Case Law Details
In the case by by export agreement, the assessee has not been transferred or permitted to use any patent, invention, model, design or secret formula. Similarly, HMCL, by way of export agreement, has not rendered any managerial, technical or consultancy services . In view of the above, we hold that export commission was neither royalty nor fee for technical services and, therefore, the assessee was not required to deduct tax at source on the payment of export fee. Once the assessee was not required to deduct the tax at source, it cannot be said that the assessee failed to deduct tax at source so as to apply Section 40(a)(ia). Court concludes that the payment of export commission by the Assessee to HMCL was not in the nature of payment of royalty or fee for technical services attracting disallowance under Section 40 (a) (i) of the Act.
Full Text of the High Court Judgment / Order is as follows:-
1. This is an appeal by the Revenue under Section 260A of the Income Tax Act, 1961 („Act‟) directed against the order dated 23rd November, 2012 passed by the Income Tax Appellate Tribunal (‘ITAT’) in ITA No. 5130/Del/2010 for the Assessment Year (‘AY’) 2006-07.
2. By its order dated 14th January, 2016, the Court issued notice confined to the following question (which incidentally was the fourth of the five questions urged by the Revenue):
“Whether on the facts and circumstances, the ITAT was correct in law in holding that by export of specified models to specified countries, the Assessee company had benefited and therefore by deleting addition of Rs. 12.19 crores made by AO on account of export commission without appreciating the fact that the Assessee has to export motorcycles to underdeveloped countries in very restrictive environment and on such terms and conditions which were detrimental to the Assessee and were for the benefit of the subsidiaries of the AE.”
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