Thy ACIT, Circle-2(1)(2), , Ahmedabad V. M & B Engineering Limited, Ahmedabad

ITA 370/AHD/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6401 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-10-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 15-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Capital asset; Business income; Double taxation relief; Deemed to accrue or arise in india; Retrospective amendment; Permanent establishment; Advance ruling; TDS
• Section: 143(3); 5(2); 40(a)(ia); 37(1); 195

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 370/AHD/2018 ( ASSESSMENT YEAR : 2013-14) THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-2(1)(2), AHMEDABAD 1 ST FLOOR, NAVJIVAN TRUST BLDG. OFF. ASHRAM ROAD, AHMEDABAD / VS. M & B ENGINEERING LIMITED M. B. HOUSE, 51, CHANDRODAY SOCIETY, OPP. GOLDEN TRIANGLE, STADIUM ROAD, AHMEDABAD ./ ./ PAN/GIR NO. : AAACM7930Q ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI LALIT P. JAIN, SR. D.R. / RESPONDENT BY : SHRI SULABH PADSHAH, A.R. DATE OF HEARING 17/10/2019 !'# / DATE OF PRONOUNCEMENT 22/10/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AHMEDABAD (CIT(A) IN SHORT), DATED 30.11.2017 ARIS ING IN THE ASSESSMENT ORDER DATED 22.11.2016 PASSED BY THE ASSESSING OFFI CER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCER NING AY 2013-14. ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS UNDER: 1 THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF COMMISSION TO FOREIGN AGENTS AMOUNT ING TO RS. 4,63,62,693/- PAID WITHOUT PROPERLY APPRECIATING TH E FACTS THAT THE ASSESSEE WAS UNABLE TO LEAD EVIDENCE TO PROVE THE F ACTUM OF ACTUAL RENDERING OF SERVICES BY SUCH RECIPIENTS. REFERENCE IN THIS REGARD IS MADE TO THE DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF PREMIER BREWERIES LTD VS CIT COCHIN 2015 56 TAXMANN .COM 361 (SC) . 1.1 WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) HAS ERRED IN LAW ON FACTS IN DELETING THE DISALLOWANCE U/S. 40(A)(I) OF THE IT. ACT ON EXPORT COMMISSION PAYMENTS MADE TO THE NON-RESIDENT AGENTS SOLELY RELYING ON THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF CIT VS. TOSHUKU LTD. (1980) 125 ITR 525 (SC ) WHICH IS NO MORE APPLICABLE IN VIEW OF THE SUBSEQUENT AMENDMENT S BROUGHT IN THE IT. ACT. 1.2 THE LD. CIT(A) HAS FAILED TO APPRECIATE THAT S UCH PAYMENTS ARE CHARGEABLE TO TAX IN INDIA UNDER THE PROVISIONS OF SECTION 9(1)(VII) OF THE IT. ACT AND, THEREFORE, THE ASSESSEE WAS REQ UIRED TO DEDUCT TDS ON SUCH REMITTANCES. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LE ARNED DR FOR THE REVENUE RELIED UPON THE ORDER OF THE AO. 4. THE LEARNED AR FOR THE ASSESSEE, ON THE OTHER HA ND, SUBMITTED THAT THE ISSUE IS COVERED BY ASSESSEES OWN CASE IN AY 2 014-15. 5. THE DISALLOWANCE OF COMMISSION TO FOREIGN AGENTS AMOUNTING TO RS.4,63,62,693/- PAID BY THE ASSESSEE IN QUESTION. THE CIT(A) HAS DEALT WITH THE ISSUE AS UNDER: 2.3 DECISION I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED THE COMMISSION PAID TO FOREIGN AGENT NAMELY; M/S. S TONE HILL ELECTROMECHANICAL CONTRACTING, FAB HOUSE TECHNOLOGI ES LLC & VIBGYOUR INTERNATIONAL FZ LLC AMOUNTING TO RS.4,63,62,693/- BY HOLDING THAT THE INCOME ARISING ON ACCOUNT OF COMMISSION PAYABLE TO OVERSEAS AGENT WAS DEEMED TO ACCRUE OR ARISE IN INDIA AND WAS ACCORDIN GLY TAXABLE UNDER THE PROVISIONS OF SECTION 5 (2)(B) READ WITH SECTION 9( 1)(I) OF INCOME TAX ACT. IT HAS FURTHER BEEN OBSERVED BY THE AO THAT THE APP ELLANT COMPANY HAD FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 195 (2). HE HAS ALSO HELD, ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 3 - WITHOUT PREJUDICE TO THE MAIN FINDINGS THAT, THE AP PELLANT HAD ALSO FAILED TO PROVE THE COMMISSIONS PAID TO THE AGENTS WERE GE NUINE AND JUSTIFIED. THE AO OBSERVED THAT THE APPELLANT HAS NOT PROVED T HE IDENTITY AND THE EVIDENCES OF SERVICES RENDERED BY THE FOREIGN COMMI SSION AGENTS FOR WHICH COMMISSION WAS PAID BY THE APPELLANT. NO COPY OF AG REEMENT OR DOCUMENTARY EVIDENCES IN SUPPORT OF COMMISSION PAYM ENT WAS GIVEN BY THE ASSESSEE WHICH COULD JUSTIFY THE REASONABLENESS OF THE COMMISSION PAYMENT TO THE NON-RESIDENT AS WELL AS GENUINENESS OF THE EXPENSES INCURRED FOR THE PURPOSE OF BUSINESS. THE AO OBSERV ED THE FACT THAT THE AGE.IT HAD RENDERED SERVICES ABROAD IN THE FORM OF SOLICITING THE ORDERS AND THE COMMISSION IS TO BE REMITTED TO THEM ABROAD IS WHOLLY IRRELEVANT FOR THE PURPOSE OF DETERMINING THE QUESTION OF ACCR UAL AND ARISE OF INCOME, SINCE THE INCOME FROM COMMISSION PAYMENT TO NON - RESIDENT HAS AROSE IN INDIA AND IS TAXABLE UNDER THE ACT, IN VIE W OF THE SPECIFIC PROVISIONS OF SECTION 5(2)(B) R.W.S. 9(1)(I) OF I.T . ACT, 1961, THE PROVISIONS OF SECTION 195 WOULD THEREFORE BE APPLICABLE. 2.4. THE APPELLANT ON THE OTHER HAND, IN ITS DETAIL ED WRITTEN SUBMISSION, HAS CLAIMED THAT THE PROVISIONS OF SECTION 5(2)(B) READ WITH SECTION 9 (1)(I) OF INCOME TAX ACT WERE NOT APPLICABLE IN ITS CASE. THE INCOME HAS BEEN EARNED ABROAD AND, IS THEREFORE, RIOT TAXABLE IN INDIA. IT HAS ALSO GIVEN DETAILED EVIDENCES TO PROVE THAT THE COMMISSI ON PAID WAS GENUINE. THE APPELLANT CLAIMED THAT THERE WAS NO PE OF THE F OREIGN AGENTS / NUN - RESIDENTS IN INDIA, THEREFORE, NO TDS WAS REQUIRED TO BE DEDUCTED FROM SUCH PAYMENTS. 