Case Law Details
Sunbeam Lightweighting Solutions Pvt. Ltd. Vs ACIT (ITAT Delhi)
ITAT Delhi held that foreign commission paid by the assessee to its foreign agent for arranging of export sales and recovery of payment could not regarded as fees for technical services under section 9(1)(vii) of the Act. Accordingly, disallowance of expenditure u/s. 40(a)(i) unjustified.
Facts- The assessee is engaged in the business of manufacturing of automotive die cast components, I.C. Engine parts and pistons for two wheelers and four wheelers since inception. During the relevant years the assessee had debited in P & L account certain amounts on account of foreign commission although the assessee has treated the aforesaid payments as foreign commission / export commission. However, AO found that services rendered by these parties are not merely for the sale of products of the assessee company but for prospecting, marketing & providing comprehensive and integrated services. Thus, soliciting of business is only a part of it. As the aforesaid would fall within the purview of section 9(l)(vii). “fee for technical services which would be liable to be taxable in India as income deemed to have accrued/arisen in India. Accordingly AO had made the disallowance considering services to be a FTS and that assessee was liable to deduct tax u/s 195 which it has failed to do so therefore, disallowance u/s 40(a)(i) of the Act was made.
CIT(A) sustained the addition. Being aggrieved, the present appeal is filed.
Conclusion- Mumbai Tribunal in the case of IHI Corporation vs. Addl. DIT (Int. taxation) that the provision of the Act or of the DTAA whichever is more beneficial shall apply and therefore, the income from offshore services though chargeable under section 9(1)(vii) but exempt under the DTAA cannot be charged to tax in the light of section 90(2) of the Act.
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