Commission Charges Paid to the Overseas Agents can’t be regarded as if for Technical Services: Madras HC [Read Order]

The Madras High Court said that the commission charges Paid to the overseas agents can’t be regarded as for technical services.

The core issue involves as to for what purpose the payments were affected by the assessee, M/s.Wheels India Limited to the non-resident and whether the assessee was required to deduct the tax at source. This is a factual matter which needs to be considered taking note of what was available in the hands of the Assessing Officer. The Assessing Officer is of the view that the payments were in the nature of fees for technical service and therefore, tax was to be deducted at source.

The Assessing Officer was of such a view by interpreting the nature of the services rendered by the non-resident as a managerial service which was received by the assessee and therefore, referred to Indo South Korean DTAA, in particular, Article 13 and held that the payments made for managing the sales affairs of the assessee Company outside India without deducting tax at source under Section 195 of the Act has to be disallowed under Section 40(a)(i) of the Act.

The assessee placed the reliance on the decision of the Division Bench of this Court in the case of Commissioner of Income Tax vs. Farida Leather Company, wherein it was held that sourcing orders abroad, for which payments have been made directly to the non-residents abroad, does not involve any technical knowledge or assistance in technical operations.

The division bench of Justice T.S.Sivagnanam and Justice Sathi Kumar Sukumara Kurup held that what was paid by the assessee to the non-resident was sales commission and cannot be regarded as for technical services.

To Read the full text of the Order CLICK HERE

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