DCIT, CHENNAI V. M/s. Good Leather Shoes (P) Ltd., CHENNAI

ITA 188/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73827 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 20-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: M KARUNAKARAN
• Keywords: Permanent establishment; Non-deduction of tax

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! ' , # $ BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NOS. 188 & 288/MDS/2014 ( / ASSESSMENT YEARS : 2009-10 & 2010-11) DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(2), NEW BLOCK, 5 TH FLOOR, CHENNAI-34. VS. M/S. GOOD LEATHER SHOES (P) LTD., 47, THIRUVENGADAM STREET, PERIAMET, CHENNAI-600 003. PAN:AAACG8998G ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. N.MADHAVAN, JCIT /RESPONDENT BY : MR. M.KARUNAKARAN, ADVOCATE / DATE OF HEARING : 12 TH MARCH, 2014 ! /DATE OF PRONOUNCEMENT : 28 TH MARCH, 2014 % / O R D E R PER CHALLA NAGENDRA PRASAD, JM: BOTH THESE APPEALS ARE FILED BY THE REVENUE AGAINS T THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S)-II, CHENNAI DATED 17.09.2013 FOR THE ASSESSMENT YEAR S 2009- 10 & 2010-11. AS THE ISSUE INVOLVED IS COMMON IN BO TH THESE APPEALS, THEY ARE HEARD TOGETHER AND DISPOSED OFF B Y THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS.188 & 288/MDS/2014 2 2. THE APPEAL FOR THE ASSESSMENT YEAR 2010-11 IN IT A NO.288/MDS/2014 IS TIME BARRED BY 18 DAYS. THE REVE NUE FILED AN AFFIDAVIT EXPLAINING REASONS FOR DELAY IN FILING OF APPEAL AND PRAYS FOR CONDONATION OF DELAY. WE HAVE PERUSED THE REASONS AND ARE SATISFIED THAT THERE IS A REASONABL E CAUSE FOR THE DELAY IN FILING OF THE APPEAL. IN THE INTEREST OF JUSTICE, WE CONDONE THE DELAY OF EIGHTEEN DAYS IN FILING OF TH E APPEAL NO.288/MDS/2014. THE PETITION FOR CONDONATION OF D ELAY IS THUS, ALLOWED AND THE APPEAL IS ADMITTED. 3. THE COMMON ISSUE IN BOTH THESE REVENUE APPEALS IS THAT COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 40(A)(I) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE OUT OF AGENCY / SALES COMMISSION PAYMENTS MA DE BY THE ASSESSEE TO ITS NON-RESIDENT AGENTS. IN BOTH TH ESE APPEALS, ASSESSING OFFICER WHILE COMPLETING ASSESSM ENTS INVOKED PROVISIONS OF SECTION 40(A)(I) READ WITH SE CTION 195 OF THE ACT ON THE COMMISSION PAYMENTS MADE TO NON-RESI DENTS HOLDING THAT ASSESSEE HAS NOT DEDUCTED TDS ON THE S AID ITA NOS.188 & 288/MDS/2014 3 PAYMENT AND THEREFORE, COMMISSION IS NOT ALLOWABLE AS DEDUCTION UNDER SECTION 40(A)(I) OF THE ACT. ON AP PEAL, COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERING TH E SUBMISSIONS OF THE ASSESSEE AND THE CASE LAWS RELIE D ON BY THE ASSESSEE DELETED THE DISALLOWANCE HOLDING THAT SALES COMMISSION PAID BY THE ASSESSEE TO THE NON-RESIDENT S IS NOT CHARGEABLE TO TAX IN INDIA AND CONSEQUENTLY, ASSESS EE IS NOT UNDER ANY OBLIGATION TO DEDUCT TDS UNDER SECTION 19 5 OF THE ACT ON THE COMMISSION PAYMENTS AND THEREFORE, PROVI SIONS OF SECTION 40(A)(I) HAVE NO APPLICATION. AGAINST THE O RDER OF COMMISSIONER OF INCOME TAX (APPEALS) REVENUE CAME U P BEFORE US. