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Income Tax Appellate Tribunal, ‘D’ BENCH: CHENNAI
Before: SHRI A. MOHAN ALANKAMONY & SHRI DUVVURU R.L.REDDY
आदेश / O R D E R PER DUVVURU R.L.REDDY, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax(A)-5, Chennai, in dated 14.06.2017 for the AY 2012-13.
The assessee raised only one effective ground viz., Ld.CIT(A) has erred in confirming the disallowance of overseas export commission of Rs.13,99,203/- paid to non-residents u/s.40(a)(ia) of the Income Tax Act, 1961.
Brief facts of the case are that the assessee has filed its return of income for the AY 2012-13 declaring total income of Rs.54,11,910/-. The AO has completed the scrutiny assessment u/s.143(3) dated 27.02.2015 determining the total income of Rs.68,21,417/-. During the course of scrutiny assessment u/s.143(3) of the Act, from the P&L A/c, the AO noticed that the assessee has claimed overseas export commission payment for Rs.13,99,203/-. Since the assessee has not produced any agreement with foreign buyers, the AO was of the opinion that the payment was made only for the purpose of sale of the goods outside India, by means of engaging agents as per Sec.917 of the Act any payment made for the purpose of managerial services outside India shall be considered only as the payment for fee for technical services. The AO concluded that the Explantion-4 to Sec.9(1)(i) and Explanation-2 to Sec.195(1) introduced by the Finance Act, 2012 with retrospective effect from 01.04.1962, which is clearly applies to the present case and held that the commission payment of Rs.13,99,203/- attracts provisions of TDS u/s.195 of the Act.
The assessee carried the matter in appeal before the Ld.CIT(A) and challenged the disallowance of export commission paid to the non- resident. After considering the submissions of the assessee, the Ld.CIT(A) has confirmed the addition made by the AO.
On being aggrieved, the assessee is in appeal before the Tribunal and the Ld.Counsel for the assessee has submitted that this case is clearly covered in favour of the assessee by the decision in the case of M/s.Faizan Shoes (P) Ltd., reported in 367 ITR 155 (Mad) and prayed that the same should be followed. On the other hand, the Ld.DR has supported the order of the authorities below.
We have heard both the sides and gone through the materials placed on record.
With regard to this issue, as to whether the TDS has to be deducted or not when the commission payment made to the overseas agencies, we find that the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Faizan Shoes (P) Ltd., wherein, it was held that where the assessee simply paid commission simplicitor to non-resident agent outside India for procuring export orders from overseas buyers and the non-resident agents did not provide any technical services for the purpose of running business of assessee in India, the assessee was not liable to deduct tax at source on such commission paid. Therefore, the commission paid to the non- resident agent would not fall within the definition of fee for technical services and the assessee was not liable for TDS on payment of commission.
By respectfully following the above judgment of the Hon’ble Jurisdictional High Court, the disallowance made towards overseas export commission of Rs.13,99,203/- u/s.40(a)(ia) of the Act is deleted. Thus, the ground raised by the assessee is allowed.
In the result, the appeal filed by the assessee is allowed.
Order pronounced on the 18th day of September, 2018 in Chennai.