2.5. IT WAS CLAIMED THAT THE GOODS WERE EXPORTED TH ROUGH AGENT WHO BASICALLY WAS FROM UAE. THE APPELLANT ALSO MADE SAL ES TO OTHER COUNTRIES LIKE TANZANIA AND MOZAMBIQUE. IT IS FURTHER CLAIMED THESE OVERSEAS AGENT WAS PROVIDING EXPORT ORDERS BY SEARCHING / INQUIRIN G EXPORT - IMPORT FROM COUNTRIES SPREAD OVER WORLD-WIDE ALONG WITH OTHER S ERVICES. 2.6. HE ALSO PROVIDED THE RELEVANT DETAILS TO THE A O DURING ASSESSMENT PROCEEDINGS THROUGH ITS LETTER DATED 18/11/2016 AS UNDER:- I) STATEMENT OF ALL TRANSACTIONS ENTERED INTO WITH M/S. STONE HILL ELECTROMECHANICAL CONTRACTING, FAB HOUSE TECHNOLOGIES LLC & VIBGYOUR INTERNATIONAL FZ LLC, W HICH INCLUDES THE DETAILS OF EXPORT PARTY AND ORDER SIZE AND COMMISSION PAID FOR EACH JOB. (II) LEDGER ACCOUNT OF M/S. STONE HILL ELECTROMECHA NICAL CONTRACTING, FAB HOUSE TECHNOLOGIES LLC & VIBGYOUR INTERNATIONAL FZ LLC. (III) COPIES OF ALL BILLS ALONG WITH COPIES OF I5C A AND 15CB. [IV] COPY OF BANK STATEMENT AND BANK PAYMENT ADVIC E OF ALL THE PAYMENTS MADE [ANNEXURE- 4). (V) COPY OF TAX RESIDENCY CERTIFICATE ISSUED BY U AE. TRC CLEARLY MENTIONED THAT M/S. STONE HILL ELECTROMECHANICAL CONTRACTING, FAB HOUSE TECHNOLOGIES LLC & VIBGYOUR INTERNATIONAL FZ LLC WAS A RESIDENT OF UAE). ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 4 - 2.7. THE APPELLANT ALSO SUBMITTED THAT THIS TYPE OF COMMISSION TO OVERSEAS AGENTS ON EXPORT INCLUDING M/S. STONE HILL ELECTROMECHANICAL CONTRACTING. FOB HOUSE TECHNOLOGIES LLC S, VIBGYOUR INTERNATIONAL FZ LLC HAVE ALSO BEEN PAID IN THE PRECEDING YEARS AND THE AO HAS ALLOWED SUCH COMMISSION PAYMENTS AND NO DISALLOWANCE IN THI S REGARD HAS BEEN MADE IN THE SCRUTINY ASSESSMENT COMPLETED FOR A. Y. 2011-12. IT WAS ALSO PLEADED THAT THEY HAVE COMPLIED THE PROVISIONS OF I . T. ACT, DTAA AND ACCORDINGLY WAS NOT UNDER AN OBLIGATION TO MAKE WIT HHOLDING TAX IN TERMS OF BENEFICIAL PROVISIONS OF SECTION 90(2) OF THE 1. T. ACT. THE APPELLANT ALSO PROVIDED TO THE AO, THE EVIDENCES ALONG WITH B ANK PAYMENT DETAILS REALIZING THE EXPORT PROCEEDS, COMPANY PAYMENT ADVI CE, FORM NO.15CA AND 15CB, CREDIT NOTE OF OVERSEAS AGENT, INVOICE FO R EXPORT BY COMPANY WITH COMMISSION AMOUNT ETC. WAS FURNISHED AS EVIDEN CES FOR JUSTIFICATION OF COMMISSION TO OVERSEAS AGENT AND THE SAME HAVE N OT BEEN CONTROVERTED IN THE ASSESSMENT PROCEEDINGS. THUS, IT WAS SUBMITT ED THAT THE PAYMENT OF COMMISSION TO OVERSEAS AGENT WAS PART OF EXPORT OF PRODUCTS AND AN IMPORTANT MEDIATORY CHANNEL TO BOOK THE EXPORT ORDE RS AS WELL AS TO TAKE CARE OF REALIZATION OF EXPORT PROCEEDS. THUS, THE C OMMISSION PAYMENT WAS GENUINE AND PAID THROUGH BANKING CHANNELS ON EXPORT ORDERS PROCURED. THE SAME WERE MADE FOR THE PURPOSE OF BUSINESS IN P RUDENT WAY TO INCREASE EXPORT AND INCREASE CUSTOMER BASE IN FOREI GN COUNTRIES. 2.8. WITH REGARD TO THE PROVISIONS OF SECTION 9(1)( I), IT WAS SUBMITTED THAT THE OVERSEAS AGENT WAS NOT DOING ANY BUSINESS IN IN DIA. IT WAS MERELY PROVIDING EXPORT ORDERS TO FACILITATE APPELLANT. FU RTHER, THE OVERSEAS AGENT DID NOT HAD ANY BUSINESS CONNECTION IN INDIA. IT WAS FURTHER CLAIMED THAT THERE IS NO INCOME DEEMED TO ACCRUE OR ARISE I N INDIA IN VIEW OF THE EXPLANATIONS TO THE PROVISIONS OF SECTION 9(1)(I) O F THE I.T. ACT AS THE OVERSEAS AGENT HAD RENDERED SERVICES OUTSIDE INDIA AND THE COMMISSION WAS ALSO PAID TO THEM OUTSIDE INDIA. HENCE, THERE W AS NO OBLIGATION TO DEDUCT THE TAX FROM SUCH COMMISSION PAYMENTS AS PER THE PROVISIONS OF SECTION 195 OF THE I. T. ACT. 2.9. THUS, IT HAS BEEN SUBMITTED THAT THE IDENTITY AND GENUINENESS OF THE OVERSEAS COMMISSION AGENT IS PROVED WITH THE EVIDEN CES SUCH AS, CREDIT NOTES TO OVERSEAS AGENTS, EXPORT INVOICES, SHIPPING BILLS, BANK CERTIFICATE FOR EXPORT REALIZATION, COPY OF FORM NO. 15CA 8, 15 CB AND COMMISSION PAYMENT ETC. AS DISCUSSED ABOVE. 2.10. HAVING CONSIDERED THE FACTS AND SUBMISSIONS, THE 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 SECTION 5 (2)( B) READ WITH SECTION 9 (1) (I) OF INCOME TAX ACT. 2. WHETHER THE PROVISIONS OF SECTION 195(2) WERE AP PLICABLE ON THE APPELLANT AND HE SHOULD HAVE DEDUCTED TAX AND I N CASE OF NO DEDUCTION HE SHOULD HAVE OBTAINED A NO DEDUCTION CERTIFICATE FROM THE AO. AND 3. WHETHER THE COMMISSION PAID WAS GENUINE AND THE SERVICES HAVE BEEN RENDERED. ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 5 - 2.11. REGARDING THE FIRST ISSUE IT IS NOTED FROM TH E EVIDENCES GIVEN BY THE APPELLANT AS WELL AS NOTED BY THE AO IN HIS ORDER T HAT THE SERVICES HAVE BEEN RENDERED BY THE FOREIGN AGENTS OUTSIDE INDIA. THE SALES WERE BOOKED BY THEM IN OTHER COUNTRIES OR FOR THE COUNTRY FOR W HICH THEY HAVE BEEN APPOINTED AS COMMISSION AGENTS. NONE OF THE ACTIVIT IES SOLICITING THE CLIENTS AND PROCURING THE ORDERS HAS TAKEN PLACE IN INDIA. THE GOODS WERE BEING DELIVERED BY THE APPELLANT COMPANY IN THE OTH ER COUNTRY. THE ACTIVITIES OF PROCURING THE PAYMENT ON BEHALF OF TH E APPELLANT COMPANY WERE ALSO DONE ABROAD. THE AO WAS THEREFORE, INCORR ECT TO HOLD THAT THE SOURCE OF INCOME LIES IN INDIA AS THE SALES HAVE BE EN MADE FROM INDIA. THE PROVISIONS OF INCOME TAX ACT CLEARLY PROVIDE THAT T HE TAX WOULD BE DEDUCTED ON THE INCOME WHICH IS TAXABLE IN INDIA. T HE ACTIVITY OF EARNING THE INCOME IS NOT THE SALE BUT SOLICITING THE SALES BY COMMISSION AGENT. THOUGH THIS ACTIVITY IS LINKED TO THE SALES OF THE COMPANY BUT IT CANNOT BE SAID THAT THE INCOME HAS BEEN DERIVED FROM SALES WH ICH HAS BEEN MADE FROM INDIA. THE INCOME HAS BEEN DERIVED FROM THE AC TIVITY OF SOLICITING THE SATES ON BEHALF OF THE APPELLANT COMPANY. THE AGENT HAS CARRIED OUT ALL THE ACTIVITY ON THE FOREIGN SOIL AND NONE OF ITS AC TIVITY 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 ME DURING TH E COURSE OF APPELLATE PROCEEDINGS TO INDICATE THAT THE SERVICES HAVE BEEN RENDERED IN INDIA. 2.12. 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-RES IDENT FOR ACTING AS THE-SELLING AGENT FOR THE INDIAN EXPORTER, WHEREIN SUCH NONRESIDENT WAS RENDERING SERVICES FROM OUTSIDE INDIA DOES NOT ACCR UE IN INDIA. IN THE PRESENT CASE BEFORE ME ALSO, THE FOREIGN SELLING CO MMISSION AGENT IS RESIDENT OF FOREIGN COUNTRY, FROM WHERE THE PROCURE MENT SERVICE HAD BEEN PROVIDED FUR WHICH THE COMMISSION HAS BEEN PAID, AN D THEREFORE, THE ISSUE IS DIRECTLY AND SQUARELY COVERED BY THE APEX COURT DECISION. 2.13. REGARDING THE OBSERVATION OF THE AO THAT THE INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA BY APPLYING THE PROVISIONS OF SECTION 9 (L)(T), IT IS SEEN THAT THERE IS NO FACT ON RECORD TO INDICATE TH AT THE AGENT HAD ANY PERMANENT ESTABLISHMENT IN INDIA. THE AGENT HAD ITS OFFICE ON THE FOREIGN SOIL AND NOTHING ON RECORD THAT IT HAD PE IN INDIA. FURTHER THE ASSESSING OFFICER HAS ALSO NOT POINTED OUT ANY SUCH FACT IN I TS ORDER WHICH INDICATE THAT THERE WAS ANY SUCH OFFICE OF THE OVERSEAS AGEN T IN INDIA WHICH ATTRACT THE DEEMING PROVISIONS. FURTHER THE OBSERVATION THA T THE SOURCE OF INCOME WAS IN INDIA IS ALSO NOT PROPER AS IT HAS CLEARLY B EEN DISCUSSED 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 OF INCOME IS THE SERVICES RENDERED AND NOT THE SALES. THERE IS NO BUSINESS CONNECTION IN INDIA FROM WHICH THE INCOME HAS BEEN EARNED, THERE IS NO PROPERTY THROUGH OR FROM WHICH THE INCOME HAS BEEN EARNED. THEREFORE, THE PROVISIONS OF SECTION 9 (1)(I) ALSO CANNOT BE A PPLIED. 2.14. 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 ITAT MUMBAI IN THE CASE OF OUR ARDESI B CURSETJEE & SONS LTD. 115 TTJ 916. ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 6 - 2.15. THEREFORE, IN VIEW OF THE PRECEDING DISCUSSIO N THE AO WAS NOT JUSTIFIED TO HOLD THAT THE COMMISSION PAYABLE TO TH E OVERSEAS AGENT WAS DOOMED TO ACCRUE OR ARISE IN INDIA AND IS TAXABLE U NDER THE ACT IN VIEW OF THE SPECIFIC PROVISIONS OF SECTIONS 5 (?)(H) READ W ITH SECTION 9 (L)(I) OF INCOME TAX ACT. 2.16. REGARDING THE ISSUE OF OBTAINING NO DEDUCT ION CERTIFICATE UNDER SECTION 196 II IS SEEN THAT FOR THE APPLICABILITY O F THE PROVISIONS OF THIS SECTION, THE SUM MUST BE CHARGEABLE UNDER THE PROVI SIONS OF THE INCOME TAX ACT. SECTION 195 PROVIDES FOR DEDUCTION OF TAX BY THE PERSON RESPONSIBLE FOR PAYING TO A NON-RESIDENT ANY INTERE ST OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT. IT IS C LEAR THAT THE PAYMENT WAS NOT THE INTEREST. IT HAS TO BE SEEN WHETHER THE PAYMENT IS COVERED UNDER THE TERM 'ANY OTHER SUM CHARGEABLE UNDER THE PROVISION OF THIS ACT'. IT HAS BEEN OBSERVED IN THE PRECEDING DISCUSS ION THAT INCOME WAS NOT CHARGEABLE TO TAX AS IT HAS NOT BEEN RECEIVED IN IN DIA NOR IT HAS ACCRUED OR ARISEN IN INDIA DIRECTLY OR INDIRECTLY. THEREFOR E, ONCE THE INCOME IS NOT TAXABLE THERE IS NO LIABILITY TO DEDUCT TAX AND THE REFORE, IT WAS NOT OBLIGATORY FOR THE APPELLANT TO DEDUCT TAX IN VIEW OF THIS, THERE WAS NO VIOLATION OF THE PROVISIONS OF SECTION 195 AND THE APPELLANT WAS ALSO NOT REQUIRED TO PAY NO DEDUCTION CERTIFICATE FROM THE A O. 2.17. THE LAST ISSUE WHICH IS TO BE ADJUDICATED IS THAT WHETHER THE COMMISSION PAYMENTS WERE GENUINE AND THE SERVICES W ERE RENDERED. THE AO HAS BRIEFLY DEALT WITH THE ISSUE IN HIS ORDER. T HE APPELLANT HAS PLACED ON RECORD SEVERAL DOCUMENTS WHICH INDICATE THAT THE AGENT HAVE RENDERED SERVICES PRIOR TO THE ACTUAL SALES AS WELL AS SUBSE QUENTLY ALSO. IT IS FURTHER OBSERVED THAT THE PAYMENTS HAVE BEEN MADE T HROUGH BANKING CHANNEL AND ARE DULY DOCUMENTED. THE APPELLANT HAS MADE COMMISSION PAYMENT TO AGENT DURING THE YEAR AND IT HAS PROVIDE D COPIES OF AGREEMENTS. THE APPELLANT HAS GIVEN SATISFACTORY EV IDENCES IN RESPECT OF ALL COMMISSION PAYMENT, AND THEREFORE, CONSIDERING THE OVERALL FUELS AND CIRCUMSTANCES THE PAYMENT MADE TO THE AGENT IS TAKE N AS GENUINE. ACCORDINGLY, IN MY CONSIDERED OPINION THE APPELLANT HAS GIVEN SATISFACTORY EVIDENCES REGARDING THE SERVICES RENDE RED BY THE AGENT AND THE GENUINENESS OF PAYMENT OF COMMISSION. 