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF ASSESSING OFFICER IN DISALLOWING AGENCY/SA LES COMMISSION PAID BY THE ASSESSEE TO THE NON-RESIDENT AGENCIES AS ASSESSEE DID NOT DEDUCT TDS UNDER SECTI ON 195 OF THE ACT. ITA NOS.188 & 288/MDS/2014 4 5. COUNSEL FOR THE ASSESSEE SUBMITS THAT AGENCY/SAL ES COMMISSION PAID BY THE ASSESSEE TO NON-RESIDENT AGE NTS FOR THE SERVICES RENDERED BY THEM OUTSIDE INDIA IN PROC URING EXPORT ORDERS FOR THE ASSESSEE. COUNSEL SUBMITS TH AT NON- RESIDENT AGENTS HAVE NO BUSINESS CONNECTION IN INDI A NOR THEY HAVE ANY PERMANENT ESTABLISHMENTS IN INDIA AND THEREFORE PROVISIONS OF SECTION 195 HAVE NO APPLICA TION FOR THE COMMISSION PAYMENTS MADE BY THE ASSESSEE TO NON- RESIDENTS FOR THE SERVICES RENDERED BY THEM OUTSIDE INDIA. HE VEHEMENTLY SUPPORTS THE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS) IN DELETING THE DISALLOWANCE. HE PLACES RELIANCE ON THE DECISIONS OF THE HONBLE SUP REME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE P.L TD. VS. CIT (327 ITR 456), THE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. EON TECHNOLOGY P.L TD. (11 TAXMANN.COM 53), THE DECISION OF THIS TRIBUNAL IN THE CASE OF PRAKASH IMPEX VS. ACIT IN ITA NO.8/MDS/2012 DATED 30.03.2012 AND THE DECISION OF THE CO-ORDINATE BEN CH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. FARIDA SHOES PVT. LTD. (143 ITD 400). ITA NOS.188 & 288/MDS/2014 5 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE CASE LAWS RELIED ON. IN BOTH THESE APPEALS , ASSESSING OFFICER DISALLOWED AGENCY/SALES COMMISSIO N PAID BY THE ASSESSEE TO THE NON-RESIDENT AGENTS ON THE G ROUND THAT ASSESSEE HAS NOT DEDUCTED TDS UNDER SECTION 19 5 OF THE ACT AND THEREFORE SALES COMMISSION PAID BY THE ASSE SSEE IS NOT ALLOWABLE EXPENDITURE UNDER SECTION 40(A)(I) OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEALS) ELABORATEL Y CONSIDERED THIS ISSUE AND HELD THAT SALES COMMISSIO N PAID BY ASSESSEE IS NOT CHARGEABLE TO TAX IN INDIA AS THE SERVICES WERE RENDERED OUTSIDE INDIA BY NON-RESIDENTS AND TH EREFORE, PROVISIONS OF SECTION 195 HAVE NO APPLICATION SO AS TO DISALLOW COMMISSION PAYMENTS UNDER SECTION 40(A)(I) OF THE ACT. WHILE HOLDING SO, THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED VARIOUS DECISIONS ON THE ISSUE INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF GE INDIA TECHNOLOGY CENTRE P. LTD. (SUPRA). THE COMMIS SIONER OF INCOME TAX (APPEALS), FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. FARIDA S HOES P.LTD. (SUPRA) DELETED THE DISALLOWANCE OBSERVING AS UNDE R:- ITA NOS.188 & 288/MDS/2014 6 I HAVE CONSIDERED THE ASSESSEE ' S SUBMISSIONS AS WELL AS THE ORDERS OF T HE HON'BLE ITAT IN THE CASES OF M/S. FARIDA SHOES P LTD (ITA NO.159/MDS/2013 D A TED 11 . 04 .2 013 FOR A.Y. 2008-09) AND M/S. DELTA SHOES P LTD (ITA NO.909/MDS/ 2 013 DATED 31 . 07.2013). THE FACTS INVOLVED IN THE CASES OF MY S. FARIDA SHOES P LTD AND M/S. DELTA SHOES P LTD, ARE EXACTLY SIMILAR TO THOSE INVOLVED IN THE PRESENT ASSESSEE. IN THE S A ID CASES (I.E. FARIDA SHOES P LTD AND DELTA SHOES P LTD) THE PA Y MENTS MADE TO THE NON-RESIDENTS, WITHOUT MAKING TDS, WERE SIMILAR TO THOSE MADE BY THE PRESENT ASSESSEE COMPANY . THE ASSESSING OFFICER DISALLOWED THE SAID PAYMENTS U/S . 40(A)(I) FOR NON- DEDUCTION OF TDS IX] S.195 OF THE ACT . THE CIT(A) ALLOWED THE APPEALS OF THE S A ID COMPANIES. THE REVENUE PREFERRED AN APPEALS TO THE ITAT AG A INST THE ORDERS OF THE CIT(A) . THE HON ' BLE INCOME TAX : APPELLATE TRIBUN A L OF CHENNAI, VIDE ITS ORDERS MENTIONED ABOVE, HAS HELD THAT THE SERVICES PROVIDED BY THE CONCERNED NON- RESIDENTS NEI T HER AMOUNTS TO MANAGERIAL/ TECHNICAL SERVICES NOR THE PAYMENTS ARE ASSESSABL E TO T AX IN INDIA AND HENCE THE PROVISIONS OF SEC.195 OF THE ACT ARE NOT APPLICABLE TO TH E FACTS OF THE SAID COMPANIES. THE RELE V ANT PORTION OF THE ORDER OF THE ITAT (IN ITA NO.159/MDS/2013 DATED 11 . 04.2013 FOR A.Y. 2008 - 09 IN THE CASE OF M/S . FARIDA SHO E S P LTD) IS REPRODUCED AS UNDER: 1 O. WE HAVE HEARD BOTH SID E S , PERUSED THE MATERIAL S AVAILABL E ON RECORD AND C ASE LAW CITED . IN THIS CASE , THE ASS E SSEE HAS MADE C E RTAIN PAYMENTS TO OVERSEAS AGENTS AS COMMISSION AND NO TDS D E DU C T E D . ACCORDING TO THE ASSESSING OFFIC E R, THE ASSESSEES ' BUSINESS IS SITUAT E D IN INDIA AND THE PAYMENTS WERE ALSO MADE FROM INDIA AND ACCORDING TO SECTION 195, THE ASSESSEE IS UNDER OBLIGATION ITA NOS.188 & 288/MDS/2014 7 T O DEDUCT TDS . THER E FORE , BY INVOKING SECTION 40(A)(I), HE HAS DISALLOWED AN AMOUNT OF RS. 5,6 2, 1 3, 8 2 6 / - . ON APPEAL , THE CIT(APPEALS) DELETED THE DISALLOWANCE ON THE GROUND THAT TH E COMMISSION WAS PAID TO NON - RESIDENT AGENT AND I T C ANNOT BE SAID TO HAVE BE E N A C CRUED IN INDIA AND SECTION 195 HAV E NO APPLICATION . TH E ONLY ISSUE FOR OUR CONSIDERATION IS AS TO WH E THER THE ASS E SS EE IS UND E R OBLIGATION TO DEDUCT THE TDS UNDER SECTION 195 OR NOT . TH E CIT(APP E AL S ) , BY CONSID E RING THE E NTIRE FACTS AND CIRCUMSTANC E S OF TH