Ld.counsel for the assessee, submitted that the assessee engaged agents to market its product in foreign countries. According to the Ld. counsel, the agents market the product of the assessee in the foreign countries and the assessee is paying commission for their service. According to the Ld. counsel, the foreign agents have not rendered any service in India. Therefore, the payment made to foreign agents is not taxable in India, hence, the assessee is not liable to deduct tax under any of the provisions of Income-tax Act. The Ld.counsel placed his reliance on the judgment of the Madras High Court in CIT v. Faizan Shoes Pvt. Ltd. (2014) 367 ITR 155.
On the contrary, Dr. B. Nischal, the Ld. Departmental Representative, submitted that the assessee admittedly paid commission to foreign agents. According to the Ld. D.R., the assessee is depending upon the agents outside India in order to conduct its business. The service of the agents is required for managing the affairs of the assessee smoothly outside India. According to the Ld. D.R., the foreign agents are providing managerial services to market the product in foreign countries. Therefore, the commission paid by the assessee has to be construed as fee for technical services. Hence, the assessee is liable to deduct tax under the provisions of Income-tax Act. Therefore, the CIT(Appeals) has rightly confirmed the disallowance made by the Assessing Officer.
Admittedly, the assessee is engaged in manufacturing leather and leather garments. In order to market its product in foreign countries, the assessee engaged agents and paid commission to them. The question arises for consideration is whether the commission payment made by the assessee is in the nature of fee for technical services or not? This issue was considered by the Madras High Court in Faizan Shoes Pvt. Ltd. (supra). On identical set of facts, the Madras High Court found that the foreign agent is not providing any technical service for the purpose of running of the business of the assessee in India. Therefore, the commission paid to the agent is not a fee for technical service, hence, the assessee is not liable to deduct tax under Section 195 of the Act. In view of this judgment of Madras High Court, this Tribunal is of the considered opinion that the payment made by the assessee to the agents outside India cannot be construed as fee for technical service. Hence, the assessee is not liable to deduct tax. By following the judgment of Madras High Court in Faizan Shoes Pvt. Ltd. (supra) and for reasons stated therein, the orders of the lower authorities are set aside and the addition of ~29,56,419/- is deleted.