AL Hamd Agro Food Products Pvt. Ltd Vs DCIT/ACIT (ITAT Agra)
No TDS on Foreign Commission for Export Orders; Disallowance u/s 40(a)(i) of ₹1.85 Crore Deleted – ITAT Agra
The Agra Bench of the ITAT allowed the assessee-company’s appeal and deleted the disallowance of ₹1.85 crore made under section 40(a)(i) for non-deduction of TDS on commission paid to foreign agents for AY 2020-21.
The assessee, a large exporter of meat, had paid commission to B & G Export Corporation PTY Ltd. and Red Coral Business Consultants for procuring export orders outside India. The Assessing Officer disallowed the expenditure on the ground that tax was not deducted under section 195. The CIT(A) confirmed the disallowance.
The Tribunal held that:
- The services were rendered entirely outside India,
- The foreign agents had no Permanent Establishment in India, and
- The commission income was not chargeable to tax in India.
Relying on the Supreme Court decision in Transmission Corporation of A.P. Ltd. and the Delhi High Court ruling in CIT v. Herbalife International India Pvt. Ltd., the Tribunal reiterated that TDS under section 195 arises only when the payment is chargeable to tax in India. It further noted that under DTAA and Article 24 (non-discrimination), such commission payments cannot be disallowed when similar payments to residents are allowable.
Since the commission was taxable only outside India and not chargeable in India, the assessee was under no obligation to deduct TDS, and consequently, section 40(a)(i) had no application.
Accordingly, the ITAT deleted the entire disallowance of ₹1.85 crore and allowed the appeal in full
FULL TEXT OF THE ORDER OF ITAT AGRA