E CAS E PASS E D A DETAILED ORDER BY OBSERVING THAT S E CTION 195 HAVE N O APPLICATION TO ASSESSEE ' S CASE. IN THE CASE OF M / S . PRAKASH IMPE X V . A C IT (SUPRA) , TH E COORDINATE BENCH OF ITAT CHENNAI HA S C ONSIDERED THE V E RY SAME ISSU E AND OBSERVED THAT THE COMMISSION PAID TO NON-R E SIDENT AGENT FOR THE SE RVICES RENDERED OUTSIDE INDIA AND S UCH PAYMENTS AR E NOT CHARG E ABL E TO TAX INDIA AND THEREFORE , TH E PROV I SION S O F SE CTION 195 AR E NOT APPLI C ABL E VIEW OF TH E DECISION OF THE HON ' BLE SUPREME COURT I N THE CAS E OF G E INDIA TECHNOLOGY C E NTRE P. LTD. V. C IT (SUPRA) . 11 . IN TH E C A SE OF CIT V . EON TECHNOLOGY (P) LTD ., TH E HON ' BLE D E LH I HIGH COURT HAS A L SO HEL D THAT THE COMMIS S ION PAYM E NT TO I TS BRITISH PARENT / HOLDING C OMP A NY ETUK C OULD NOT SAID TO HAVE BE E N ACCRU E D TO E TUK I N IND I A AND THEREFORE , THE AS S E SS EE WA S NOT L I ABL E TO D E DUCT TA X AT SOURCE FROM PAYMENT OF COMMIS S ION TO ETUK . THE HEAD NOT E OF ODD E R IS REPRODUCED HEREUNDER: ' S EC TI O N 9 O F T H E IN CO M E -T AX AC T , 1 9 61 ~ IN CO M E - D EE M E D T O ACC RU E OR A RI SE IN I ND I A A SSESS M E N T YEAR 200 7 -0 8 - ASSESSEE - CO M PA N Y WAS E N GA G E D IN BUS I N ESS OF D EVE L O PM E NT A N D EX P O RT O F SO FTW A R E - DURIN G R E L E VANT A SSESS M E NT YEA R , I T H AD P AI D CO MM ISSIO N T O I T S BRITI S H PAR E NT / H O LDIN G C OMPAN Y ET U K O N S AL ES A ND A MOUNT S R EA L IZE D O N EX P O RT CO NTRA C T S PR OC UR E D B Y E T U K FOR ASSESSEE - ASSESS IN G O FFI CE R H E LD THAT ITA NOS.188 & 288/MDS/2014 8 C OMMI SS ION IN CO M E E ARN E D B Y E T U K H A D ACC RU E D IN INDI A O R WA S D E EMED TO AC C RU E IN INDIA AND , TH E R E FOR E , A SSE SSE E WA S LIABL E TO D E DU C T T AX AT SO UR CE THER E F R OM A ND AS TH E R E WA S FAILUR E, S AID E X PENDITUR E S H O ULD B E DI S ALL OWE D UND E R SEC TI O N 4 0(A )( IA ) - W H E TH E R W H E N E T U K W A S N O T R E ND E RING AN Y SE RVIC E O R P ER F O RMIN G ANY AC TI V I TY IN INDI A I T SE LF CO MMI SS I O N IN CO M E CO ULD BE SA I D T O H AVE ACCR U ED , ARI SEN TO O R R ECE I VE D B Y ET U K IN IN D I A M E R E L Y B ECA U SE IT WAS RECORDED IN B OOKS OF A SSESSEE I N INDI A O R WAS P AID B Y ASSESSEE S ITUA TE D IN INDI A - H E L D, N O - WH E TH E R F O R APPL Y IN G SEC TI O N 9 ASSESS IN G OFFI CE R WAS R E QUIR E D T O EX AMIN E WH E TH E R SAID CO MMI SS ION IN C OM E WAS ACC RUIN G OR ARI S IN G DIR EC TL Y O R INDIR EC TLY F RO M A N Y BU S IN ESS C ONN E CTI O N IN IND IA - H E LD, YES - WH E TH E R S INC E FA C T S F O UND B Y AS SESS IN G OFFIC E R DID NOT M A K E O UR A C A SE O F BU S IN ESS CO NN EC TI O N A S S TIPUL A T E D IN SEC TI O N 9 ( 1 )( I ), CO MMI SS I O N IN CO M E CO ULD NOT B E SA ID T O H AVE ACC RU E D T O E T U K I N IN D I A A N D, TH E R EFO R E, ASSESSEE WAS N O T L I A B L E T O D E DU C T T AX A T SOURCE FRO M PAY M E NT OF CO MM ISSIO N TO ETU K - H E L D, YES [I N FAVO UR OF ASSESSEE ) . 