CIT(A).
We have heard both the parties and perused the material available on record. The issues involved in this appeal relates to applicability of TDS u/s 195 on payments abroad of export commission to non-resident the foreign agent for the procurement of export orders for the assessee and consequently disallowance u/s 40(a)(i) of the Income Tax Act, 1961. As pointed out by the Ld. AR the issue is covered in favour of the assessee in case of DIT Vs. Panalfa Autoelektrik Ltd. 378 ITR 205 wherein it is held that commission paid by the assessee to its foreign agent for arranging of export sales and recovery of payments could not be regarded as Fee for Technical Services u/s 9(1)(vii). In the present case, the commission was paid to ACE Trading, a non-resident agent (payee) who is a tax resident of France. The payee was simply assisting in procuring export orders for the Assessee in his ordinary course of business in France. The commission was paid for activities of the payee outside India and the amount is received by the payee outside India through normal banking channels. Section 5(2) states that total income of a person, who is a non- resident, includes income from all sources which (a) is received or deemed to be received in India; (b) accrues or arises in India; or (c) is deemed to accrue or arise in India. In the present case, the commission income paid to the foreign agent neither accrued in India nor deemed to be accrued in India as per deeming provisions of section 9 and nor the same was received nor deemed to be received in India. Thus, there is no need to interfere with the findings of the CIT(A). The Appeal of the Revenue is dismissed.
In result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 27th March, 2019. Sd/- Sd/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 27 /03/2019 R. Naheed * Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT
ASSISTANT REGISTRAR ITAT NEW DELHI
Date of dictation 27.02.2019 Date on which the typed draft is placed before the 27.02.2019 dictating Member
Date on which the typed draft is placed before the Other Member
Date on which the approved draft comes to the Sr. PS/PS
Date on which the fair order is placed before the Dictating Member for pronouncement
Date on which the fair order comes back to the Sr. 27 .03.2019 PS/PS Date on which the final order is uploaded on the 27 .03.2019 website of ITAT Date on which the file goes to the Bench Clerk 27 .03.2019 Date on which the file goes to the Head Clerk
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