The Dy. CIT, Circle-2(1)(1), Ahmedabad V. M/s. Gujarat Microwax Ltd., Ahmedabad

ITA 2503/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8218 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 04-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR JAYANT JHVERI
• Assessee Lawyers: G C PIPARA
• Keywords: Capital asset; Deemed to accrue or arise in india; Retrospective amendment; Permanent establishment; Advance ruling
• Section: 5(2)

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD L LL LOZJH OZJH OZJH OZJH OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA ] YS[KK LNL; ,OA EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN] U;KF;D LNL; ] U;KF;D LNL; ] U;KF;D LNL; ] U;KF;D LNL; DS LE{KA DS LE{KA DS LE{KA DS LE{KA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.2503/AHD/2016 ( / ASSESSMENT YEAR : 2013-14) D CIT, CIR 2(1)(1), AHMEDABAD. / VS. M/S. GUJARAT MICRO W AX PVT. LTD., 401 & 02, SARTHIK SQUARE, SARKHEJ GANDHINAGAR HIGHWAY, BODAKDEV, AHMEDABAD 380 054 ./ ./ PAN/GIR NO. : AAACG 5593 P ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : DR. JAYANT JHVERI, SR.D.R. / RESPONDENT BY : SHRI G.C. PIPARA, C.A. / DATE OF HEARING 0 9 /05/2018 !'# / DATE OF PRONOUNCEMENT 24 /05/2018 $% / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE APPELLATE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-2, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)-2/424/DC.CIR.2(1)(1)/2015-16 DATED 14/07/ 2016 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF T HE INCOME TAX ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 2 - ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') D ATED 18/03/2016 RELEVANT TO ASSESSMENT YEAR (AY) 2013-14. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF EXPORT CO MMISSION OF RS.54,06,265/- PAID TO OVERSEAS AGENTS U/S. 40(A )(I) OF THE ACT WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 3. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D.CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED TO THE ABOVE EXTENT. 3. THE ONLY ISSUE RAISED BY THE REVENUE IS THAT LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF NON- DEDUCTION OF TDS U/S 195 R.W.S 40(A)(I) OF THE ACT. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IN TH E PRESENT CASE IS A PRIVATE LTD. COMPANY AND ENGAGED IN THE MANUFACTURI NG BUSINESS OF MICROCRYSTALLINE CELLULOSE POWDER, CROSSCARMELLOSE SODIUM, SODIUM STARCH GLYCOLATE, DL CALCIUM PHOSPHATE ETC. 5. THE ASSESSEE, IN THE YEAR UNDER CONSIDERATION HA S CLAIMED COMMISSION EXPENSES OF RS.54,06,265/- FOR THE SERVI CES RENDERED BY THE FOREIGN COMMISSION AGENTS IN CONNECTION WITH IT S BUSINESS. THE DETAILS OF THE PARTIES, COMMISSION AMOUNT AND VOLUM E OF THE BUSINESS REFERRED BY THE COMMISSION AGENTS ARE REPR ODUCED AS UNDER: ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 3 - SR. NO NAME OF THE COMMISSION AGENT COUNTRY OF RESIDENCE AMOUNT OF COMMISSI ON PAID/PRO VIDED (IN RS.) AMOUNT OF SALES MADE BY COMMISSION AGENT (IN RS.) 1. ARIEL LEVIN ARGENTINA 1,55,032 32,36,942 2. BIESTERFIELD INTERNATIONAL GERMANY 6,03,732 2,65,48,305 3. HECTOR NORBERTO LEVIN ARGENTINA 1,96,934 1,48,34,303 4. PHARMA TRADE BANGLADESH 34,414 8,20,799 5. SEVEX PHARMA BULGARIA 25,01,419 1,20,29,252 6. SHINE RESOURCES LTD. VIETNAM 1,64,680 99,27,484 7. TRANS CONTINENTAL AGENCIES PAKISTAN 13,25,399 4,21,34,979 8. VARUNESH TULI BARAZIL 4,24,655 2,50,06,395 TOTAL 54,06,265 13,45,38,459 THE AO, DURING THE ASSESSMENT PROCEEDINGS REQUIRES THE ASSESSEE TO FURNISH THE DETAILS OF THE PARTIES OF THE FOREIGN C OMMISSION AGENT, EVIDENCES OF SERVICES RENDERED BY THEM ALONG WITH C OPIES OF THE AGREEMENT. THE AO WAS ALSO OF THE VIEW THAT THE PAY MENT OF COMMISSION TO THE FOREIGN AGENTS IS SUBJECT TO TDS U/S 195 OF THE ACT. ACCORDINGLY, THE AO SOUGHT AN EXPLANATION FROM THE ASSESSEE. IN COMPLIANCE THERETO THE ASSESSEE SUBMITTED THAT T HE AMOUNT OF COMMISSION EXPENSE HAS BEEN INCURRED IN CONNECTION WITH THE BUSINESS AND THEREFORE, NO DISALLOWANCE FOR THE SAM E CAN BE MADE. ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 4 - 6. THE ASSESSEE ALSO SUBMITTED THAT THE COMMISSION PAID TO THE FOREIGN AGENTS IS NOT CHARGEABLE TO TAX IN INDIA. T HEREFORE, THERE WAS NO LIABILITY TO DEDUCT THE TDS U/S 195 OF THE ACT. 7. HOWEVER, THE AO DISREGARDED THE CONTENTION OF TH E ASSESSEE AND CONCLUDED THAT THE COMMISSION INCOME TO THE FOR EIGN PARTIES/AGENTS HAS ACCRUED IN INDIA, THEREFORE, THE ASSESSEE WAS UNDER THE OBLIGATION TO DEDUCT TDS U/S 195 OF THE A CT. HENCE, THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOME O F THE ASSESSEE. 8. ACCORDINGLY, ASSESSEE PREFERRED AN APPEAL TO LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE F OREIGN AGENTS DO NOT HAVE PERMANENT ESTABLISHMENT IN INDIA. THEREFOR E, IT CAN BE CONCLUDED THAT THE COMMISSION INCOME HAS NOT ACCRUE D AND AROSE IN INDIA AND ACCORDINGLY THE SAME IS NOT CHARGEABLE TO TAX IN INDIA. ACCORDINGLY, THERE IS NO LIABILITY ON THE PART OF T HE ASSESSEE TO DEDUCT TDS UNDER SECTION 195 OF THE ACT. LD. CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE ADDITION MAD E BY THE AO BY OBSERVING AS UNDER: 2.9 HAVING CONSIDERED THE FACTS AND SUBMISSIONS, T HE ISSUES WHICH ARE TO BE EXAMINED AND DECIDED ARE AS UNDER:- 1. WHETHER THE COMMISSION PAID TO FOREIGN AGENTS IS TAXABLE IN INDIA BY VIRTUE OF THE PROVISIONS OF SEC TION 5(2)(B) READ WITH SECTION 9(1)(I) OF INCOME TAX ACT . 2. WHETHER THE PROVISIONS OF SECTION 195(2) WERE APPLICABLE ON THE APPELLANT AND HE SHOULD HAVE DEDUCTED TAX AND IN CASE OF NO DEDUCTION HE SHOULD HAVE OBTAINED A NO DEDUCTION CERTIFICATE FROM THE AO. AN D 3. WHETHER THE COMMISSION PAID WAS GENUINE AND TH E SERVICES HAVE BEEN RENDERED. ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 5 - 2.10. REGARDING THE FIRST ISSUE IT IS NOTED FROM T HE EVIDENCES GIVEN BY THE APPELLANT AS WELL AS NOTED BY THE AO IN HIS ORD ER THAT THE SERVICES HAVE BEEN RENDERED BY THE FOREIGN AGENTS OUTSIDE IN DIA. THE SALES WERE BOOKED BY THEM IN THEIR COUNTRY OR FOR THE COU NTRY FOR WHICH THEY HAVE BEEN APPOINTED AS COMMISSION AGENTS. NONE OF THE ACTIVITIES SOLICITING THE CLIENTS AND PROCURING THE ORDERS HAS TAKEN PLACE IN INDIA. THE GOODS WERE BEING DELIVERED BY THE APPELL ANT COMPANY IN THE OTHER COUNTRY. THE ACTIVITIES OF PROCURING THE PAYMENT ON BEHALF OF THE APPELLANT COMPANY WERE ALSO DONE ABROAD. THE AO WAS, THEREFORE, INCORRECT TO HOLD THAT THE SOURCE OF INC OME LIES IN INDIA AS THE SALES HAVE BEEN MADE FROM INDIA. THE PROVISIONS OF INCOME TAX ACT CLEARLY PROVIDE THAT THE TAX WOULD BE DEDUCTED ON THE INCOME WHICH IS TAXABLE IN INDIA. THE ACTIVITY OF EARNING THE INCOME IS NOT THE SALE BUT SOLICITING THE SALES BY COMMISSION AGENTS. THOUGH THIS ACTIVITY IS LINKED TO THE SALES OF THE COMPANY BUT IT CANNOT BE SAID THAT THE INCOME HAS BEEN DERIVED FROM SALES WHICH HAS BE EN MADE FROM INDIA. THE INCOME HAS BEEN DERIVED FROM THE ACTIVIT Y OF SOLICITING THE SALES ON BEHALF OF THE APPELLANT COMPANY. THE AGENT S HAVE CARRIED OUT ALL THE ACTIVITY ON THE FOREIGN SOIL AND NONE OF TH EIR ACTIVITY IS IN INDIA THEREFORE, IT CANNOT BE SAID THAT THE INCOME HAS AC CRUED OR ARISEN IN INDIA AND THE SOURCE OF INCOME WAS IN INDIA. THERE IS NO FACT BROUGHT OUT BY THE AO IN THE ORDER AS WELL AS OBSERVED BY M E DURING THE COURSE OF APPELLATE PROCEEDINGS TO INDICATE THAT THE SERVI CES HAVE BEEN RENDERED IN INDIA. 2.11. THE APPELLANT HAS ALSO SUBMITTED THAT DURING THE YEAR IT HAS PAID THE COMMISSION TO 8 FOREIGN COMMISSION AGENTS WHICH INCLUDED 2 NEW PARTIES AND 6 OLD COMMISSION AGENTS TO WHOM COM MISSION WAS PAID IN THE PRECEDING YEARS ALSO. FURTHER SUBMITTED THAT THE DISALLOWANCE OF FOREIGN COMMISSION PAYMENTS HAVE AL SO BEEN MADE BY THE A.O. IN THE A.YRS. 2012-13 AND 2011-12 AND AFTE R HAVING EXAMINED THE FACTS AND SUBMISSIONS THE SAME HAVE BEEN DELETE D BY THE CIT(A) IN THE APPELLATE ORDER PASSED IN THOSE YEARS. FOR READ Y REFERENCE THE DETAILS OF THE COMMISSION PAYMENTS TO THE AGENTS IN THE YEAR UNDER CONSIDERATION AND IN THE PRECEDING YEARS IS NOTED A S UNDER:- ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 6 - CONSOLIDATED CHART SHOWING DETAILS OF EXPORT SALES COMMISSION PAID DURING F. Y. 2008-09 (A.Y. 2009- 10) TO F. Y. 2012-13 (A. Y. 2013-14) SR. NO. NAME OF COMMISSION AGENT COUNTRY OF COMMISSION AGENT A.Y.2013- 14 A.Y.2012- 13 A.Y.2011- 12 A.Y.2010- 11 A.Y.2009- 10 TOTAL 1 A BRIL Y. COPANIA