1 2. TH E HON ' BLE DELH I H I GH COUR T HAS CONSI DE R E D T HE D E C I SION OF T H E HON ' BLE SUPREME COURT I N THE CAS E OF M / S. TRANSMISSION CORPORATION OF ANDHRA PRADESH REPORTED IN 23 9 ITR 5 87 AND DECIDED TH E ISSU E IN FAVOUR OF THE ASSESSEE . 13. IN THE CASE OF ARMAY E SH GLOBAL V . ACIT (SUPRA) , THE MUMBAI BENCH OF ITAT HAS OBSERVED THAT THE C OMMISSION PAYMENT WAS MADE TO TH E OVERSEAS AGENT FOR PROCURING EXPORT ORDERS . TH E AGENTS HAVE NOT BE E N PROVIDED AN Y MANAGERIAL / TECHNICAL S E R V ICES. THE R E LATIONSHIP B E TW EE N TH E ASSESSEE A ND THE NON - RESID E NT (AGENT) WAS ONLY FOR R E ND E RING NON - TECHNICAL S E RVICES . MOREOVER , THERE WAS NO PERMANENT ESTABLISHM E NT OF TH E SA I D NON-R E S I DENT IN INDIA. THEREFOR E, THE COMMISS I ON PAID TO T H E NO N- R E SIDENT AGENT DID NOT ITA NOS.188 & 288/MDS/2014 9 ACCRUE OR ARISE I N INDIA AND THUS , TH E R E WAS NO N EE D FOR DEDUCTING TDS UNDER SECTION 195 OF TH E ACT . 14 . IN THE PRESENT CASE , THE ASSESSEE PAID CERTAIN AMOUNTS TO OVERS E AS AGENTS FOR PROCUREMENT OF EXPORT ORDERS . THE AGENTS HAVE NOT PROVID E D ANY MANAGERIAL / T E CHNICAL SER V IC E S. THE PAYM E NTS RECEI VE D BY TH E NON - R E SID EN T IND I AN ARE NOT TA X ABLE I N INDIA. TAKING INTO CONSID E RATION OF ENTIR E FA C TS AND CIRCUMS T ANC E S AND BY FOLLO WI NG AFOR E SAID D E CI S IONS , W E A R E OF T H E OPIN I ON THA T TH E I SSUE IN V OL VE D IN THIS APPEAL IS C OV E R E D I N FAVOUR OF TH E ASSESSEE AND S E CTION 1 95 HAVE N O A PPL I CATIO N T O A S SE S SEE'S C AS E. A C CORDINGLY , THE APPEAL OF THE REVENUE IS DISMISSED. ' IN THE INSTANT CASE ALSO, THE ASSESSEE COMPANY IS ENGAGED M THE BUSINESS OF M A NU F ACTURING AND EXPORT OF LEATHER GOODS (SHOES) . AS EXPLAINED B Y THE ASSESSEE , IT IS AV AILING THE SERVICES OF CERTAIN NON - RESIDENT AGENTS FOR PA Y MENT FOLLOW- UPS , ORDER PROCUREMENTS AND FOR MARKETING THE PRODUCTS FOR THE ASSESSEE FOR WHICH IT IS PA Y ING C OMM I SS I ON . PERUSAL OF T HE ASSESSEE ' S SUBMISSIONS SHOWS THAT TH E S A ID NON - R E SID E NT AG EN T S HA V E NO BUSIN E SS CONN E CTION IN INDIA , NOR THE Y HAVE AN Y PERM A NEN T E ST A BLISHMENTS IN INDIA. THEY ARE PROCURING EXPORT ORDERS, MARKETING THE PRODUCTS AND FOLLOWING-UP THE PAYMENTS, FOR THE ASSESSEE. THUS , THE SAID NON-RESIDENT AGENTS ARE OPERATING OUTSIDE THE COUNTRY