Case Law Details
DCIT (OSD) Vs Jay Chemical Industries Ltd. (ITAT Ahmedabad)
Conclusion: Commission paid to non-resident agent was not liable to tax under the provisions of act when the services were rendered outside India, payments were made outside India and there was no permanent establishment or business connection in India, therefore, assessee was not required to deduct TDS u/s 195(2).
Held: Assessee had claimed commission payment to various non-residents on export sales made during the year under consideration. AO had disallowed the commission paid to foreign agents by holding that the income arising on account of commission paid to overseas agents was deemed to accrue or arise in India and was accordingly taxable under the provision of section 5(2)(b) r.w.s. 9(1)(i) and assessee had failed to make compliance with the provisions of section 195(2). In the present case case, non-residents agents had rendered their services outside India. All the agents had overseas offices and they were not having any permanent establishment in India. As per explanation below section 9(2) state that income of non-resident shall be deemed to accrue or arise in India under clause (v) or (vi) or (vii) of sub-section (1) included in the total income of the non-resident whether or not the non-resident has a residence or place of business or business connection in India or the non-resident has rendered services in India. It was clear from the provision that income of the nature of interest or royalty or fees for technical services shall be deemed to accrue or arise in India in the case of non-resident. Regarding applicability of section 195 once the income was not taxable, there was no liability of deduction of tax, therefore, it was not applicable for the assessee to deduct tax, therefore, there was no violation of provision of section 195. In the case of the assessee, the commission paid to non-resident agent was not liable to tax under the provisions of act when the services were rendered outside India, payments were made outside India and there was no permanent establishment or business connection in India.
FULL TEXT OF THE ITAT JUDGEMENT
These two appeals filed by revenue and two cross objections filed by assessee A.Y. 2010-11 & 2011-12, arise from order of the CIT(A)-VIII, Ahmedabad, in proceedings under section 143(3) of the Income Tax Act, 1961; in short “the Act”.
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