INCOME TAX ACT, 1961

Section 40(a)(i)

Business disallowance under section 40(a)(i) - Payment to non-resident without TDS - Fees for technical services - Non-deduction of TDS under section 195--Export commission paid to foreign agents for rendering services outside India

AO disallowed commission payment made by assessee-company to a non-resident export agent stating that the export commission paid by the assessee was covered under term 'fees for technical services' liable for TDS under section 195. Since the assessee did not deduct tax at source on such commission paid by it, the same would not be allowable as deduction under section 40(a)(i). Assessee submitted that the commission was paid to non-resident agents for services rendered outside India and thus, the same was not taxable in India and consequently it was not liable to deduct tax at source under section 195 on such payment. Held: In view of Tribunal decision in the case of Dy. CIT v. M/s. Turbo Energy Ltd. & Vice-Versa [ITA No. 351, 316 & 317/Mds/2014, dt. 3-5-2017], export commission paid to foreign agents for rendering services outside India is not liable for deduction of tax at source under section 195 and consequently, no disallowance could be made under section 40(a)(i) for non-deduction of TDS. In instant case, the assessee made payment to a non-resident agent, who rendered services to the assessee outside India for marketing the products of the assessee. Further, the assessee filed necessary evidence to prove that the payment was made for export sales and such services were rendered outside India. Therefore, the addition made towards disallowance of export commission made to non-resident agents was deleted.

Followed:Dy. CIT v. Turbo Energy Ltd. & Vice-Versa [ITA No. 351, 316 & 317/Mds/2014, dt. 3-5-2017]

REFERRED : CIT v. Faizan Shoes Pvt. Ltd. (2014) 367 ITR 155 (Mad) : 2014 TaxPub(DT) 3836 (Mad-HC)

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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