2.18. 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 INDIA TRAV EL SERVICES PVT. LTD. [14 ITR (T) 282 [MUM], CLSA LIMITED VS. ITO (INTERN ATIONAL TAXATION) [56 SOT 254], WHICH HOLD THAT SUCH KIND OF COMMISSI ON IS NOT TAXABLE IN INDIA AND ACCORDINGLY NO LIABILITY TO DEDUCT TAX WA S THERE. FURTHER THE DECISION OF HONOURABLE SUPREME COURT OF INDIA IN TH E 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. 2.19. FURTHER, RELIANCE IS PLACED ON THE FOLLOWING DECISIONS / JUDGMENTS:- * ACIT VS. MODERN INSULATORS LTD. [56 DTR 362 (JAIP UR TRIB.)] ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 7 - * ISHIKAWAJAMA - HARIMA HEAVY INDUSTRIES LTD. VS. D IRECTOR OF INCOME TAX [20/CTR361] * DY. COMMISSIONER OF INCOME TAX VS. DIVL'S LABORAT ORIES LTD. 1(2011) 60 DTR (HYD) (TRIB) 210] * ITO, INTERNATIONAL TAXATION, CHENNAI VS. PRASAD P RODUCTOIN LTD. [(2010) 125 ITD 263 CHENNAI) (SB) * ACIT, CIRCLE - 16(3)(HYDERABAD-TRIB) VS. PRIYADAR SHINI 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.) 2.20. IN VIEW OF THE PRECEDING DISCUSSIONS, THE SUB MISSIONS OF I HE APPELLANT, INCLUDING THE JUDGMENTS / DECISIONS OF V ARIOUS COURTS AND CONSIDERING THE FACT THAT IDENTICAL ISSUE HAS BEEN DECIDED BY CIT(A)-2, AHMEDABAD IN PRECEDING YEAR I.E. A. Y. 2012-13 IN F AVOUR OF THE APPELLANT IT IS CLEAR THAT THE APPELLANT WAS NOT LIABLE TO DE DUCT TAX ON THE COMMISSION PAID TO FOREIGN AGENT. THEREFORE, THE DI SALLOWANCE OF RS.4.63,62,693/- UNDER SECTION 40(A)(IA) MADE BY TH E AO IS DIRECTED TO BE DELETED. 6. AS STATED, THE IDENTICAL ISSUE CAME UP FOR HEARI NG BEFORE THE TRIBUNAL IN ITA NO. 355/AHD/2018. THE RELEVANT OPERATIVE PA RA READS AS UNDER: 8. WE HAVE HEARD THE LEARNED COUNSEL APPEARING FOR THE PARTIES, WE HAVE PERUSED THE RELEVANT MATERIALS AVAILABLE ON RE CORD. WE FIND WHILE COMING TO THE CONCLUSION IN RESPECT OF LIABILITY TO DEDUCT TAX AT SOURCE BY THE ASSESSEE THE LEARNED ASSESSING OFFICER CAME TO A FINDING THAT THE IDENTITY OF COMMISSION AGENTS HAS NOT BEEN PROVED B Y THE ASSESSEE, NEITHER THE AGREEMENTS BEEN SUBMITTED BY THE ASSESSEE. IT W AS FURTHER OBSERVED BY THE LEARNED ASSESSING OFFICER THAT IT COULD BE ASCE RTAINED FROM THE AGREEMENT SINCE NOT SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE MADE THE COMMISSION PAYMENT TO STONE HILL ELECTROMECHANICAL CONTRACTING OF UAE WHEREAS THE ASSESSEE HAS MADE SALES TO OTHER COUNTR IES LIKE TANZANIA AND MOZAMBIQUE. THEREFORE THE ASSESSEE FAILED TO SPECIF Y AS TO WHO THIS COMMISSION AGENTS BASED IN UAE MADE SALES TO COUNTR IES LIKE TANZANIA AND MOZAMBIQUE. THE TERMS AND CONDITION FOR SUCH PA YMENT OF COMMISSION AND THE ROLE OF COMMISSION AGENT HAS NOT BEEN CLARI FIED BY THE ASSESSEE AS ALSO OBSERVED BY THE LEARNED ASSESSING OFFICER. THE ASSESSEE HAS PAID COMMISSION AS HIGH AS 20% TO THE COMMISSION AGENT A S CONTENDED BY THE LEARNED ASSESSING OFFICER. THE PROOF OF SERVICES RE NDERED BY THE COMMISSION AGENTS HAS NOT BEEN SUBMITTED BY THE ASS ESSEE AS ALSO ONE OF THE FINDINGS OF THE LEARNED ASSESSING OFFICER. IN T HE ABSENCE OF ANY PROOF TOWARDS THE IDENTITY OF THE COMMISSION AGENTS OR TH AT THE SERVICES RENDERED BY THE AGENTS THE COMMISSION EXPENSES TO F OREIGN AGENTS HAS BEEN DISALLOWED UNDER SECTION 37(1) OF THE ACT. 9. APART FROM THAT ACCORDING TO THE LEARNED ASSESSI NG OFFICER SINCE THE ASSESSEE FAILED TO DEDUCT TAX ON THE COMMISSION PAYMENT FOR NON- RESIDENT FOREIGN AGENTS FURTHER SHOW-CAUSE DATED 13 .10.2016 WAS ISSUED TO HIM AS TO WHY COMMISSION ON WHICH TDS IS NOT DEDUCT ED SHOULD NOT BE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE WAS FURTHER DIRECTED TO FURNISH AGREEMENT, NATURE OF SE RVICES PROVIDED BY THE ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 8 - COMMISSION AGENTS, DETAILS OF SALE IN ORDER TO PROV E GENUINENESS OF TRANSACTION. 10. IN REPLY TO THE SAID SHOW-CAUSE THE ASSESSEE SU BMITTED HIS WRITTEN ARGUMENTS DATED 17.10.2016 INTER ALIA AS FOLLOWS: WITH REGARD TO ASKING THE COMPLETE NAMES, ADDRESSE S & SERVICES RENDERED OF THE PARTIES TO WHOM COMMISSION ON EXPOR T SALES HAVE BEEN PAID DURING THE YEAR UNDER CONSIDERATION TO FO REIGN/ OVERSEAS COMMISSION AGENTS. IN THIS CONNECTION, WE HAVE ALRE ADY SUBMITTED THE REQUIRED DETAILS IN OUR EARLIER SUBMISSIONS IN RESPONSE TO DETAILS ASKED VIDE YOUR NOTICE. OUT OF TOTAL FOREIG N SALES COMMISSION ON EXPORTS, OF RS.29356350/-. WE HAVE PA ID AN AMOUNT RS.8970500/- TO STONE HILL ELECTROMECHANICAL CONTRA CTING, AN OVERSEAS AGENT HAVING THEIR OFFICE SITUATED AT STON E HILL ELECTROMECHANICAL CONTRACTING LLC. P.O. BOX 96255, DUBAI, U.A.E., ON EXPORT SALES AND AN AMOUNT OF RS.2038585 0/- IS PAID TO VIBGYOR INTERNATIONAL F.Z. LLC, AN OVERSEAS AGENT, HAVING THEIR OFFICE SITUATED AT P.O. BOX : 34632, RAK INVESTMENT AUTHORITY. U.A.E. STATEMENT SHOWING THE COMPLETE SUCH DETAILS OF ALL TRANSACTIONS OF EXPORT SALES AND COMMISSION PART TH EREON TO STONE HILL MECHANICAL CONTRACTING AND VIBGYOR INTERNATION AL F.Z. LLC, IS ENCLOSED AS PER ANNEXURE. IT IS SUBMITTED THAT S UCH COMMISSION