Armayesh Global v. Assistant Commissioner of Incometax

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The Tax Publishers2012 TaxPub(DT) 2260 (Mum-Trib) : (2013) 049 (II) ITCL 0582 : (2012) 051 SOT 0564 INCOME TAX ACT, 1961 Tax deduction at source- Under section 195 -Commission paid to overseas agent-Whether income deemed to accrue in India Assessee firm engaged in business of manufacture and export of hand embroidery and handicraft items. For procuring the export orders, it used services of overseas agent on commission basis and agreement between assessee and non-resident was only for rendering non-technical services. While completing the assessment under section 143(3), the AO held that the assessee had not deducted TDS on payment made to an overseas commission agent and disallowed the said expenses under section 40(a)(i). Assessee submitted that as per CBDT Circular No. 23 dated 23-7-1969 stated that no tax was required to be deductible under section 195. AO rejected the assessee claimed on the ground that consideration paid to non-resident was for managerial services and thus payment to non-resident was income deemed to arise in India chargeable to tax under section 9(1)(vii). Held : Assessees agreement with non-resident company clearly showed that non-resident company was to received the commission after sales proceeds were received for promoting the product and rendering incidental services on sales such as recovery etc. on export sales of the assessee-company and had not been providing any managerial/technical services. Since the services were rendered outside India, the provisions of section 5 cannot be applied to the commission paid, therefore, no violation of provisions of section 195 had been done and accordingly the same cannot be disallowed under section 40(a)(ia). Income Tax Act, 1961, Section 195 read with Section 9 A.Y.: 2007-08 *Decision :* In favour of assessee. IN THE ITAT MUMBAI 'A' BENCH B. RAMAKOTAIAH, A.M. & V. DURGA RAO, J.M. Armayesh Global v. Asstt CIT ITA No. 8822 (Mum) of 2010 A.Y. 2007-08 4 May, 2012 Section 9, read with section 195, of the Income-tax Act, 1961 and Article 7 of the Double Taxation Avoidance Agreement between India and UK (Business profits) - Income - Deemed to accrue or arise in India - Assessment year 2007-08 SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2012 TaxPub(DT) 2260 (Mum-Trib) : (2013) 049 (II) ITCL 0582 : (2012) 051 SOT 0564

INCOME TAX ACT, 1961

Tax deduction at source- Under section 195 -Commission paid to overseas agent-Whether income deemed to accrue in India

Assessee firm engaged in business of manufacture and export of hand embroidery and handicraft items. For procuring the export orders, it used services of overseas agent on commission basis and agreement between assessee and non-resident was only for rendering non-technical services. While completing the assessment under section 143(3), the AO held that the assessee had not deducted TDS on payment made to an overseas commission agent and disallowed the said expenses under section 40(a)(i). Assessee submitted that as per CBDT Circular No. 23 dated 23-7-1969 stated that no tax was required to be deductible under section 195. AO rejected the assessee claimed on the ground that consideration paid to non-resident was for managerial services and thus payment to non-resident was income deemed to arise in India chargeable to tax under section 9(1)(vii). Held : Assessees agreement with non-resident company clearly showed that non-resident company was to received the commission after sales proceeds were received for promoting the product and rendering incidental services on sales such as recovery etc. on export sales of the assessee-company and had not been providing any managerial/technical services. Since the services were rendered outside India, the provisions of section 5 cannot be applied to the commission paid, therefore, no violation of provisions of section 195 had been done and accordingly the same cannot be disallowed under section 40(a)(ia).

Income Tax Act, 1961, Section 195 read with Section 9

A.Y.: 2007-08

Decision : In favour of assessee.

IN THE ITAT MUMBAI 'A' BENCH

B. RAMAKOTAIAH, A.M. & V. DURGA RAO, J.M.

Armayesh Global v. Asstt CIT

ITA No. 8822 (Mum) of 2010

A.Y. 2007-08

4 May, 2012

Section 9, read with section 195, of the Income-tax Act, 1961 and Article 7 of the Double Taxation Avoidance Agreement between India and UK (Business profits) - Income - Deemed to accrue or arise in India - Assessment year 2007-08