AND ALL THE SERVICES ARE RENDERED ABROAD ONL Y. IN O T HER WORDS, THOUGH THE SAID NON-RESIDENTS ARE RENDERING SERVICES TO THE ASSESSEE (I N DIAN COMPANY), THESE SERVICES ARE RENDERED TOTALLY OUTSIDE THE COUNTRY. IN SUCH A SI T UATION THE PAYMENTS (COMMISSIONS) MADE TO SUCH AGENTS ARE NOT LIABLE TO BE TAXED IN INDIA. TDS IS REQUIRED TO BE DEDUCTED ON ITA NOS.188 & 288/MDS/2014 10 ALL PAYMENTS TO NON - RESIDENTS IF THE SAID PAYMENTS ARE LIABLE FOR TAX IN INDIA. IN THE INSTANT CASE, THE COMMISSION PAYMENTS TO THE NON- RESIDENT AGENTS ARE NOT TAXABLE IN INDIA AS THE SERVICES ARE RENDERED ABROAD AN D THE AGENTS HAVE NO PE IN INDIA. THEREFORE, THERE IS NO REQUIREMENT TO DEDUCT TDS ON THESE PAYMENTS. FOR THIS PURPOSE RELIANCE IS ALSO PLACED ON THE DECISION OF APEX COURT IN THE CASE OF GE INDIA TECHNOLOGY CEN. P LTD. V. CIT [2010 ] (327 ITR 456) ( SC) WH E REIN IT WAS HELD AS UNDER: SECTION 195 OF THE INCOME-TAX ACT, 1961 - DEDUCTION OF TAX AT SOURCE - PAYMENT TO NON-RESIDENT - WHETHER THE MOMENT A REMITTANCE IS MADE TO A NON-RESIDENT, OBLIGATION TO DEDUCT TAX AT SOURCE DOES NOT ARISE; IT ARISES ONLY WHEN SUCH REMITTANCE IS A SUM CHARGEABLE UNDER ACT, I . E ., CHARGEABLE UNDER SECTIONS 4, 5 AND 9 - HELD, YES . WHETHER SECTION 195(2) IS NOT A MERE PROVISION TO PROVIDE INFORMATION TO ITO(TDS) SO THAT DEPARTMENT CAN KEEP TRACK OF REMITTANCES BEING MADE TO NON-RESIDENTS OUTSIDE INDIA; RATHER IT GETS ATTRACTED TO CASES WHERE PAYMENT MADE IS A COMPOSITE PAYMENT IN WHICH CERTAIN PROPORTION OF PAYMENT HAS AN ELEMENT OF 'INCOME' CHARGEABLE TO TAX IN INDIA AND PAYER SEEKS A DETERMINATION OF APPROPRIATE PROPORTION OF SUM CHARGEABLE - HELD, YES. FURTHER, UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE HON'BLE ITAT OF CHENNAI, IN THE CASES OF M/S . FARIDA SHOES P LTD (IN ITA NO . 159 /MDS/ 2013 DATED 11 . 04 . 2013 FOR A . Y . 2008-09) AND ACIT VS. DELTA SHOES P LTD (IN ITA NO . 909/MDS/2013 DATED 31 . 07.2013) , HAS EXAMINED THE ISSUE OF COMMISSION PAYMENTS TO NON- ITA NOS.188 & 288/MDS/2014 11 RESIDENTS FOR PROC U RING EXPORT ORDERS IN DETAIL AND CONCLUDED THAT THE COMMISSION PAYMENTS TO THE SAID NON- RESIDENT AGENTS ARE NOT ASSESSABLE ' TO TAX IN INDIA AND CONSEQUENTLY THE RESIDENT PAYEE COMPANY (M/S. FARIDA SHOES P LTD/DELTA SHOES P LTD) WAS NOT UNDER THE OBLIGATION OF DEDUCTION TDS ON THE COMMISSION PAYMENTS U/S . 195 OF THE ACT . IN THE PRESENT APPEALS OF THE ASSESSEE (I.E. IN THE A . YS. 2009-10 AND 2010-11) A LSO THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTICAL TO THOSE INVOLVED IN THE CASE OF MR S. FARIDA SHOES P LTD FOR A . Y. 2008 - 09. THEREFORE , SINCE THE ISSUE INVOLVED IN THE PRESENT APPEALS IS THE SAME AND THE FACTS ARE EXACTLY IDENTICAL, THE ABOVE DECISION OF THE ITAT, (M/S. FARIDA SHOES P LTD, IN ITA NO . 