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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Waseem Ahmed & Shri Soundararajan K.
Appellant by: ------- None ------ Respondent by: Smt. Girly Albert, Sr. D.R. Date of Hearing: 23.09.2024 Date of Pronouncement: .09.2024 O R D E R Per Bench These appeals filed by the assessee are directed against separate orders of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 31.01.2023 & 01.02.2023 for Assessment Years (AY)2010-11& 2013-14 respectively.
AY 2010-11 2. The only issue raised by the assessee in these appeals is that the learned CIT(A) erred in confirming the addition made by the Assessing Officer (AO) of Rs. 4,26,849/- and Rs. 7,24,265/- respectively representing the commission paid to the foreign agent on account of non-deduction of TDS u/s. 195 r.w.s. 40(a)(i) of the Income Tax Act, 1961 (the Act) for the AYs2010-11 and 2013-14. Therefore, the AO disallowed the same by adding to the total income of the assessee. Aggrieved, 232/Coch/2023 Safa Enterprises assessee preferred appeal to the learned CIT(A) who has confirmed the order of the AO by observing as under: “4.2.2 It is an undisputed fact that the appellant failed to deduct the TDS on the payment against the services of M/s. Grecal Ltd. In his submission, the appellant relied on Circular No. 786, dated February 7, 2000. It is critical to remind the appellant that the aforementioned circular was withdrawn on October 23, 2009, and since the appellant had already made the payment amounting to Rs. 8,08,886/- to M/s Grecal Ltd., the A.O. has only made the addition of Rs. 4,26,849/- as that was paid after the withdrawal of the circular. Also, it is important to mention the AAR decision of M/s SKF Boiler and Drivers Pvt. Ltd. dated February 22, 2012. In the decision, it is clearly held that although the agents have services abroad and have provided the orders abroad, the right to receive commission arises in India, and hence commission is deemed to accrue or arise in India, and that will be taxed u/s 5(2)(b) rws 9(1)(i) of the Act, and hence section 195 would also apply. In view of the above, the addition done by the A.O. u/s 40(i)(a) is upheld and the appeal is dismissed.”
Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us.The learned Sr. DR vehemently supported the orders of the authorities below.
We have heard the learned Sr. DR appearing on behalf of the Revenue and perused the materials available on record. The assessing officer has disallowed the commission paid to foreign agents by holding that the income arising on account of commission paid to overseas agents was deemed to accrue or arise in India and was accordingly taxable under the provision of section 5(2)(b) r.w.s. 9(1)(i) of the Act but the assessee has failed to make the compliances with the provisions of section 195(2) of the Act. In this case, the non-residents agents have rendered their services outside India in connection with procurement of sale. All the agents have overseas offices, and they were not having any permanent establishment in India. At the time hearing learned DR has not brought any material on record suggesting that the non-resident agents are having any permanent establishment in India or services were provided within India. In absence of such finding it is held that the commission income earned by the foreign agent cannot be 232/Coch/2023 Safa Enterprises deemed to be accrue or arise in India. Regarding the applicability of section 195 of the Act, we observe that once the income is not taxable, there is no liability of deduction of tax on the part of the assessee, therefore, it was not applicable for the assessee to deduct tax. Therefore, there was no violation of the provision of section 195 of the Act. Accordingly, this ground of appeal
of the assessee is allowed.
5. In the result, both the appeals filed by the assessee are allowed.