LIMITADA AV CHILE -- -- 65,002 2,07,784 -- 2,72,786 2 ARCHEM LTD. ISREAL -- 7,442 -- -- -- 7,442 3 ARIEL LEVIN 1,55,032 -- -- -- -- 1,55,032 4 BESTERFIELD INTERNATIONAL GERMANY 6,03,732 7,35.241 2,96,456 1,175.931 3,87,212 3,198,572 5 CHEMPHAR HONGKONG -- -- -- 75,851 1,09,770 1,85,621 6 AMOLI ENTERPRISE LTD. HONGKONG -- 1,80,413 1,80,413 7 HAKIMSONS PVT. LTD. PAKISTAN -- -- -- 44,223 44,223 8 HECTOR NORBERTO LEVIN ARGENTINA 1,96,934 77.398 -- 2,75,215 92,785 6,42,332 9 TO KEMIMAC (COOM) SINGAPORE -- -- -- -- 20,930 20,930 M.A.J. ENTERPRISE PAKISTAN -- -- -- -- 88,920 88,920 II P.T.SIGNA HUSADA INDONESIA -- 3,13,042 -- -- -- 3,13,042 12 PHARMO TRADE DHAKA 34,414 -- -- -- 34,414 13 S B R AND CO., PAKISTAN P. LTD. PAKISTAN -- 47,810 -- -- -- 47,810 14 SEVEX PHARMA BELGARIA 2,501,419 -- 7,96,572 -- -- 3,297,991 15 SHINE RESOURCES LTD. - VIETNAM VIETNAM 1.64,680 8,12.220 7,60.564 2,00,645 44,504 19,82,613 16 TENTRA CHEMIE P. LTD. -- -- -- -- 11,836 11,836 17 TRANS CONTINENTAL AGENCIES INC. PAKISTAN 13,25,399 9,30,795 4,28,574 3,08,468 1,83,733 31,76,969 ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 7 - 18 TRANS PHARM (HONG KONG) LTD. HONGKONG -- 22,334 65,597 78,630 1,83,733 31,76,969 19 VARUNESH TULI BRASIL 4,24,645 4,83,099 -- -- 1,45,686 10,53,440 A EXPORT COMMISSION TO FOREIGN AGENT (WHEREIN NO TDS HAS BEEN MADE) 54,06,265 34,29,381 24,12,765 23,66,747 12,84,816 1,48,99,974 2.12. THE APPELLANT HAS RELIED UPON VARIOUS JUDGEME NTS OF HON'BLE COURTS AND ON THE IDENTICAL FACTS IT WAS HELD THAT NO TDS U/S.195 IS WARRANTED WHEN THE COMMISSION INCOME HAS NOT ARISEN IN INDIA AND THE FOREIGN AGENTS DID NOT HAVE ANY BUSINESS CONNEC TION/PERMANENT ESTABLISHMENT IN INDIA. SOME OF SUCH JUDGEMENTS ARE BRIEFLY DISCUSSED IN THE SUBSEQUENT PARAS. 2.13. THE JUDGMENT OF HONOURABLE SUPREME COURT IN THE CASE OF CIT VS. TOSHOKU LIMITED [125 ITR 525 (SC)] IS IMPORTANT ON THE ISSUE, WHEREBY IT HAS BEEN HELD THAT COMMISSION EARNED BY THE NON-RESIDENT FOR ACTING AS THE SELLING AGENT FOR THE INDIAN EXPO RTER, WHEREIN SUCH NON-RESIDENT WAS RENDERING SERVICES FROM OUTSIDE IN DIA DOES NOT ACCRUE IN INDIA. IN THE PRESENT CASE BEFORE ME ALSO , THE FOREIGN SELLING COMMISSION AGENTS ARE RESIDENT OF FOREIGN COUNTRY, FROM WHERE THE PROCUREMENT SERVICE HAD BEEN PROVIDED FOR WHICH THE COMMISSION HAS BEEN PAID, AND THEREFORE, THE ISSUE IS DIRECTLY AND SQUARELY COVERED BY THE APEX COURT DECISION. 2.14. REGARDING THE OBSERVATION OF THE AO THAT THE INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA BY APPLYING THE PROVISI ONS OF SECTION 9 (L)(I), IT IS SEEN THAT THERE IS NO FACT ON RECORD TO INDICATE THAT ANY OF THE AGENTS HAD ANY PERMANENT ESTABLISHMENT IN INDIA . ALL THE AGENTS HAD THEIR OFFICES ON THE FOREIGN SOIL AND NOTHING O N RECORD THAT THEY HAD PE IN INDIA. FURTHER THE ASSESSING OFFICER HAS ALSO NOT POINTED OUT ANY SUCH FACT IN ITS ORDER WHICH INDICATE THAT THER E WAS ANY SUCH OFFICE OF THE OVERSEAS AGENTS IN INDIA WHICH ATTRAC T THE DEEMING PROVISIONS. FURTHER THE OBSERVATION THAT THE SOURCE OF INCOME WAS IN INDIA IS ALSO NOT PROPER AS IT HAS CLEARLY BEEN DIS CUSSED IN THE PRECEDING PARAGRAPHS THAT NONE OF THE SERVICES HAVE BEEN RENDERED IN INDIA AND SOURCE OF INCOME CANNOT BE SAID TO BE IN INDIA AS THE SOURCE ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 8 - OF INCOME IS THE SERVICES RENDERED AND NOT THE SALE S. THERE IS NO BUSINESS CONNECTION IN INDIA FROM WHICH THE INCOME HAS BEEN EARNED, THERE IS NO PROPERTY THROUGH OR FROM WHICH THE INCO ME HAS BEEN EARNED. THEREFORE, THE PROVISIONS OF SECTION 9(1)(I ) ALSO CANNOT BE APPLIED. 2.15. RELIANCE IS PLACED ON THE JUDGEMENT OF HONOUR ABLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PRIVATE LIMITED 327 ITR 456 AND THE JUDGEMENT OF HONOURABLE 1TAT MUMBAI IN THE CASE OF OUR ARDESI B CURSETJEE 8. SONS LTD. 115 TTJ 916. 2.16. WITH REGARD TO AO'S OBSERVATION ABOUT OBTAINI NG THE CERTIFICATE OF NIL DEDUCTION OF TAX BY THE APPELLANT FROM THE I .T. AUTHORITIES, THERE WAS NO NECESSITY TO OBTAIN THE SAME FOR THE REASON THAT THE PAYMENTS TO NONRESIDENT AGENTS WAS MADE UPON WHICH NO TDS WA S LIABLE TO BE MADE. THEREFORE THE OBSERVATIONS OF THE A.O. IN THI S REGARD WERE NOT RELEVANT. 