ACIT., CIRCLE-1, AGRA vs. M/S DAWAR FOODWEAR INDUSTRIES, , AGRA

The assessee paid commission to non-resident agents for export orders. No tax was deducted against the same on the ground that the payment was not for managerial and technical services. No part of services was rendered in India. None of the payee was stated to be having any permanent establishment in India. However, Ld. AO made disallowance u/s 40(a)(i) for Rs.288.47 Lacs. The assessee also paid sample design development expenses to foreign parties which was similarly disallowed for Rs.36.15 Lacs.

The Ld. CIT(A), inter-alia, relied on the decision of Hon’ble Delhi High Court in the case of EON Technology Pvt. Ltd. (343 ITR 366) as well as the decision of Hon’ble High Court of Madras in the case of Faizan Shoes Pvt. Ltd. (48 Taxmann.com 48) to hold that where foreign agents had no PE in India, no part of their services would be rendered in India and therefore, there would be no obligation to deduct TDS u/s 195. On the issue of sample charges, it was held that when the payment was made, the amendment made below Sec.9 by Finance Act, 2010 was not in statute and therefore, there was impossibility of performance as held by Agra bench of Tribunal in the case of Metro & Metro (39 Taxmann.com26).Accordingly, the impugned disallowances were deleted against which the revenue is in further appeal before us. 4. It could very well be seen that the adjudication of Ld. CIT(A) is based on binding judicial precedents. No contrary decision has been shown to us. This being the case, we confirm impugned order, on both the issues.