Service of procuring export order for assessee cannot be termed as FTS

Rajinder Kumar Aggarwal (HUF) Vs DCIT (ITAT Delhi)

Facts- Assessee appointed M/s. ACE as its agent for procuring export orders in France. Assessee debited a sum of INR 1,16,99,172 as commission paid on export sales. However, no tax was deducted by the assessee on the said payment.

Conclusion- The assessee has made agreement with M/s. ACE every year, though scope of the services remained same. The Learned DR could not bring before us any evidence as regard to change of scope of services rendered by the said agent in the year under consideration as compared to earlier year.

For bringing the services under the net of Fee for Technical Services (FTS) under the India France DTAA, the ‘make available’ clause has to be satisfied. But in the services rendered by the non-resident of procuring export order for the assessee, no knowledge has been provided to the assessee which could be exploited further by the assessee. In such circumstances, the services rendered by the non-resident cannot be held as ‘FTS’ under the India-France DTAA. Accordingly, such services will not be chargeable in India in the hands of nonresident under DTAA and, therefore, no liability to deduct tax at source will arise. Consequently, payment to said non-resident is not liable to disallowance under section 40(a)(i) of the Act.

FULL TEXT OF THE ORDER OF ITAT DELHI

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