2.17. THEREFORE, IN VIEW OF THE DISCUSSION IN PRECE DING PARAS, THE AO WAS NOT JUSTIFIED TO HOLD THAT THE COMMISSION PAYAB LE TO THE OVERSEAS AGENTS WAS DEEMED TO ACCRUE OR ARISE IN INDIA AND I S TAXABLE UNDER THE ACT IN VIEW OF THE SPECIFIC PROVISIONS OF SECTI ONS 5 (2)(B) READ WITH SECTION 9 [L)[IJ OF INCOME TAX ACT. 2.18. THE LAST ISSUE WHICH IS TO BE ADJUDICATED IS THAT WHETHER THE COMMISSION PAYMENT WAS GENUINE AND THE SERVICES WER E RENDERED. THE AO HAS BRIEFLY DEALT WITH THE ISSUE IN PARA - 4 OF ASSESSMENT ORDER. IT HAS PLACED ON RECORD SEVERAL DOCUMENTS WHICH IND ICATE THAT THE AGENTS HAVE RENDERED SERVICES. IT IS FURTHER OBSERV ED THAT THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL AND ARE DULY DOCUMENTED. THE APPELLANT HAS GIVEN SATISFACTORY EV IDENCES IN RESPECT OF ALL COMMISSION PAYMENTS, AND THEREFORE, CONSIDER ING THE OVERALL FACTS AND CIRCUMSTANCES THE PAYMENT MADE TO THE AGE NTS IS TAKEN AS GENUINE. EVEN THE AO IN PARA NO.4.5 OF THE ASSESSME NT ORDER HIMSELF HAS OBSERVED 'NO DOUBT THE AGENTS MUST HAVE RENDERED SERVICES ABROAD AND HAVE SOLICITED ORDERS THEREFROM BUT THE RIGHT TO RECEIVE THE COMMISSION ARISES IN INDIA WHEN THE ORDER IS ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 9 - EXECUTED BY THE ASSESSEE IN INDIA AND THEREFORE THE INCOME ACCRUED SOURCED IN INDIA.' IT IS APPARNRET FROM THE ABOVE OBSERVATION OF THE AO THAT THE SERVICES HAVE BEEN R ENDERED BY THE AGENTS OUTSIDE INDIA BY OBTAINING THE ORDERS FOR TH E APPELLANT. THE DISALLOWANCE MADE FOR THE REASON THAT THE COMMISSIO N HAS BEEN ARISED IN INDIA DUE TO THE EXECUTION OF THE ORDERS IN INDIA. BUT THIS FINDING IS NOT CORRECT FOR THE REASON THAT THE COMM ISSION PAYMENTS HAS BEEN MADE ON SOLICITING THE ORDERS BY THE AGENT S IN FOREIGN COUNTRIES AND THEREFORE THE COMMISSION HAS ARISEN T HERE ONLY. ACCORDINGLY, IN MY CONSIDERED OPINION THE APPELLANT HAS GIVEN SATISFACTORY EVIDENCES REGARDING THE SERVICES RENDE RED BY THE AGENTS AND THE GENUINENESS OF PAYMENT OF COMMISSION. 2.19. THE AO HAS ALSO PLACED RELIANCE ON THE DECISI ON OF HON'BLE AUTHORITY OF ADVANCE RULINGS IN THE CASE OF SKF BOI LERS AND DRIERS [P.) LTD. (2012) 18 TAXMANN 325 AND RAJIV MALHOTRA (2006 ) 284 ITR 564 (DELHI). THE JUDGEMENTS ARE NOT APPLICABLE TO THE P RESENT FACTS AS THERE ARE SEVERAL OTHER DECISIONS OF HON'BLE ITAT, MUMBAI IN THE CASE OF ACIT (INTERNATIONAL TAXATION) VS. STAR CRUISE IN DIA TRAVEL SERVICES PVT. LTD. [14 ITR (T) 282 (MUM)], CLSA LIMITED VS. ITO (INTERNATIONAL TAXATION] [56 SOT 254], WHICH HOLD THAT SUCH KIND O F COMMISSION IS NOT TAXABLE IN INDIA AND ACCORDINGLY NO LIABILITY T O DEDUCT TAX WAS THERE. FURTHER THE DECISION OF HONOURABLE SUPREME C OURT OF INDIA IN THE CASE OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. TOSHOKU LIMITED 125 ITR 525, STILL PREVAILS AS ON DATE AND IS THE LAW OF THE LAND AS REGARDS APPLICABILITY OF TDS PROVISIONS TO COMMISSION PAID TO OVERSEAS/NON-RESIDENT AGENTS BY INDIAN EXPORTERS. 2.20. FURTHER, RELIANCE IS PLACED ON THE FOLLOWING DECISIONS/JUDGMENTS:- * ACIT VS. MODERN INSULATORS LTD. [56 DTR 362 (JAIP UR TRIB.)] * ISHIKAWAJAMA - HARIMA HEAVY INDUSTRIES LTD. VS. DIRECTOR OF INCOME TAX [207 CTR 361] ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 10 - * DY. COMMISSIONER OF INCOME TAX VS. DIVI'S LABORATORIES LTD. [(2011) 60 DTR (HYD) (TRIB) 210] * ITO, INTERNATIONAL TAXATION, CHENNAI VS. PRASAD PRODUCTION LTD. [(2010) 125 ITD 263 CHENNAI) (SB) * ACIT, CIRCLE-16(3)(HYDERABAD-TRIB) VS. PRIYADARSHIM SPINNING MILLS (P.) LTD. (2012) ITA NO. 1776 (2011) * ACIT (INTERNATIONAL TAXATION) VS. STAR CRUISE IND IA TRAVEL SERVICES PVT. LTD. [14 ITR (T) 282 (MUM.) * CLSA LIMITED VS. ITO (INTERNATIONAL TAXATION) [56 SOT 254 (MUM.) * ACIT VS. MODERAL INSULATORS LTD. [56 DTR 362 (ITA T, JAIPUR)] * ISHIKAWAJAMA - HARIMA HEAVY INDUSTRIES LTD. VS. DIRECTOR OF INCOME TAX [207 CTR 361] * DCIT VS. EON TECHNOLOGY PVT. LTD. [46 SOT 323 (DE LHI ITAT) * SUKANI ENTERPRISES VS. ACIT [ITA NO. 1330/MUM/2011] (ITAT, MUMBAI) * ITO VS. PIPAVAV SHIPYARD LIMITED [(2014) 42 TAXMANN.COM 159] * ACIT 17(2), MUMBAI VS. VILAS N. TAMHANKAR (2015) [55 TAXMANN.COM 413] * CIT V. VINAYAK EXPORTS 82 CCH 0032 (GUJ) (2012) * CIT VS. FLUIDTHERM TECHNOLOGY (P.) LTD. (2015) 57 TAXMANN.COM 87 (MADRAS) * CIT VS. ORIENT EXPRESS (2015) 56 TAXMANN.COM 331 MADRAS) * ASST. CIT V. INDIA SHOES EXPORTS (P.) LTD. (2015) 57 TAXMANN.COM 303 (CHENNAL - TRIB) * INDO INDUSTRIES LTD. V. 1TO (2015) 53 TAXMANN.COM 458 MUMBAI -TRIB.) * KHIMJI VISRAM & SONS V. ADDL. CIT (2014) 52 TAXMANN.COM 485 (ITAT, MUMBAI) * COMMISSIONER OF INCOME-TAX, CHENNAI V. FAIZAN SHOES (P.) LTD. [2014] 48 TAXMAN.COM 48 (MAD.) ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 11 - * ASSISTANT COMMISSIONER OF INCOME-TAX, CO. CIRCLE - 1(3) V. COMEX EXPORTS (P) LTD. [2014] 45 TAXMANN.COM 406 (CHENNAI -TRIB.) * ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE 111 (2), CHENNAI V. T. ABDUL WAHID TANNERIES (P.) LTD. [2014] 47 TAXMANN.COM 133 (CHENNAI TRI.) * AJIT IMPEX VS. DCIT 46 TAXMANN.COM 163 [2014] * PANKAJ A. SHAH VS. ITO, WARD - 1, BARODA [47 TAXMANN.COM 205(2014)] * ZANAV HOME COLLECTION VS. JCIT, RANGE - 10, BANGALORE [2015] 55 TAXMAN.COM 200 (BANGALORE TRIB.) * ACIT VS. KARISHMA GLOBAL MINERALS P VT. LTD. [2015] 56 TAXMAN.COM 265 (PANAJI TRIB.) * ACIT VS. SHIVA TEXYARN LTD. [2015] 53 TAXMAN.COM 495 (CHENNAI TRIB.) 2.21. IN VIEW OF THE ABOVE DISCUSSION AND THE SUBMI SSION OF THE APPELLANT, BESIDES THE JUDGMENTS / DECISIONS OF VAR IOUS COURTS, IT IS HOLD THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT TA X ON THE COMMISSION PAID TO FOREIGN AGENTS. ON GOING THROUGH THE MATERIAL ON RECORD, THERE WERE THE UNCONTROVERTED FACTS THAT TH E AGENTS WERE NON - RESIDENTS AND THEY WERE ACTING OUTSIDE INDIA AND PROVIDING THE SERVICES IN LIEU OF COMMISSION FROM ABROAD ONLY. TH E AGENTS DID NOT HAVE ANY PERMANENT ESTABLISHMENT FOR BUSINESS CONNE CTION OR BUSINESS PLACE IN INDIA, THUS, IN ABSENCE OF ANY AC TIVITY BEING CARRIED OUT IN INDIA BY A NON - RESIDENT COMMISSION AGENT, THE COMMISSION DOES NOT ACCRUE OR ARISE IN INDIA, AND HENCE, NOT T AXABLE IN INDIA. THEREFORE, THE DISALLOWANCE OF RS. 54,06,265/- UNDE R SECTION 40(A)(IA) MADE BY THE AO IS DIRECTED TO BE DELETED. 9. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) REVEN UE IS IN SECOND APPEAL BEFORE US. BOTH THE PARTIES BEFORE US RELIED ON THE ORDER OF AUTHORITIES BELOW AS FAVORABLE TO THEM. ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 12 - 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE IN STANT CASE, ASSESSEE HAS MADE PAYMENT TO VARIOUS AGENTS AS COMM ISSION BASED IN FOREIGN COUNTRIES ON ACCOUNT OF EXPORT MADE TO T HE PARTIES REFERRED BY THEM. THE AO DISALLOWED THE SAME ON TW O GROUNDS, FIRSTLY, THE IDENTIFICATION OF THE PARTIES, DETAILS OF PAYMENT & SERVICES RENDERED BY THEM WERE NOT FURNISHED, SECONDLY NO TD S WAS DEDUCTED UNDER SECTION 195 OF THE ACT BY THE ASSESS EE ON SUCH PAYMENT. THE VIEW TAKE BY THE AO WAS SUBSEQUENTLY R EVERSED BY THE LD. CIT-A. HOWEVER THE ISSUE BEFORE US ARISES WITH REGARD TO THE NON- DEDUCTION OF TDS BY THE ASSESSEE UNDER SECTION 195 OF THE ACT. IN THIS REGARD WE FIND IMPORTANT AND RELEVANT TO REPRODUCE THE PROVISION OF SECTION 195 OF THE ACT WHICH READS AS UNDER :- OTHER SUMS. 71 195. 72 [(1) 73 ANY PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDENT , NOT BEING A COMPANY, OR TO A FOREIGN COMPANY, ANY I NTEREST 74 [***] OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF TH IS ACT (NOT BEING INCOME CHARGEABLE UNDER THE HEAD SALARIES 75 [***]) SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYE E OR AT THE TIME OF PAYMENT THEREOF IN CASH OR BY THE ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATES IN FORCE : A PLAIN LOOK AT THE ABOVE STATUTORY PROVISION MAKES IT CLEAR THAT THE ASSESSEE IS LIABLE TO DEDUCT TDS ON THE PAYMENT TO NON RESIDENTS ON ANY SUM CHARGEABLE UNDER THE PROVISION OF THIS ACT. NOW, THE QUESTION AROSE WHETHER PAYMENT MADE TO THE FOREIGN AGENT IS CHARGEABLE TO TAX IN INDIA. FOR THIS PURPOSE, WE NE ED TO REFER THE PROVISION OF SEC. 5(2) OF THE ACT WHICH READS AS UN DER:- ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 13 - SCOPE OF TOTAL INCOME. 47 5. 