Foods And Inns Limited Vs DCIT (ITAT Mumbai)
ITAT Mumbai Deletes Rs.4.52 Cr 40(a)(ia) Disallowance – No TDS Required on Foreign Agent Commission Overseas Storage Charges -Sec.195 TDS Not Attracted
ITAT Mumbai allowed the assessee’s appeal & deleted disallowance of Rs.4.52 crore made u/s 40(a)(ia) on account of non-deduction of TDS on commission paid to foreign agents & warehousing charges abroad
Assessee, engaged in manufacture & export of fruit pulps & concentrates, had paid Rs.25.84 lakh as commission to overseas agents in UK, Australia, Netherlands, France, UAE, Hong Kong & Germany, and Rs.3.19 crore as warehousing charges in Europe. AO held that though services were rendered outside India, they were “utilised” in India & hence taxable u/s 9(1). Since no TDS was deducted u/s 195, expenditure was disallowed u/s 40(a)(ia). CIT(A) affirmed the disallowance holding that commission & warehousing partook character of consultancy or managerial services taxable as FTS.
ITAT disagreed, holding that commission to foreign agents is business income accruing outside India, taxable only if the non-resident had a PE or business connection in India, which was absent. The agents merely canvassed orders abroad & did not render managerial, consultancy or technical services. Similarly, warehousing charges represented mere storage facilities abroad & not FTS. Business income & FTS are distinct statutory categories, and the payments clearly fell under business income abroad.
