The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the commission paid to foreign agents for procurement of orders do not fall under Technical, Managerial or consultancy services so as to attract the provisions of section 9(1)(vii) of the Income Tax Act, 1961 read with Section 195 Income Tax Act.
The assessee in this present case is M/s. Alnoor Exports. The Assessing Officer (AO) while completing the assessment noticed that the assessee debited commission expenses of Rs.80,32,863/- in P & L (Profit and Loss) account of export sales. The assessee was required to furnish copies of agreements, details and evidences of services provided by the foreign agents and evidence of TDS (Tax Deducted at Source) made under Section 195 Income Tax Act, not convinced with the submissions made by assessee the AO disallowed commission expenses to foreign agents for non-deduction of TDS under Section 195 Income Tax Act.
Aggrieved by the order the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT (A)], which deleted the disallowance. The Revenue filed an appeal before the Tribunal challenging the order of the CIT (A).
The Departmental Representative (DR) Mr. Kanav Bali strongly placed reliance on the order of the Assessing Officer.
The Authorised Representative(AR) of the assessee Mr. A. T. Panda relied on the order of the CIT (A) and placed his reliance on the decision of various cases, like Delhi Bench of the Tribunal in the case of Welspring Universal Vs. JCIT where it was held that commission paid by the assessee to non-resident agents for procuring export orders was not chargeable to tax in the hands of the assessee.
The AR relied on the decision of the Delhi High Court in the case of DIT (International Taxation) Vs. Panalfa Autoelektrik Ltd., where it was held that commission paid by the assessee to its foreign agents for arranging of export sales and recovery of payments could not be regarded as fees for technical services under Section 9(1)(vii) Income Tax Act.
Reliance was also placed on the decision of the Delhi High Court in the case of CIT Vs. Grup ISM P. Ltd.
The Bench comprising of Challa Nagendra Prasad, Judicial Member and Dr. B.R.R. Kumar, Accountant Member followed the decision of High court in the case of DIT (International Taxation) Vs. Panalfa Autoelektrik Ltd. where it was held that the commission paid to foreign agents for procurement of orders do not fall under Technical, Managerial or consultancy services so as to attract the provisions of Section 9(1)(vii) Income Tax Act read with Section 195 Income Tax Act.
Thus the Tribunal held that on careful perusal of the order of the CIT (Appeals) the Bench do not find any good reason to interfere with the findings of the CIT (Appeals) and thus upheld the decision of CIT (A) and dismissed the appeal of Revenue on this matter.
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