48 (1) SUBJECT TO 49 THE PROVISIONS OF THIS ACT, THE TOTAL INCOME 49 OF ANY PREVIOUS YEAR OF A PERSON WHO IS A RESIDENT INC LUDES ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH XXXXXXXXXXXXXXX (2) SUBJECT TO 49 THE PROVISIONS OF THIS ACT, THE TOTAL INCOME 49 OF ANY PREVIOUS YEAR OF A PERSON WHO IS A NON-RESIDENT INC LUDES ALL INCOME FROM WHATEVER SOURCE DERIVED WHICH (A) IS RECEIVED 50 OR IS DEEMED TO BE RECEIVED 50 IN INDIA IN SUCH YEAR BY OR ON BEHALF OF SUCH PERSON ; OR (B) ACCRUES 50 OR ARISES 50 OR IS DEEMED TO ACCRUE OR ARISE TO HIM IN INDIA DURING SUCH YEAR. IT IS BEYOND DOUBT THAT THE PAYMENT FOR THE COMMISS ION WAS NOT RECEIVED BY THE FOREIGN AGENTS IN INDIA. THEREFORE, THE SAME CANNOT BE TAXED IN INDIA AS PER CLAUSE (A) OF SUB-SECTION (2) OF SECTION 5 OF THE ACT. SIMILARLY, WE FURTHER NOTE THAT THE INCOME WAS RECEIVED BY THE FOREIGN AGENTS ON ACCOUNT OF SERVICES RENDERED BY THEM IN THEIR RESPECTIVE COUNTRIES. THEREFORE, WE CONCLUDE THAT S UCH INCOME HAS NOT ACCRUED OR ARISEN IN INDIA AND CONSEQUENTIAL NO T CHARGEABLE TO TAX IN INDIA. NOW COMING TO THE FACT THAT WHETHER SUCH COMMISSION INCOME BY THE FOREIGN AGENTS WERE DEEMED TO ACCRUE OR ARISE IN IN DIA IN TERMS OF PROVISION OF SECTION 9 OF THE ACT, WHICH READS AS U NDER:- INCOME DEEMED TO ACCRUE OR ARISE IN INDIA. 65 9. 66 (1) THE FOLLOWING INCOMES SHALL BE DEEMED 67 TO ACCRUE OR ARISE IN INDIA : 68 (I) ALL INCOME ACCRUING OR ARISING, WHETHER DIRECT LY OR INDIRECTLY, THROUGH OR FROM ANY BUSINESS CONNECTION 69 IN INDIA, OR THROUGH OR FROM ANY PROPERTY 69 IN INDIA, OR THROUGH OR FROM ANY ASSET OR SOURCE OF INCOME IN INDIA, 70 [* * *] OR THROUGH THE TRANSFER OF A CAPITAL ASSET SITUATE IN INDIA. ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 14 - 71 [EXPLANATION 1].FOR THE PURPOSES OF THIS CLAUSE (A) IN THE CASE OF A BUSINESS OF WHICH ALL T HE OPERATIONS 72 ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DE EMED UNDER THIS CLAUSE TO ACCRUE OR ARISE IN INDIA SHALL BE ON LY SUCH PART OF THE INCOME AS IS REASONABLY ATTRIBUTABLE TO THE OPERATIONS 72 CARRIED OUT IN INDIA ; (B) IN THE CASE OF A NON-RESIDENT, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA TO HIM THROUGH OR FROM OPE RATIONS WHICH ARE CONFINED TO THE PURCHASE OF GOODS IN INDI A FOR THE PURPOSE OF EXPORT ; 73 [* * *] 74 [(C) IN THE CASE OF A NON-RESIDENT, BEING A PERSON ENGAGED IN THE BUSINESS OF RUNNING A NEWS AGENCY OR OF PUBLISHING NEWSPAPERS, MAGAZINES OR JOURNALS, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA TO HIM THROUGH OR FROM ACTIVITIES WH ICH ARE CONFINED TO THE COLLECTION OF NEWS AND VIEWS IN IND IA FOR TRANSMISSION OUT OF INDIA ;] FROM THE ABOVE PROPOSITION, WE FIND THAT INCOME SHA LL BE DEEMED TO ACCRUE OR ARISE IN INDIA IF IT FULFILLS ANY OF THE CONDITIONS :- I) BUSINESS CONNECTION IN INDIA; OR II) FROM ANY PROPERTY IN INDIA; OR III) FROM ANY ASSET OR SOURCE OF INCOME IN INDIA OR IV) TRANSFER OF CAPITAL ASSET SITUATED IN INDIA FROM THE ABOVE, WE NOTE THAT THE CASE OF ASSESSEE I S NOT FALLING IN ANY OF THE CATEGORY AS DISCUSSED ABOVE. SIMILARLY, WE ALSO NOTE THAT IT IS NOT THE CASE OF REVENUE THAT PAYMENT WAS MADE BY ASSESSEE ON ACCOUNT OF TECHNICAL SERVIC ES RENDERED BY THE FOREIGN AGENTS. THEREFORE, IN OUR CONSIDERED VI EW, ASSESSEE WAS NOT LIABLE TO DEDUCT TDS U/S 195 OF THE ACT. IN HOL DING SO, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON'BLE M ADRAS HIGH ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 15 - COURT IN THE CASE OF CIT VS. FARIDA LEATHER CO. REPORTED IN 66 TAXMAN.COM 321 (MAD) WHEREIN IT WAS HELD AS UNDER:- 9.2 THE UNDERLYING PRINCIPLE IS THAT, THE TAX WITHHOLD ING LIABILITY OF THE PAYER IS INHERENTLY A VICARIOUS LIABILITY ON BE HALF OF THE RECIPIENT AND THEREFORE, WHEN THE RECIPIENT / FOREIGN AGENT D OES NOT HAVE THE PRIMARY LIABILITY TO BE TAXED IN RESPECT OF INCOME EMBEDDED IN THE RECEIPT, THE VICARIOUS LIABILITY OF THE PAYER TO DE DUCT TAX DOES NOT ARISE. THIS VICARIOUS TAX WITHHOLDING LIABILITY CAN NOT BE INVOKED, UNLESS PRIMARY TAX LIABILITY OF THE RECIPIENT / FOR EIGN AGENT IS ESTABLISHED. IN THIS CASE, THE PRIMARY TAX LIABILIT Y OF THE FOREIGN AGENT IS NOT ESTABLISHED. THEREFORE, THE VICARIOUS LIABIL ITY ON THE PART OF THE ASSESSEE TO DEDUCT THE TAX AT SOURCE DOES NOT EXIST . WE ALSO FIND SUPPORT AND GUIDANCE FROM THE ORDER OF ITAT AHMEDABAD BENCH IN THE CASE OF