INCOME TAX ACT, 1961

Section 195 Section 8(1)(vii)(b)

Tax deduction at source - Under section 195 - Amounts paid to non-resident by resident company by way of fees for technical services, for the purpose of making or earning income from a source outside India -

Assessee-company appointed non-resident agent in the territories of European Union, North America and Middle East; all outside India. Assessee procured orders from these outside territories by reason of activities carried on by non-resident commission agent. Assessee received income in such business generated by non-resident Commission Agent(s) in those territories, outside India. AO treated commission paid by assessee as fee for technical services and accordingly, disallowed deduction for want of TDS under section 195. Held: Admittedly, service carried on under Commission Agency Contract was not one falling under any of the exclusions provided in Explanation 2. Section 9(1)(vii) and concerned would come within the ambit of 'technical services' as consultancy services. However, income generated by resident assessee by reason of sales canvassed by non-resident agent, in the territories of European Union, North America and Middle East was income sourced from those countries. This clearly fell under second exception as provided under clause (b) of section 9(1)(vii) and hence, there could be no taxability on such income, clearly excluded from the deeming fiction as provided by section 5(2) read with section 9(1)(vii). Accordingly, assessee was not liable to withhold TDS under section 195.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

SUBSCRIBE FOR FULL CONTENT