No TDS on Commission to Non-Resident when He has no PE in India and the Amount was Payable/ Paid to them outside India: ITAT [Read Order]

The Income Tax Appellate Tribunal, New Delhi bench recently held that absence of Permanent Establishment in India, there is no liability to withhold TDS of payment of commission to the foreign agents.

In the instant case, the Revenue approached the Tribunal against the order Commissioner of Income Tax (A) wherein the authority has deleted disallowance made by the AO under Section 40(a)(i) of the Income Tax Act, 1961 on account of commission paid to non-resident commission agents by the assessee.

Before the Tribunal, the counsel for the department submitted that the assessee had made the payment to two non-resident agents in foreign currency for receipt of export orders.

On contrary, the assessee submitted that their company was not liable to deduct any tax at source on the impugned commission in terms of provisions of section 195 of the Income Tax Act as the foreign resident agents had provided services outside India and, therefore, as per section 9 of the Act, commission paid to them was not chargeable in India.

The bench includes R.S. Syal, vice president and Sudhanshu Srivastava, judicial member heard both the parties’ contentions and pointed out undisputed fact that commission was paid for services provided to the assessee out of India which was remitted directly outside India and was not received by them or on their behalf by any third party.

Finally the tribunal bench observed the case as settled law that in absence of Permanent Establishment in India, there is no liability to withhold deduction of payment of commission to the foreign agents.