DCIT (INTERNATIONAL TAXATION) VS. WELSPUN CORPORATION LTD., REPORTED IN 77 TAXMANN.COM 165 (AHD), WHEREIN IT WAS HELD AS UNDER;- 33. THERE ARE A COUPLE OF RULINGS BY THE AUTHORITY FOR ADVANCE RULING, WHICH SUPPORT TAXABILITY OF COMMISSION PAID TO NON-RESIDENTS UNDER SECTION 9(1)(I), BUT, NEITHER THESE RULINGS A RE BINDING PRECEDENTS FOR US NOR ARE WE PERSUADED BY THE LINE OF REASONING ADOPTED IN THESE RULINGS. AS FOR THE AAR RULING IN THE CASE OF SKF BOILERS & DRIERS (P.) LTD. IN RE [2012] 343 ITR 385/206 TAXMAN 19/18 TAXMANN.COM 325 (AAR - NEW DELHI) , WE FIND THAT THIS DECISION MERELY FOLLOWS THE EARLIER RULING IN THE CASE OF RA JIV MALHOTRA, IN RE [2006] 284 ITR 564/155 TAXMAN 101 (AAR - NEW DELHI) WHICH, IN OUR CONSIDERED VIEW, DOES NOT TAKE INTO ACCOUNT THE IMPACT OF EXPLANATION 1 TO SECTION 9(1)(I) PROPERLY. THAT WAS A CASE IN WHICH THE NON-RESIDENT COMMISSION AGENT WORKED FOR PROCUR ING PARTICIPATION BY OTHER NON-RESIDENT ENTITIES IN A F OOD AND WINE SHOW IN INDIA, AND THE CLAIM OF THE ASSESSEE WAS THAT SI NCE THE AGENT HAS NOT CARRIED OUT ANY BUSINESS OPERATIONS IN INDIA, T HE COMMISSION AGENT WAS NOT CHARGEABLE TO TAX IN INDIA, AND, ACCO RDINGLY, THE ASSESSEE HAD NO OBLIGATION TO DEDUCT TAX AT SOURCE FROM SUCH ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 16 - COMMISSION PAYMENTS TO THE NON-RESIDENT AGENT. ON T HESE FACTS, THE AUTHORITY FOR ADVANCE RULING, INTER ALIA, OPINED TH AT 'NO DOUBT THE AGENT RENDERS SERVICES ABROAD AND PURSUES AND SOLIC ITS EXHIBITORS THERE IN THE TERRITORY ALLOTTED TO HIM, BUT THE RIG HT TO RECEIVE THE COMMISSION ARISES IN INDIA ONLY WHEN EXHIBITOR PART ICIPATES IN THE INDIA INTERNATIONAL FOOD & WINE SHOW (TO BE HELD IN INDIA), AND MAKES FULL AND FINAL PAYMENT TO THE APPLICANT IN IN DIA' AND THAT 'THE COMMISSION INCOME WOULD, THEREFORE, BE TAXABLE UNDE R SECTION 5(2)(B) READ WITH SECTION 9(1)(I) OF THE ACT'. THE AUTHORIT Y FOR ADVANCE RULING ALSO HELD THAT 'THE FACT THAT THE AGENT REND ERS SERVICES ABROAD IN THE FORM OF PURSUING AND SOLICITING PARTICIPANTS AND THAT THE COMMISSION IS REMITTED TO HIM ABROAD ARE WHOLLY IRR ELEVANT FOR THE PURPOSE OF DETERMINING SITUS OF HIS INCOME'. WE DO NOT CONSIDER THIS APPROACH TO BE CORRECT. WHEN NO OPERATIONS OF THE B USINESS OF COMMISSION AGENT IS CARRIED ON IN INDIA, THE EXPLAN ATION 1 TO SECTION 9(1)(I) TAKES THE ENTIRE COMMISSION INCOME FROM OUT SIDE THE AMBIT OF DEEMING FICTION UNDER SECTION 9(1)(I), AND, IN EFFE CT, OUTSIDE THE AMBIT OF INCOME 'DEEMED TO ACCRUE OR ARISE IN INDIA' FOR THE PURPOSE OF SECTION 5(2)(B). THE POINT OF TIME WHEN COMMISSION AGENT'S RIGHT TO RECEIVE THE COMMISSION FRUCTIFIES IS IRRELEVANT TO DECIDE THE SCOPE OF EXPLANATION 1 TO SECTION 9(1 )(I), WHICH IS WHAT IS MATERIAL IN THE CONTEXT OF THE SITUATION THAT WE ARE IN SEISIN OF. THE REVENUE'S CASE BEFORE US HINGES ON THE APPLICABILITY OF SECTION 9( 1)(I) AND, IT IS, THEREFORE. IMPORTANT TO ASCERTAIN AS TO WHAT EXTENT WOULD THE RIGOUR OF SECTION 9(1)(I) BE RELAXED BY EXPLANATION 1 TO S ECTION 9(1)(I). WHEN WE EXAMINE THINGS FROM THIS PERSPECTIVE, THE INEVIT ABLE CONCLUSION IS THAT SINCE NO PART OF THE OPERATIONS OF THE BUSINES S OF THE COMMISSION AGENT IS CARRIED OUT IN INDIA, NO PART OF THE INCOM E OF THE COMMISSION AGENT CAN BE BROUGHT TO TAX IN INDIA. IN THIS VIEW OF THE MATTER, VIEWS EXPRESSED BY THE HON'BLE AAR, WHICH DO NOT FETTER O UR INDEPENDENT OPINION ANYWAY IN VIEW OF ITS LIMITED BINDING FORCE UNDER S. 245S OF THE ACT, DO NOT IMPRESS US, AND WE DECLINE TO BE GU IDED BY THE SAME. THE STAND OF THE REVENUE, HOWEVER, IS THAT THESE RU LINGS, BEING FROM SUCH A HIGH QUASI-JUDICIAL FORUM, EVEN IF NOT BINDI NG, CANNOT SIMPLY BE BRUSHED ASIDE EITHER, AND THAT THESE RULINGS AT LEA ST HAVE PERSUASIVE VALUE. WE HAVE NO QUARREL WITH THIS PROPOSITION. WE HAVE, WITH UTMOST CARE AND DEEPEST RESPECT, PERUSED THE ABOVE RULINGS RENDERED ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 17 - BY THE HON'BLE AUTHORITY FOR ADVANCE RULING. WITH G REATEST RESPECT, BUT WITHOUT SLIGHTEST HESITATION, WE HUMBLY COME TO THE CONCLUSION THAT WE ARE NOT PERSUADED BY THESE RULINGS. SIMILARLY WE ALSO FIND SUPPORT & GUIDANCE FROM THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PR