Case Law Details
ACIT Vs Groz Engineering Tools Pvt. Ltd. (ITAT Delhi)
Non-residents have rendered the services outside India and have been paid in foreign currency. Therefore, no income accrues or arises in India. These nonresidents do not have any PE or business connection in India which is not doubted by the AO. Further, the Assessing Officer has not made any efforts to establish any ‘business connection’ for invoking section 9(1)(i) of the Act. Thus, in the absence of same, the AO is wrong in invoking the provisions of section 9(1)(i) and accordingly export commission paid by the assesse is not chargeable to tax in India.
Regarding taxability under section 9(1)(vii)(b) read with Explanation-2 the AO in Pg. 7 Para 4.7 has alleged that the payments made by the assessee are in the nature of ‘Fees for Technical services’ for consultancy, Technical and Managerial Services provided by these agents and hence chargeable to tax in India in terms of section 9(1)(vii)(b) read with Explanation 2 of the Income Tax Act. In this regard it is pertinent to note that these non- resident agents have provided services of securing the orders in overseas market for the assessee company and are entitled to commission on the business procured by them as is evident from agreements placed in the Paper Book. Further, no managerial, technical & consultancy services undisputedly have been rendered by these non-residents agents to the assessee and accordingly, the AO cannot invoke Section 9(1)(vii)(b) of the Act there is no iota of evidence with the AO that these non-residents have rendered any technical services. Therefore, in view of the above, the commission payment made to them does not fall into the category of “fees of technical services” and therefore, explanation (2) to Section 9(1)(vii) of the Act, as invoked by the Assessing Officer, has no application to the facts of the assessee’s case.
FULL TEXT OF THE ORDER OF ITAT DELHI
ITA No.3894/Del/2017 is the appeal of the Department preferred against order dated 10.02.2017 passed by the Ld. Commissioner of Income Tax (Appeals)-39, New Delhi {CIT(A)} for Assessment Year 2011-12 whereas ITA No.3895/Del/2017 is the Department’s appeal against order dated 10.02.2017 passed by the Ld. Commissioner of Income Tax (Appeals)-39, New Delhi {CIT(A)} for Assessment Year 2013-14. Since, both the appeals involved identical issues, the same were heard together and are being disposed by this common order for the sake of convenience.
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