HAVE BEEN PAID BY OUR COMPANY TO OVERSEAS AGENTS AG AINST THEIR SERVICES RENDERED TOWARDS PROCUREMENTS OF ORDERS, F OLLOW UP FOR PAYMENTS FROM, ABROAD, CO-ORDINATION FOR EXECUTION OF SUPPLY, ETC. I.E. WHOLLY & EXCLUSIVELY FOR THE PURPOSE OF BUSINE SS. THIS TYPE OF COMMISSION TO OVERSEAS AGENTS ON EXPORT SALES HAVE BEEN PAID IN EARLIER YEARS, A/SO AND SAME WAS ACCEPTED IN THE EA RLIER YEARS SCRUTINY ASST. MADE U/S. 143(3) UPTO A. Y. 2011-12. BY OIL EARLIER ASSESSING OFFICE/S OVERSEAS AGENT TO WHOM COMMISSIO N IS PAID IS NOT HAVING ANY BUSINESS ESTABLISHMENT OR SET UP IN INDIA AND HIS INCOME IS NOT AT ALL LIABLE TO TAX IN INDIA, HAS PR OVISIONS OF SECTION 195 IS NOT APPLICABLE. FROM (HE DETAILS OF COMMISSION GIVEN INCLUDING THE FURNISHING OF THE RELEVANT FORMS REQUIRED TO BE SUBMITTED AT THE TIME OF REMITTANCES SUCH AS 15CB/CA ETC., THAT THE LIABILIT Y TOWARDS THE TDS ON SUCH PAYMENTS WERE NOT ARISEN BECAUSE THE PE RSONS/PARTIES TO WHOM COMMISSION HAS BEEN PAID HAS TENDERED THE S ERVICES OUTSIDE INDIA & ALSO NOT HAVING ANY PERMANENT ESTAB LISHMENT AND SET UP IN INDIA. IN SHORT, IT IS SUBMITTED THAT THE PAYMENTS SO MADE BY US TOWARDS COMMISSION TO NON-RESIDENT DOES NOT HAVING/INVOLVING INCOME CHARGEABLE TO TAX IN INDIA & THEREFORE NOT ATTRACTED AT ALL FOR DEDUCTION OF TDS. IN FURTHERAN CE, WE HAVE TO SUBMIT AS UNDER: SECTION 40(A)(I) STATES THAT SPECIFIED PAYMENTS TO NON-RESIDENTS ON WHICH TAX IN DEDUCTIBLE AT SOURCE SHALL NOT BE ALLO WED TO BE DEDUCTED IN COMPUTING THE BUSINESS INCOME, IF THE T AX HAS NOT BEEN DEDUCTED OR PAID IN ACCORDANCE WITH THE RELEVANT PR OVISIONS. IN THIS CONTEXT, IT IS IMPORTANCE TO NOTE THAT THERE MUST B E A CLEAR FINDING OF THE AO THAT PAYMENT ON WHICH TAX IS DEDUCTIBLE A T SOURCE HAS NOT BEEN DEDUCTED. ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 9 - HOWEVER, SUCH EXPLANATION GIVEN BY THE ASSESSEE WA S NOT ACCEPTED BY THE ASSESSING OFFICER IN THE ABSENCE OF ANY CONTRACT AG REEMENT WITH THE FOREIGN AGENTS AND THE NATURE OF SERVICES RENDERED ON THE BASIS OF WHICH THE COMMISSION HAS BEEN PAID BEEN FURNISHED BY THE ASSESSEE. ACCORDING TO THE ASSESSING OFFICER THOUGH THE AGENTS HAVE REN DERED SERVICES ABROAD AND HAVE SOLICITED ORDERS THEREFROM THE RIGHT TO RE CEIVE THE COMMISSION ARISES IN INDIA WITH THE ORDER EXECUTED BY THE ASSE SSEE IN INDIA AND THUS ACCORDING TO HIM THE INCOME ACCRUED IS SOURCED IN I NDIA AND THE SAID COMMISSION IS TAXABLE. THUS THE PROVISION OF SECTIO N 195 IS SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE AND THE OBLI GATION TO DEDUCT TAX AT SOURCE UNDER THE SAID PROVISION HAS BEEN FAILED TO BE COMPLIED WITH BY THE ASSESSEE AS HELD BY THE LEARNED ASSESSING OFFICER A ND THE EXPENDITURE CLAIMED UNDER THE HEAD COMMISSION EXPENSES PAID TO NON RESIDENTS HAS BEEN DISALLOWED AND ADDED BACK TO THE INCOME OF THE ASSESSEE UNDER SECTION 40(A)(I) OF THE ACT. 11. IN APPEAL, LEARNED CIT(A) CONSIDERED THE DETAIL S SUBMISSIONS MADE BY THE ASSESSEE. THE LEARNED CIT(A) ALSO CONSIDERED THE SUBMISSIONS MADE BY THE ASSESSEE THAT NO DISALLOWANCE IN THIS R EGARD WAS MADE IN THE SCRUTINY ASSESSMENT COMPLETED FOR A.Y. 2011-12. FUR THER THAT THE PLEA AS THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF TH E INCOME TAX ACT, 1961 AND THE DTAA AND ACCORDINGLY WAS NOT UNDER AN OBLIG ATION TO MAKE ANY WITHHOLDING TAX IN TERMS OF THE BENEFICIAL PROVISIO NS OF SECTION 90(2) OF THE ACT. THE FIRST APPELLATE AUTHORITY PARTICULARLY OBSERVED THAT ALL THE EVIDENCES INCLUDING BANK PAYMENT DETAILS, BANK CERT IFICATE FOR EXPORT REALIZATION, COMPANY PAYMENT ADVANCES, FORM NO.15CA , 15CB, CREDIT NOTES TO OVERSEAS AGENT, INVOICES FOR EXPORT BY THE COMPA NY WITH COMMISSION AMOUNT WERE DULY FURNISHED FOR CONSIDERATION OF THE ISSUE IN JUSTIFYING THE COMMISSION OF OVERSEAS AGENTS BY THE ASSESSEE BEFOR E THE ASSESSING OFFICER WHICH WAS NOT BEING CONTROVERTED. HE THUS C ONCLUDED THAT THE COMMISSION PAYMENT MADE BY THE ASSESSEE WAS GENUINE ; THE SAME WAS PAID THROUGH BANKING CHANNELS ON EXPORT ORDERS PROCURED AND WERE MADE FOR BUSINESS PURPOSE IN PRUDENT WAY TO INCREASE EXPORT AND INCREASE CUSTOMER BILLS FOR FOREIGN COUNTRY. HE FURTHER OBSERVED AS F OLLOWS: 2.8. WITH REGARD TO THE PROVISIONS OF SECTION 9(1 )(I), IT WAS SUBMITTED THAT THE OVERSEAS AGENT WAS NOT DOING ANY BUSINESS IN INDIA. IT WAS MERELY PROVIDING EXPORT ORDERS TO FAC ILITATE APPELLANT. FURTHER, THE OVERSEAS AGENT DID NOT HAD ANY BUSINES S CONNECTION IN INDIA, IT WAS FURTHER CLAIMED THAT THERE IS NO INCO ME DEEMED TO ACCRUE OR ARISE IN INDIA IN VIEW OF THE EXPLANATION S TO THE PROVISIONS OF SECTION 9(1)(I) OF THE I.T. ACT AS TH E OVERSEAS AGENT HAD RENDERED SERVICES OUTSIDE INDIA AND THE COMMISS ION WAS ALSO PAID TO THEM OUTSIDE INDIA. HENCE, THERE WAS NO OBL IGATION TO DEDUCT THE TAX FROM SUCH COMMISSION PAYMENTS AS PER THE PROVISIONS OF SECTION 195 OF THE I.T. ACT. 2.9. THUS, IT HAS BEEN SUBMITTED THAT THE IDENTITY AND GENUINENESS OF THE OVERSEAS COMMISSION AGENT IS PROVED WITH THE EVIDENCES SUCH AS, CREDIT NOTES TO OVERSEAS AGENTS, EXPORT INVOICE S, SHIPPING BILLS, BANK CERTIFICATE FOR EXPORT REALIZATION, COPY OF FO RM NO. 15CA & 6CB AND COMMISSION PAYMENT ETC. AS DISCUSSED ABOVE. ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 10 - 2.10. HAVING CONSIDERED THE FACTS AND SUBMISSIONS, THE ISSUES WHICH ARE TO BE EXAMINED AND DECIDED ARE AS UNDER:- 1. WHETHER THE COMMISSION PAID TO FOREIGN AGENTS I S 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 A O. AND 3. WHETHER THE COMMISSION PAID WAS GENUINE AND TH E SERVICES HAVE BEEN RENDERED. 2.11. REGARDING THE FIRST ISSUE IT IS NOTED FROM T HE EVIDENCE, GIVEN BY THE APPELLANT AS WELL AS NOTED BY THE AO IN HIS ORDER THAT THE SERVICES HAVE BEEN TENDERED BY THE FOREIGN AGENTS O UTSIDE INDIA. THE SALES WERE BOOKED BY THEM IN OTHER COUNTRIES OR FOR THE COUNTRY FOR WHICH THEY HAVE BEEN APPOINTED AS COMMISSION AG ENTS. NONE OF THE ACTIVITIES SOLICITING THE CLIENT AND PROCURING THE ORDERS HAS TAKEN PLACE IN INDIA. THE GOODS WERE BEING DELIVERE D BY THE APPELLANT COMPANY IN THE OTHER COUNTRY. THE ACTIVIT IES OF PROCURING THE PAYMENT ON BEHALF OF THE APPELLANT COMPANY WERE ALSO DONE ABROAD. THE AO WAS THEREFORE, INCORRECT TO HOLD THA T SOURCE OF INCOME LIES IN INDIA AS THE SALES HAVE BEEN MADE FR OM INDIA THE PROVISIONS OF INCOME TAX ACT CLEARLY PROVIDE THAT T HE TAX WOULD BE DEDUCTED ON THE INCOME WHICH IS TAXABLE IN INDIA. T HE ACTIVITY OF EARNING THE INCOME IS NOT THE SALE BUT SOLICITING T HE SALES BY COMMISSION AGENT. THOUGH THIS ACTIVITY IS LINKED TO THE SALES OF THE COMPANY BUT IT CANNOT BE SAID THAT THE INCOME HAS B EEN DERIVED FROM SALES WHICH HAS BEEN MADE FROM INDIA. THE INCO ME HAS BEEN DERIVED FROM THE ACTIVITY OF SOLICITING THE SALES O N BEHALF OF THE APPELLANT COMPANY. THE AGENT HAS CARRIED OUT ALL TH E ACTIVITY ON THE FOREIGN SOIL AND NONE OF ITS ACTIVITY IS IN INDIA T HEREFORE, IT CANNOT BE SAID THAT THE INCOME HAS ACCRUED OR ARISEN IN IN DIA AND THE SOURCE OF INCOME WAS IN INDIA. THERE IS NO FACT BRO UGHT OUT BY THE AO IN THE ORDER DAS WELL AS OBSERVED BY ME DURING T HE COURSE OF APPELLANT PROCEEDINGS TO INDICATE THAT THE SERVICES HAVE BEEN RENDERED IN INDIA. 2.12 THE JUDGMENT OF HONORABLE SUPREME COURT IN THE CASE OF CIT VS. TOSHOKU LIMITED [125 ITR 525 [SCJ] IS IMPOTENT ON THE ISSUE, WHEREBY IT HAS BEEN HELD THAT COMMISSION EARNED BY THE NON- RESIDENT FOR ACTING AS THE SELLING AGENT FOR THE IN DIAN EXPORTER, WHEREIN SUCH NON-RESIDENT WAS RENDERING SERVICES FR OM OUTSIDE INDIA DOES NOT ACCRUE IN INDIA. IN THE PRESENT CASE BEFORE ME ALSO, THE FOREIGN SELLING COMMISSION AGENT IS RESIDENT OF FOREIGN COUNTY, FROM WHERE THE PROCUREMENT SERVICE HAD BEEN PROVIDE D FOR WHICH THE COMMISSION HAS BEEN PAID, AND THEREFORE, THE IS SUE IS DIRECTLY AND SQUARELY COVERED BY THE APEX COURT DECISION. 2.13. REGARDING THE OBSERVATION OF THE AO THAT THE INCOME IS DEEMED TO ACCRUE OR ARISE IN INDIA BY APPLYING THE PROVISIONS OF SECTION 9(1)(I), IT IS SEEN THAT THERE IS NO FACT O N RECORD TO INDICATE THAT THE AGENT HAD ANY PERMANENT ESTABLISHMENT IN INDIA. THE ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 11 - AGENT HAD ITS OFFICE ON THE FOREIGN SOIL AND NOTHIN G ON RECORD THAT IT HAD PE IN INDIA, FURTHER THE ASSESSING OFFICER HAS ALSO NOT POINTED OUT ANY SUCH OFFICE HAS ALSO NOT POINTED OUT ANY SU CH FACT IN ITS ORDER WHICH INDICATE THAT THERE WAS ANY SUCH OFFICE OF THE OVERSEAS AGENT IN INDIA WHICH ATTRACT THE DEEMING PROVISIONS . FURTHER THE OBSERVATION THAT THE SOURCE OF INCOME WAS IN INDIA IS ALSO NOT PROPER AS IT HAS CLEARLY BEEN DISCUSSED IN THE PREC EDING PARAGRAPHS THAT NONE OF THE SERVICES HAVE BEEN RENDERED IN IND IA AND SOURCE OF INCOME CANNOT BE SAID TO BE IN INDIA AS THE SOURCE OF INCOME IS THE SERVICES RENDERED AND NOT THE SALES. THERE IS NO BU SINESS CONNECTION IN INDIA FROM WHICH THE INCOME HAS BEEN EARNED, THERE IS NO PROPERLY THROUGH OR FROM WHICH THE INCOME HAS BEEN EARNED. THEREFORE, THE PROVISIONS OF SECTION 9(1)(I) ALSO C ANNOT BE APPLIED. 2.14 RELIANCE IS PLACED ON THE JUDGEMENT OF HONOUR ABLE SUPREME COURT IN IN CASE OF GE INDIA TECHNOLOGY CENTRE PRIVATE LIMITED 327 ITR 456 AND THE JUDGEMENT OF HONBLE ITAT MUMBAI IN THE CA SE OF OUR ARDESI B CURSETJEE & SONS LTD. 115 TTJ 916. 2.15. THEREFORE, IN VIEW OF THE PRECEDING DISCUSSI ON THE AO WAS NOT JUSTIFIED TO HOLD THAT THE COMMISSION PAYABLE T O THE OVERSEAS AGENT WAS DEEMED TO ACCRUE OR ARISE IN INDIA AND IS TAXABLE UNDER THE ACT IN VIEW OF THE SPECIFIC PROVISIONS OF SECTI ONS 5 (2)(B) READ WITH SECTION 9(1)(I) OF INCOME TAX ACT. 2.16. REGARDING THE ISSUE OF OBTAINING NO DEDUCTIO N CERTIFICATE UNDER SECTION 195 IT IS SEEN THAT FOR THE APPLICABI LITY OF THE PROVISIONS OF THIS SECTION, THE SUM MUST BE CHARGEA BLE UNDER THE PROVISIONS OF THE INCOME TAX ACT. SECTION 195 PROVI DES FOR DEDUCTION OF TAX BY THE PERSON RESPONSIBLE FOR PAYI NG TO A NON- RESIDENT ANY INTEREST OR ANY OTHER SUM CHARGEABLE U NDER THE PROVISIONS OF THE ACT. IT IS CLEAR THAT THE PAYMENT WAS NOT THE INTEREST. IT HAS TO BE SEEN WHETHER THE PAYMENT IS