TDS u/s 195 not deductible on commission paid to foreign agents for procurement of orders

ACIT Vs Alnoor Exports (ITAT Delhi)

ITAT Delhi held that commission paid to foreign agents for procurement of orders do not fall under Technical, Managerial or consultancy services. Accordingly, TDS not deductible on commission paid to such foreign agents.

Facts- The Assessing Officer while completing the assessment noticed that the assessee debited commission expenses of Rs.80,32,863/- in P & L account of export sales. AO disallowed commission expenses to foreign agents for non-deduction of TDS u/s. 195 of the Act. CIT(A) deleted the disallowance.

Conclusion- Held that the assessee was not liable to deduct TDS at source on commission paid to agents located outside India for procuring orders from buyers were all located outside India and not having permanent establishment in India. The provisions of section 195 of the Act were not applicable on the commission paid by the assessee as the same was not taxable in India as per the provisions of section 9(1) of the Act.

Hon’ble Delhi High Court in the case of DIT (International Taxation) Vs. Panalfa Autoelektrik Ltd. has held that the commission paid to foreign agents for procurement of orders do not fall under Technical, Managerial or consultancy services so as to attract the provisions of section 9(1)(vii) of the Act read with section 195 of the Act.

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