INCOME TAX ACT, 1961

Section 195

Tax deduction at source - Under section 195 - Reimbursement of expenses made to non-resident agent rendering services on commission basis -

Assessee entered into agreement with M/s. Pharmark Consulting FZE, UAE and appointed them as their agent for business in Russia. The agent appointed employees/staffs for promotion of assessee's products, for identifying new customers and carry out marketing and sales promotion in Russia. For said expenses incurred by agent in Russia, assessee reimbursed to its agent operating from UAE and claimed deduction of the reimbursement so made. AO disallowed deduction for want of TDS under section 195. Held: Agent provided marketing support service as per marketing and promotion strategies devised by assessee. Assessee retained full control over all the marketing activities in Russia and agent was to simply implement the same. Agent incurred expenses on behalf of assessee and assessee reimbursed the same to agent. Payment was made to non-resident towards services rendered outside India and payee had no business connection in India and services provided by agents were not managerial in nature. Therefore, payment made for said services was not covered under section 9(1)(vii). The agreement indicated only services on commission basis and accordingly, TDS under section 195 did not get attracted on payment of reimbursement of expenses made by assessee to its agent in UAE.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2013-14 & 2014-15

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