Case Law Details
Export commission earned by foreign commission agent is not taxable India. Further it is not in the nature of Fees for Technical Services
Agreement between the assessee and the Non Resident is only for rendering services which cannot be considered as technical services and as there is no PE to the said non resident in India, the amount does not accrue or arise in India and further as there is no need for deducting the amount under section 195, there is no violation of provisions of section 195 and accordingly the same cannot be disallowed under section 40(a)(ia).
Since similar issues are also discussed in various cases relied upon by the learned Counsel, we do not consider it necessary to extract the same, but the principles laid down in all the cases is that if the fee payable is on source of income outside India, the same is not taxable in India. Therefore, we are of the opinion that both the Assessing Officer and the CIT (A) ignored the facts that services were rendered outside India and wrongly considered that the services are managerial services partly. Since there is no evidence that the non-resident has rendered any managerial services to assessee and the agreement indicates only services simplicitor for agency on commission basis, the findings of AO and CIT(A) are to be rejected. Assessee placed reliance on the CBDT circular 786 dated 7 February 2000 wherein the CBDT has considered and clarified that where the non-resident agent operates outside the country, no part of his income arises in India. Also, since the payment is usually remitted directly abroad it cannot be held to have been received by or on behalf of the agent in India. Such payments are therefore held to be not taxable in India. Accordingly as per the said circular, no tax is therefore deductible under section 195 of the Act on export commission and other related charges payable to non-resident for services rendered outside India. Even though the said Circular 786 has been withdrawn by Circular 7 of 2009 dated 22nd October, 2009 w.e.f. 22nd October, 2009, the Circular 786 would continue to be applicable during AY 2007-08, i.e. the period under appeal as held by the jurisdictional Bombay High Court in the case of UTI v Income Tax Officer (249 ITR 612) that the withdrawal of a circular can only operate prospectively. Accordingly, assessee’s contentions are allowed. The ground is allowed.
Income Tax Appellate Tribunal, Mumbai
ITA No. 8822/Mum/2010 – (Assessment Year: 2007-08)
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DEAR SIR,
I AM AN EXPORTER OF KIDS READYMADE GARMENTS AND EXPORTING TO DIFFERENT COUNTRIES THROUGH MY NON-RESIDENT COMMISSION AGENT.
WE ARE PAYING THEIR COMMISSION @ 3 % ON TOTAL SALE FIGURE WHICH ARE MENTIONED ON SDF FORM AND CUSTOM COPY.
COMMISSION FIGURE FULLY PAID TO THE NON RESIDENT OUTSIDE OF INDIA IN THE YEAR 2009-2010. SO IS THERE ANY TDS DEDUCTION ON THE COMMISSION AMOUNT ?
PLEASE GUIDE ME IN THIS MATTER.