159/MDS/2013 DATED 11 . 04.2013) , IS EQUALLY APPLICABLE TO THE FACTS OF THE PRESENT APPEALS OF THE INSTANT ASSESSEE FOR A.YS 2009-10 AND 2010-11 UNDER CONSIDERATION. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF ITAT, IN THE CASE OF M/S. FARIDA SHOES P LTD (IN ITA NO . 159/MDS/2013 DATED 11 . 04.2013) , I HOLD THAT THE ABOVE TRANSACTIONS OF COMMISSION PAYMENTS TO THE NON-RESIDENTS FOR PAYMENT FOLLOW - UPS , ORDER PROCUREMENTS AND FOR MARKETING THE PRODUCTS, ARE NOT ASSESSABLE TO TAX IN INDIA AND CONS E QUENTLY THE AS S ESSEE COMPANY IS NOT UNDER ANY OBLIGATION T O DEDUCT THE TDS ON THE A B OVE COMMISSION PAYMENTS U/ S.195 OF THE ACT . THEREFORE, T H E P ROVISI O NS OF SEC 40(A)(I) HAVE NO APPLICATION IN THE PR E S E NT CASE. ACC O RDINGLY, T HE A DD ITI O NS MADE BY THE ASSESSING OFFICER IN BOTH OF THE ASSESSMENT YEARS UNDER C O N S I D ERATI O N, O N ACCOUNT OF D ISALLOWANCE OF COMMISSION PAYMENTS FOR NO N -DED U CTI ON O F TDS UNDER SEC.40(A)(I) R . W . S . 1 9 5 OF THE ACT, ARE N OT JUSTIFIED AND DELETED. ITA NOS.188 & 288/MDS/2014 12 6. SIMILAR ISSUE HAS BEEN CONSIDERED BY THIS TRIBUN AL IN THE CASE OF ITO VS. FAIZAN SHOES (P.) LTD. ( 58 SOT 245), WHEREIN CO-ORDINATE BENCH OF THIS TRIBUNAL, TO WHIC H ONE OF US IS A PARTY, AFTER CONSIDERING THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CE NTRE P.LTD. (SUPRA) HELD THAT SALES COMMISSION PAID BY T HE ASSESSEE TO NON-RESIDENTS ARE NOT CHARGEABLE TO TAX IN INDIA, THEREFORE PROVISIONS OF SECTION 195 ARE NOT APPLIC ABLE. ON GOING THROUGH THE ABOVE ORDER OF THE COMMISSIONER O F INCOME TAX (APPEALS), WE FIND THAT IN BOTH THE CAS ES ASSESSEE PAID SALES COMMISSION TO ITS NON-RESIDENT AGENTS FOR THE SERVICES RENDERED BY THEM OUTSIDE INDIA AND THE SALES COMMISSION IS NOT CHARGEABLE TO TAX IN INDIA SO AS TO DEDUCT TDS ON SUCH PAYMENTS UNDER SECTION 195 OF THE ACT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF T HE HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CE NTRE P. LTD. (SUPRA) AND THE ABOVE CITED DECISION OF THE CO -ORDINATE BENCH OF THIS TRIBUNAL, WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING TH E ITA NOS.188 & 288/MDS/2014 13 DISALLOWANCE MADE UNDER SECTION 40(A)(I) OF THE ACT AND REJECT THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 7. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 28 TH DAY OF MARCH, 2014 AT CHENNAI. SD/- SD/- (A.MOHAN ALANKAMONY) (CHALLA NAGEN DRA PRASAD) ACCOUNTANT MEMBER JUDI CIAL MEMBER CHENNAI, DATED THE 28 TH MARCH, 2014. SOMU COPY TO: (1) APPELLANT (4) CIT(A) (2) RESPONDENT (5) D.R (3) CIT (6) G.F.