MADALBAL GOA EXPORTS PVT. LTD,MIRAMAR vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE -1(1), PANAJI

ORDER Per Anikesh Banerjee, JM:

The instant appeal was directed against the order of the learned Commissioner of Income Tax (Appeal) – 2, Panaji {in brevity CIT(A)} bearing IT No-437/CIT(A)-2/PNJ/2017–18, order dated 21.06.2018, passed under section 250(6) of the Income Tax Act, 1961 (in brevity the Act) for assessment year 2007– 08. Instant appeal was generated from the order of the learned Assistant

Madalbal Goa Exports Pvt. Ltd. v. Asstt. CIT Commissioner of Income Tax, Circle 1(1), Panaji order passed under section 143(3) r.w.s. 147 of the Act, date of order 26/02/2013.

Madalbal Goa Exports Pvt. Ltd. v. Asstt. CIT clear. Accordingly, the revenue authorities offered the addition of commission amount to rupees 982962/– for violation of section 40(a)(ia) read with Section 195 of the Act. Aggrieved assessee filed an appeal before us for further adjudication after rejection of the appeal by the CIT(A).

Madalbal Goa Exports Pvt. Ltd. v. Asstt. CIT 5. We heard rival submissions and relied on the documents available in the record. The section 40(a)(ia)will be applicable if the liability is raised in India for deduction of tax under section 195. Moreover, where a non-resident has no permanent establishment in India, there can be no liability either under domestic law or under Double Taxation Avoidance Agreement (in brevity DTAA). In any case, even if a non-resident Indian did have a permanent establishment, but income was on without availing of such permanent establishment, the income for services rendered abroad could not have been liable for tax deduction at source. Income by way of fees or technical services payable by a person, who is resident, is taxable income except where the fees are payable in respect of services utilized in a business or profession carried on by such person outside India or for the purpose of making or earning any income from any source outside India u/s 9(1)(vii)(b) of the Act. In view of explanation (2) to section 9(1)(i), technical services mean any consideration, including lump-sum consideration, for rendering of any managerial, technical or consultancy services, including the provision of services of technical or other personal, but does not include consideration for any commission related to sale. Related commission there is no managerial, technical or consultancy service.

In GE India technology Centre Private Limited Supreme Court clearly held that no tax is deductible under section 195 of the Act on commission payments and consequently the expenditure on export commission payable to non-resident for Madalbal Goa Exports Pvt. Ltd. v. Asstt. CIT services rendered outside India becomes a liable expenditure. So, this particular commission paid to foreign party is not attributable to tax in India and no deduction is required under section 195. Accordingly, the expenses dis-allowed under section 40(a)(ia)of the Act is liable to be quashed.