Case Law Details
DCIT Vs Maan Aluminium Ltd. (ITAT Delhi)
The undisputed fact is that the assessee had paid commission to two non-residents on export orders procured by them. It is also undisputed that the non-resident agents did not have any permanent establishment or permanent place in India and the agents operated from outside India. It is also undisputed that the commission was paid for services provided to the assessee out of India which was remitted directly outside India and was not received by them or on their behalf by any third party. It is also a matter of record that the assessee has furnished Form 15CA in terms of Rule 37(BB) of the Income Tax Rules which is on record. It is a settled law that income of non-resident agents cannot be considered to accrue or arise or deemed to be received in India when the services rendered by the non-residents and the agents were outside India and the commission was also payable or paid to them outside India. It is also settled law that in absence of Permanent Establishment in India, there is no liability to withhold deduction of payment of commission to the foreign agents. Therefore, in view of the settled legal position as well as the fact that the assessee had duly discharged its duty in filing the required Form 15CA with respect to the foreign remittances, we find no reason to interfere with the findings of the Ld. CIT (A) and we dismiss the grounds raised by the department.
FULL TEXT OF THE ITAT JUDGMENT
This appeal has been preferred by the revenue against the order dated 10.06.2014 passed by the Ld. Commissioner of Income Tax (A)-IX, New Delhi, wherein vide the impugned order, the Ld. Commissioner of Income Tax (A) has deleted disallowance made by the AO u/s 40(a)(i) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) amounting to Rs. 34,63,534/- on account of commission paid to non-resident commission agents by the assessee.
2. Brief facts of the case are that the assessee company is engaged in the business of manufacturing of aluminium profiles, section and trading of aluminium ingot and billets. The return of income was filed declaring income of Rs. 2,96,86,077/- and the assessment was completed u/s 143(3) of the Act at an income of Rs. 34,63,634/- after making a disallowance u/s 40(a)(i) of the Act on the ground of non-deduction of withholding tax on payment of commission to two non-resident agents. A disallowance of Rs. 9,09,274/- under the provisions of section 14A of the Act was also made by the AO.
2.1 On appeal by the assessee before the Commissioner of Income Tax(A), the Ld. CIT(A) allowed both the grounds of the assessee and now the department is in appeal and has challenged the deletion of addition of Rs. 34,63,634/- u/s 40(a)(i) of the Act by raising the following grounds of appeal:-
“1. Whether on the facts and circumstances of the case & in law, the Ld. CIT(A) erred in deleting me disallowance of Rs.34,63,534/- on account of commission paid to non-resident commission agents by wrongly distinguished the decision of the Hon’ble Apex court in the case of Transmission Corporation of AP Limited Vs. CIT and also ignoring the fact that the commission paid to the non-resident agents which accrue or arise in India liable for deduction of withholding tax from such payment to non-residents?
2. That the order of the Ld. CIT (A) is erroneous and is not tenable on facts and in law.
3. That the grounds of appeal are without prejudice to each other.
4. That the appellant craves leave to add, alter, amend or forego any ground(s) of the appeal raised above at the time of the hearing.”
3. The Ld. Departmental Representative read out extensively from the assessment order and submitted that the assessee had paid commission of Rs. 34,63,634/- to M/s Alpine Enterprise LLC and Shri Bipin Parmar in foreign currency for receipt of export She underlined the fact that the Assessing Officer had specifically mentioned that no information regarding the residential status and other particulars and transaction details with the two parties was submitted before the Assessing Officer. The Ld. Departmental Representative also submitted that the Ld. CIT (A) had erred in deleting the disallowance by ignoring the fact that the said commission had accrued/arisen in India and, therefore, was liable for deduction of tax prior to the making of payment to the non-residents.
4. In response, the Ld. AR submitted that the assessee company was not liable to deduct any tax at source on the impugned commission in terms of provisions of section 195 of the Act as the foreign resident agents had provided services outside India and, therefore, as per section 9 of the Act, commission paid to them was not chargeable in India. It was submitted that the impugned payments were made for procuring export orders and the payments were made to non-residents in foreign currency and, further, since the non-residents did not have any business connection or permanent establishment in India, the income of the recipients cannot be deemed to have accrued or arisen in India. It was submitted that M/s Alpine Enterprises was a resident of Dubai whereas Shri Bipin Parmar was a resident of UK. It was also submitted that the CBDT had prescribed Form 15CA and 15CB as per Rule 37(BB) of the Income Tax Rules, 1962 in accordance with section 195(6) of the Act which is to be submitted by the remitter to its bank for making remittance in foreign exchange. The Ld. AR submitted that the assessee had followed the procedure laid down under section 195(6) and furnished the required Form 15CA and 15CB to the bank. Our attention was drawn to a copy of the same dated 22.12.09 and placed on record. It was submitted that it was the assessee’s duty to submit the form to the bank and it was open to the Assessing Officer to make inquiry on the issue which was not so done during the course of assessment proceedings.
5. We have heard the rival submissions and perused the material available on record. The undisputed fact is that the assessee had paid commission to two non-residents on export orders procured by them. It is also undisputed that the non-resident agents did not have any permanent establishment or permanent place in India and the agents operated from outside India. It is also undisputed that the commission was paid for services provided to the assessee out of India which was remitted directly outside India and was not received by them or on their behalf by any third party. It is also a matter of record that the assessee has furnished Form 15CA in terms of Rule 37(BB) of the Income Tax Rules which is on record. It is a settled law that income of non-resident agents cannot be considered to accrue or arise or deemed to be received in India when the services rendered by the non-residents and the agents were outside India and the commission was also payable or paid to them outside India. It is also settled law that in absence of Permanent Establishment in India, there is no liability to withhold deduction of payment of commission to the foreign agents. Therefore, in view of the settled legal position as well as the fact that the assessee had duly discharged its duty in filing the required Form 15CA with respect to the foreign remittances, we find no reason to interfere with the findings of the Ld. CIT (A) and we dismiss the grounds raised by the department.
6. In the result, the appeal of the department stands dismissed. Order pronounced in the Open Court on 10.01.2018.