CIT VS . MGM EXPORTS IN R/TAX APPEAL NO. 309 OF 2018 VIDE ORDER DATED APRIL 11, 2018. THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW : 7. IN THE RECENT ORDER IN TAX APPEAL NO. 290 OF 2018, WE HAD DEALT WITH SIMILAR SITUATION MAKING FOLLOWING OBSERVATIONS: 'IT CAN THUS BE SEEN THAT WHILE CONFIRMING THE ORDE R OF CIT [A], THE TRIBUNAL RELIED ON JUDGMENT OF THE SUPREME COURT IN THE CASE OF G.E INDIA TECHNOLOGY CENTRE P. LIMITED VS. COMMISSIONER OF INCOME-TAX & ANR., REPORTED IN [2010] 327 ITR 456 (SC) = 2010-TI I-07-SC-INTL IN SUCH JUDGMENT, IT WAS HELD AND OBSERVED THAT THE MOST IMPORTANT EXPRESSION IN SECTION 195[1] OF THE ACT CONSISTS OF THE WORDS, 'CHARGEABLE UNDER THE PROVISIONS OF THE ACT'. IT WA S OBSERVED THAT, '..A PERSON PAYING INTEREST OR ANY OTHER SUM TO A NON-RE SIDENT IS NOT LIABLE TO DEDUCT TAX IF SUCH SUM IS NOT CHARGEABLE TO TAX UNDER THE ACT,' COUNSEL FOR THE REVENUE, HOWEVER, DREW OUR ATTENTIO N TO THE EXPLANATION 2 TO SUB-SECTION [1] OF SECTION 195 OF THE ACT WHICH WAS INSERTED BY THE FINANCE ACT OF 2012 WITH RETROSPECT IVE EFFECT FROM 1ST APRIL 1962. SUCH EXPLANATION READS AS UNDER:- EXPLANATION 2 - FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT THE OBLIGATION TO COMPLY WITH SUBSECTION (1) A ND TO MAKE DEDUCTION THEREUNDER APPLIES AND SHALL BE DEEMED TO HAVE ALWAYS APPLIED AND EXTENDS AND SHALL BE DEEMED TO H AVE ALWAYS EXTENDED TO ALL PERSONS, RESIDENT OR NON-RES IDENT, WHETHER OR NOT THE NON-RESIDENT PERSON HAS- ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 18 - [I] A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CO NNECTION IN INDIA; OR [II] ANY OTHER PRESENCE IN ANY MANNER WHATSOEVER I N INDIA. IS INDISPUTABLY TRUE THAT SUCH EXPLANATION INSERTED WITH RETROSPECTIVE EFFECT PROVIDES THAT OBLIGATION TO CO MPLY WITH SUBSECTION [1] OF SECTION 195 WOULD EXTEND TO ANY PERSON RESIDENT OR NON-RESIDENT, WHETHER OR NOT NON - RESIDENT PERSON HAS A RESIDENCE OR PLACE OF BUSINES S OR BUSINESS CONNECTIONS IN INDIA OR ANY OTHER PERSONS IN ANY MANNER WHATSOEVER IN INDIA. THIS EXPRESSION WHI CH IS ADDED FOR REMOVAL OF DOUBT IS CLEAR FROM THE PLA IN LANGUAGE THEREOF, MAY HAVE A BEARING WHILE ASCERTAINING WHETHER CERTAIN PAYMENT MADE TO A NON- RESIDENT WAS TAXABLE UNDER THE ACT OR NOT. HOWEVER, ONCE THE CONCLUSION IS ARRIVED THAT SUCH PAYMENT DI D NOT ENTAIL TAX LIABILITY OF THE PAYEE UNDER THE ACT, AS HELD BY THE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOG Y CENTRE P. LIMITED [SUPRA], SUB-SECTION [1] OF SECTI ON 195 OF THE ACT WOULD NOT APPLY. THE FUNDAMENTAL PRINCIP LE OF DEDUCTING TAX AT SOURCE IN CONNECTION WITH PAYMENT ONLY, WHERE THE SUM IS CHARGEABLE TO TAX UNDER THE ACT, STILL CONTINUES TO HOLD THE FIELD. IN THE PRESENT C ASE, THE REVENUE HAS NOT SEVEN SERIOUSLY CONTENDED THAT THE PAYMENT TO FOREIGN COMMISSION AGENT WAS NOT TAXABLE IN INDIA. TAX APPEAL IS THEREFORE DISMISSED. THE PRINCIPLES LAID DOWN IN THE ABOVE CITED JUDGMEN TS ARE SQUARELY APPLICABLE TO THE INSTANT FACTS OF THE CASE. THUS, IT CAN BE SAFELY CONCLUDED THAT THE COMMISSION INCOME IN THE HANDS O F FOREIGN AGENT IS NOT CHARGEABLE TO TAX IN INDIA IN THE GIVEN FACT S & CIRCUMSTANCES. ONCE AN INCOME IS NOT CHARGEABLE TO TAX IN INDIA TH EN THE QUESTION OF DEDUCTING TDS UNDER THE PROVISION OF SECTION 195 OF THE ACT DOES NOT ARISE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO IN TERFERE IN THE ORDER ITA NO.2503/AHD/2016 DCIT V. M/S. GUJARAT MICROWAX PVT LTD. ASST.YEAR 2013-14 - 19 - OF LD. CIT-A. HENCE THE GROUND OF APPEAL RAISED BY THE REVENUE IS HEREBY DISMISSED. 11. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 24/05/2018 SD/- SD/- EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN EGKOHJ IZLKN OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; YKS[KK LNL; U;KF;D LNL; YKS [KK LNL; U;KF;D LNL; YKS [KK LNL; U;KF;D LNL; YKS [KK LNL; (MAHAVIR PRASAD) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 24/05/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / CONCERNED CIT 4. ) () / THE CIT(A)-2, AHMEDABAD. 5. ,-. //'( , '(# , 12$&$ / DR, ITAT, AHMEDABAD 6. .34 5 / GUARD FILE. % & / BY ORDER, , / //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD