P.MURALI,CHENNAI vs. DCIT, CHENNAI
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the commission paid to non-resident agents for procuring export orders was not 'fees for technical services' and thus, TDS was not required to be deducted. Consequently, the disallowance was deleted.
What were the facts?
The assessee, engaged in leather tannery and exports, paid foreign agency commission. The Assessing Officer disallowed this payment under Section 40(a)(i) r.w.s. 195 for non-deduction of TDS.
What were the issues?
Whether foreign agency commission paid to non-residents is considered 'fees for technical services' requiring TDS deduction under Section 195.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(1)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- CIT v. Faizan Shoes (P.) Ltd.139 citing367 ITR 155 · 2014 · HC
Before: Shri A. Mohan Alankamony & Shri Duvvuru RL Reddy
O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 10, Chennai, dated 10.09.2015 relevant to the assessment year 2011-12. The only effective ground raised in the appeal of the assessee is that the ld. CIT(A) has erred in confirming the disallowance of foreign agency commission payments under section 40(a)(i) r.w.s. 195 of the Income Tax Act, 1961 [“Act” in short].
Brief facts of the case are that the assessee is engaged in the business of leather tannery and exports and filed its return of income on 30.09.2011 admitting total income of ₹.63,25,660/-. The return filed by the assessee was processed under section 143(1) of the Act and the case was selected for scrutiny and notice under section 143(2) and 142(1) of the Act were issued on the assessee. Assessment under section 143(3) of the Act was completed by assessing total income of the assessee at ₹. 89,30,235/- after making various disallowances.
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 Assessing Officer.
On being aggrieved, the assessee is in appeal before the Tribunal and the ld. Counsel for the assessee has submitted that the issue is squarely covered in favour of the assessee by the decision in the case of Faizon Shoes Pvt. Ltd. 367 ITR 155 (Mad) and prayed that the same should be followed.
On the other hand, the ld. DR has supported the orders of authorities below.
We have heard both sides, perused the materials available on record and gone through the orders of authorities below. With regard to the issue as to whether the TDS has to be deducted or not when the commission payment made to the overseas agents, 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 v. Faizan Shoes Pvt. Ltd. [2014] 367 ITR 155, wherein by dismissing the appeal of the Revenue, the Hon’ble High Court has held as under: “Held, dismissing the appeal, that on a reading of section 9(1)(vii), commission paid by the assessee to the non-resident agents would not come under the term "fees for technical services". For procuring orders for leather business from overseas buyers, wholesalers or retailers, as the case may be, the non-resident agent was paid 2.5 per cent commission on free on board basis. This was a commission simpliciter. What was the nature of technical service that the non-resident agents had provided abroad to the assessee was not clear from the order of the Assessing Officer. The Opening of letters of credit for the purpose of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non-resident agent did not provide technical services for the purposes of running of the business of the assessee in India. Therefore, the commission paid to the non-resident agents would not fall within the definition of 'Tees for technical services" and the assessee was not liable to deduct tax at source on payment of commission.”
6.1 By respectfully following the above judgement of the Hon’ble Jurisdictional High Court in the case of CIT v. Faizan Shoes Pvt. Ltd. (supra), the disallowance made by the Assessing Officer towards export commission paid to non-residents under section 40(a)(i) of the Act is deleted.
In the result, the appeal filed by the assessee is allowed. Order pronounced on the 23rd June, 2017 at Chennai.
More judgments on Section 40(a)(i)
- M/S American Express Bank Ltd., Mumbai vs The Jt DIT (It)1(1), MumbaiITA 9414/MUM/2004[2000-2001]Status: Disposed8 Oct 2026AY 2000-2001
- DDIT(It)- 1(1), Mumbai vs M/S. American Express Bank Ltd., MumbaiITA 5667/MUM/2004[2000-01]Status: Disposed8 Oct 2026AY 2000-01
- Eurofins Peenya Resources Private Limited… vs Deputy Commissioner of Income Tax…ITA 1116/BANG/2023[2016-17]Status: Disposed28 Sept 2026AY 2016-17
- Azure Green Tech Private Limited, Delhi vs Deputy Commissioner of Income Tax, Circle…ITA 6199/DEL/2026[2021-22]Status: Disposed21 Sept 2026AY 2021-22
- Azure Green Tech Private Limited, Delhi vs Deputy Commissioner of Income Tax, Circle…ITA 6198/DEL/2026[2020-21]Status: Disposed21 Sept 2026AY 2020-21
Recent GST High Court judgments
Search GST case law →- Permender Singh vs. Union Of INDIA And Ors.Calcutta · 14 Oct 2026
- M/S Abdhish Dhal Samanta, Bhubaneswar vs. Chief Commissioner, CT And GST, Odisha, CuttackOrissa · 14 Oct 2026
- Kniit Net Industries Private Limited, Khurda vs. Superintendent Of CGST And Central Excise, Bhubaneswar Ii CircleOrissa · 14 Oct 2026
- M/S Maa Swarnapai Chemicals (Opc) Private Limited, Cuttack vs. Sales Tax Officer, Cuttack IOrissa · 14 Oct 2026
- M/S. Middlex, Puri vs. Commnr. Of State Tax, Banijyakar Bhawan, CuttackOrissa · 14 Oct 2026