Case Law Details
Pr. CIT Vs Komal Amin Exports Pvt Ltd (Gujarat High Court)
Conclusion: When the commission paid to the non-resident agents was neither received or deemed to be received in India nor accrued or was deemed to accrue in India, no income was chargeable to tax under the provisions of the Act. When the payment made by assessee to the overseas agent for services rendered abroad was not income chargeable to tax in India, there was no obligation cast upon assessee to deduct tax at source under section 195 and consequently, the provisions of section 40(a)(ia) would not be attracted.
Held: AO observed that the income generated to the overseas commission agents from the receipts of commission income paid by assessee company were clearly income accruing or arising in India for which the source of income was in India. He, accordingly, held that income arising on account of commission payable to overseas agent was deemed to accrue or arise in India and, accordingly, should be taxable under the provisions of section 5(2)(b) read with section 9(1)(i). He also observed that as per the provisions of section 195(2), no tax had been deducted at source upon such commission payment to the foreign agents and, therefore, the same was liable to be disallowed under section 40(a)(ia). It was held nonresident overseas agents had offered services to procure export sales order. All these services were rendered abroad, only the payment was made by assessee from India. Insofar as the nonresident overseas agent was concerned, the source of income was the transaction whereby services were offered by them to the assessee by procuring export sales orders abroad. The overseas agents did not have any permanent establishment or any business connection in India nor was the source of income through, by means of, in consequence of or by reason of any source of income in India. Ao was trying to confuse two aspects equating the source of payment with the source of income. Thus, the source of income was the services rendered by the overseas agent abroad and not the payment made by assessee, and hence, it could not be said that any income accrues of arises to the overseas agent India as contemplated in section 9. When the commission paid to the non-resident agents was neither received or deemed to be received in India nor accrued or was deemed to accrue in India, no income was chargeable to tax under the provisions of the Act. When the payment made by assessee to the overseas agent for services rendered abroad was not income chargeable to tax in India, there was no obligation cast upon assessee to deduct tax at source under section 195 and consequently, the provisions of section 40(a)(ia) would not be attracted.
FULL TEXT OF THE HIGH COURT ORDER / JUDGMENT
1. Both these appeals under section 260A of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) arise out of a common order dated 12.7.2018 passed by the Income Tax Appellate Tribunal, Ahmedabad ‘D’ Bench, Ahmedabad (hereinafter referred to as the “Tribunal”) in ITA No.274/Ahd/2015 and 3417/Ahd/2015 respectively, and hence, the same were taken up for hearing together and are decided by this common order.
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