Manisha Kiran Temkar Vs ACIT (ITAT Mumbai)
No TDS Required on Commission, Inspection & Software Payments to Foreign Parties – Entire Addition Deleted
Mumbai ITAT has delivered an important ruling in favour of a merchant exporter, holding that payments made to foreign entities towards commission, inspection charges & software subscription are not taxable in India, & therefore Assessee was under no obligation to deduct tax at source u/s 195. Consequently, the disallowance of nearly ₹1.85 crore made by the Assessing Officer u/s 40(a)(i) was directed to be deleted in its entirety. The decision was pronounced in the case of Manisha Kiran Temkar vs. ACIT (ITA Nos. 674 & 673/Mum/2025; order dated 18.08.2025).
Assessee , an individual proprietor, was engaged in international merchant trading of garments. Her business model involved sourcing garments from countries such as China, Hong Kong, Bangladesh & Vietnam & exporting them directly to customers in the United States. During scrutiny assessment, AO noted substantial foreign remittances made without deduction of tax at source, which included a commission of ₹1.35 crore paid to Imperial Impact Bangladesh Ltd., inspection & testing charges of ₹45.15 lakh paid to Bureau Veritas Hong Kong Ltd., & a subscription fee of ₹4.86 lakh paid to EC Vision Hong Kong Ltd. for software services. AO treated all these payments as falling within the ambit of royalty or fees for technical services u/s 9(1)(vi)/(vii), held that tax was deductible u/s 195 & consequently disallowed the expenditure u/s 40(a)(i). CIT(A) upheld this action.