COVERED UNDER THE TERM ANY OTHER SUM CHARGEABLE UNDER THE PROVISION OF THIS ACT. IT HAS BEEN OBSERVED IN THE PROCEEDING DISCUSSION THAT INCOME WAS NOT CHARGEABLE TO TAX AS IT HAS NOT BEEN RECEIVED IN IN DIA NOR IT HAS ACCRUED OR ARISEN IN INDIA DIRECTLY OR INDIRECTLY. THEREFORE, ONCE THE INCOME IS NOT TAXABLE THERE IS NO LIABILITY TO DEDUCT TAX AND THEREFORE, IT WAS NOT OBLIGATORY FOR THE APPELLANT TO DEDUCT TAX IN VIEW OF THIS, THERE WAS NO VIOLATION OF THE PROVISI ONS OF SECTION 195 AND THE APPELLANT WAS ALSO NOT REQUIRED TO PAY NO D EDUCTION CERTIFICATE FROM THE AO. 2.17. THE LAST ISSUE WHICH IS TO BE ADJUDICATED IS THAT WHETHER THE COMMISSION PAYMENTS WERE GENUINE AND THE SERVICES W ERE RENDERED. THE AO HAS BRIEFLY DEALT WITH THE ISSUE IN HIS ORDE R. THE APPELLANT HAS PLACED ON RECORD SEVERAL DOCUMENTS WHICH INDICA TE THAT THE AGENT HAVE RENDERED SERVICES PRIOR IN THE ACTUAL SA LES AS WELL AS SUBSEQUENTLY ALSO. IT IS FURTHER OBSERVED THAT THE PAYMENT HAVE BEEN MADE THROUGH BANKING CHANNEL AND ARE DULY DOCUMENTE D. THE APPELLANT HAS MADE COMMISSION PAYMENT TO AGENT DURI NG THE YEAR AND IT HAS PROVIDED COPIES OF AGREEMENTS. THE APPEL LANT HAS GIVEN SATISFACTORY EVIDENCES IN RESPECT OF ALL COMMISSION PAYMENT, AND THEREFORE, CONSIDERING THE OVERALL FACTS AND CIRCUM STANCES THE PAYMENT MADE TO THE AGENT IS TAKEN AS GENUINE. ACCO RDINGLY, IN MY ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 12 - CONSIDERED OPINION THE APPELLANT HAS GIVEN SATISFAC TORY EVIDENCES REGARDING THE SERVICES RENDERED BY THE AGENT AND TH E GENUINENESS OF PAYMENT OF COMMISSION. 2.18. THE AO HAS ALSO PLACED RELIANCE ON THE DECIS ION OF HON'BLE AUTHORITY OF ADVANCE RULINGS IN THE CASE OF SKF BO ILERS AND DRIERS (P.) LTD. (2012) 18 TAXMANN 325 AND RAJIV MA LHOTRA (2006) 284 ITR 564 (DELHI). THE JUDGMENTS ARE NOT APPLICAB LE LO THE PRESENT FACTS AS THERE ARE SEVERAL OTHER DECISIONS OF HON'BLE 1TAT, MUMBAI IN THE CASE OF ACIT (INTERNATIONAL TAXATION) VS. STAR CRUISE INDIA TRAVEL SERVICES PVT. LTD. [14 ITR (T) 282 (MUM)L. CLSA LIMITED VS. ITO (INTERNATIONAL TAXATION) [56 S OT 254], WHICH HOLD THAT SUCH KIND OF COMMISSION IS NOT TAXABLE IN INDIA AND ACCORDINGLY NO LIABILITY TO DEDUCT TAX WAS THERE. F URTHER THE DECISION OF HONOURABLE SUPREME COURT OF INDIA IN TH E CASE OF CIT VS. TOSHOKU LIMITED 125 ITR 525 STILL PREVAILS AS O N DATE AND IS THE LAW OF THE LAND AS REGARDS APPLICABILITY OF TDS PRO VISIONS TO COMMISSION PAID TO OVERSEAS/NON-RESIDENT AGENTS BY INDIAN EXPORTERS. 2.19 FURTHER, RELIANCE IS PLACED ON THE FOLLOWING DECISIONS/JUDGMENTS: ACIT VS. MODERN INSULATORS LTD. [56 DTR 362 (JAIPUR TRIB.)] ISHIKAWAJAMA - HARIMA HEAVY INDUSTRIES LTD. VS. DIRECTOR OF INCOME TAX [207 CTR 361] DY. COMMISSIONER OF INCOME TAX VS. DIVI'S LABORATOR IES 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. PRIYADARSH INI SPINNING MILLS (P.) LTD. (2012) ITA NO. 1776 (2011) ACIT (INTERNATIONAL TAXATION) VS. STAR CRUISE INDIA TRAV EL SERVICES PVT. LTD. [14 ITR (T) 282 (MUM.) 2.20. IN VIEW OF THE PRECEDING DISCUSSIONS, THE SU BMISSIONS OF THE APPELLANT, INCLUDING THE JUDGMENTS / DECISIONS OF V ARIOUS COURTS AND CONSIDERING THE FACT THAT IDENTICAL ISSUE HAS BEEN DECIDED BY CIT(A)-2, AHMEDABAD IN A. Y. 2012-13 AND BY THIS OF FICE IN PRECEDING YEAR I.E. A.Y. 2013-14 IN FAVOUR OF THE A PPELLANT, IT IS CLEAR THAT THE APPELLANT WAS NOT LIABLE TO DEDUCT T AX ON THE COMMISSION PAID TO FOREIGN AGENT. THEREFORE, THE DI SALLOWANCE OF RS.2,93,56,350/- UNDER SECTION 40(A)(IA) MADE BY TH E AO IS DIRECTED TO LIE DELETED . 12. WE FIND THAT THE SAME ISSUE WAS CONSIDERED BY T HE CO-ORDINATE BENCH IN RESPECT OF A.Y. 2012-13 IN ASSESSEES OWN CASE IN REVENUES APPEAL WHICH WAS ULTIMATELY DECIDED IN FAVOUR OF TH E ASSESSEE BY DISMISSING THE SAID APPEAL. IN THE SAID APPEAL FOLL OWING SUBMISSIONS MAD AS UNDER: 13. WE HAVE CONSIDERED THE JUDGMENT CITED BY THE LE ARNED COUNSEL APPEARING FOR THE ASSESSEE PASSED BY THE COORDINATE BENCH IN ITA NO. ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 13 - 2503/AHD/2016 FOR ASSESSMENT YEAR 2013-14 ON THE ID ENTICAL ISSUE REJECTING THE APPEAL PREFERRED BY THE REVENUE THE R ELEVANT PORTION WHEREOF IS AS FOLLOWS: 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH TH E 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, SECON DLY NO TDS 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 RE PRODUCE 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 INTEREST 74 [***] OR ANY OTHER SUM CHARGEABLE UNDER THE PROVISIONS OF THIS ACT (NOT BE ING INCOME CHARGEABLE UNDER THE HEAD SALARIES 75 [***]) SHALL, AT THE TIME OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THER EOF 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 RESIDENT S 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. FO R THIS PURPOSE, WE NEED TO REFER THE PROVISION OF SEC. 5(2) OF THE ACT WHICH READS A S UNDER:- 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 SECTI ON 5 OF THE ACT. SIMILARLY, WE FURTHER NOTE THAT THE INCOME WAS RECE IVED BY THE FOREIGN AGENTS ON ACCOUNT OF SERVICES RENDERED BY THEM IN T HEIR RESPECTIVE COUNTRIES. THEREFORE, WE CONCLUDE THAT SUCH INCOME HAS NOT ACCRUED OR ARISEN IN INDIA AND CONSEQUENTIAL NOT CHARGEABLE TO TAX IN INDIA. ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 14 - 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. 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 DEE MED 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 O R FROM ACTIVITIES WHICH ARE CONFINED TO THE COLLECTION OF NEWS AND VIEWS IN INDIA 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 VIEW, ASSESSEE WAS NOT LIABLE TO DEDUCT TDS U/S 195 OF THE ACT. IN HOLDING SO, WE FIND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HON'BLE MADRAS HI GH COURT IN THE CASE OF CIT VS. FARIDA LEATHER CO. REPORTED IN 66 T AXMAN.COM 321 (MAD) WHEREIN IT WAS HELD AS UNDER:- 9.2 THE UNDERLYING PRINCIPLE IS THAT, THE TAX WITH HOLDING LIABILITY OF THE PAYER IS INHERENTLY A VICARIOUS LI ABILITY ON BEHALF OF THE RECIPIENT AND THEREFORE, WHEN THE REC IPIENT / FOREIGN AGENT DOES NOT HAVE THE PRIMARY LIABILITY T O BE TAXED IN RESPECT OF INCOME EMBEDDED IN THE RECEIPT, THE V ICARIOUS ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 15 - LIABILITY OF THE PAYER TO DEDUCT TAX DOES NOT ARISE . THIS VICARIOUS TAX WITHHOLDING LIABILITY CANNOT BE INVOK ED, UNLESS PRIMARY TAX LIABILITY OF THE RECIPIENT / FOREIGN AG ENT IS ESTABLISHED. IN THIS CASE, THE PRIMARY TAX LIABILIT Y OF THE FOREIGN AGENT IS NOT ESTABLISHED. THEREFORE, THE VI CARIOUS LIABILITY 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.C OM 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 COMMISS ION PAID TO NON-RESIDENTS UNDER SECTION 9(1)(I), BUT, NEITHE R THESE RULINGS ARE BINDING PRECEDENTS FOR US NOR ARE WE PE RSUADED 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 RAJIV MALHOTRA, I N 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 PROCURING PARTICIPATION BY OTHER NON-RESIDENT ENTIT IES IN A FOOD AND WINE SHOW IN INDIA, AND THE CLAIM OF THE A SSESSEE WAS THAT SINCE THE AGENT HAS NOT CARRIED OUT ANY BU SINESS OPERATIONS IN INDIA, THE COMMISSION AGENT WAS NOT CHARGEABLE TO TAX IN INDIA, AND, ACCORDINGLY, THE A SSESSEE HAD NO OBLIGATION TO DEDUCT TAX AT SOURCE FROM SUCH COMMISSION PAYMENTS TO THE NON-RESIDENT AGENT. ON T HESE FACTS, THE AUTHORITY FOR ADVANCE RULING, INTER ALIA , OPINED THAT 'NO DOUBT THE AGENT RENDERS SERVICES ABROAD AN D PURSUES AND SOLICITS EXHIBITORS THERE IN THE TERRIT ORY ALLOTTED TO HIM, BUT THE RIGHT TO RECEIVE THE COMMISSION ARI SES IN INDIA ONLY WHEN EXHIBITOR PARTICIPATES 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 TA XABLE UNDER SECTION 5(2)(B) READ WITH SECTION 9(1)(I) OF THE ACT'. THE AUTHORITY FOR ADVANCE RULING ALSO HELD THAT 'TH E FACT THAT THE AGENT RENDERS SERVICES ABROAD IN THE FORM OF PURSUING AND SOLICITING PARTICIPANTS AND THAT THE C OMMISSION IS REMITTED TO HIM ABROAD ARE WHOLLY IRRELEVANT FOR THE PURPOSE OF DETERMINING SITUS OF HIS INCOME'. WE DO NOT CONSIDER THIS APPROACH TO BE CORRECT. WHEN NO OPERA TIONS OF THE BUSINESS OF COMMISSION AGENT IS CARRIED ON IN I NDIA, THE EXPLANATION 1 TO SECTION 9(1)(I) TAKES THE ENTIRE C OMMISSION INCOME FROM OUTSIDE THE AMBIT OF DEEMING FICTION UN DER SECTION 9(1)(I), AND, IN EFFECT, OUTSIDE THE AMBIT OF INCOME 'DEEMED TO ACCRUE OR ARISE IN INDIA' FOR THE PURPOS E OF SECTION 5(2)(B). THE POINT OF TIME WHEN COMMISSION AGENT'S RIGHT TO RECEIVE THE COMMISSION FRUCTIFIES IS IRREL EVANT TO ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 16 - DECIDE THE SCOPE OF EXPLANATION 1 TO SECTION 9(1)(I ), WHICH IS WHAT IS MATERIAL IN THE CONTEXT OF THE SITUATION TH AT WE ARE IN SEISIN OF THE REVENUE'S CASE BEFORE US HINGES ON TH E APPLICABILITY OF SECTION 9(1)(I) AND, IT IS, THEREF ORE. IMPORTANT TO ASCERTAIN AS TO WHAT EXTENT WOULD THE RIGOUR OF SECTION 9(1)(I) BE RELAXED BY EXPLANATION 1 TO SECT ION 9(1)(I). WHEN WE EXAMINE THINGS FROM THIS PERSPECTI VE, THE INEVITABLE CONCLUSION IS THAT SINCE NO PART OF THE OPERATIONS OF THE BUSINESS OF THE COMMISSION AGENT IS CARRIED OUT IN INDIA, NO PART OF THE INCOME OF THE COMMISSION AGEN T 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 B INDING FORCE UNDER S. 245S OF THE ACT, DO NOT IMPRESS US, AND WE DECLINE TO BE GUIDED BY THE SAME. THE STAND OF THE REVENUE, HOWEVER, IS THAT THESE RULINGS, BEING FROM SUCH A H IGH QUASI- JUDICIAL FORUM, EVEN IF NOT BINDING, CANNOT SIMPLY BE BRUSHED ASIDE EITHER, AND THAT THESE RULINGS AT LEAST HAVE PERSUASIVE VALUE. WE HAVE NO QUARREL WITH THIS PROPOSITION. WE HAVE, WITH UTMOST CARE AND DEEPEST RESPECT, PERUSED THE A BOVE RULINGS RENDERED BY THE HON'BLE AUTHORITY FOR ADVAN CE RULING. WITH GREATEST RESPECT, BUT WITHOUT SLIGHTES T HESITATION, WE HUMBLY COME TO THE CONCLUSION THAT W E 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 REPRODUC ED BELOW : 7. IN THE RECENT ORDER IN TAX APPEAL NO. 290 OF 2018, WE HAD DEALT WITH SIMILAR SITUATION MAKI NG 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. COMMISSI ONER OF INCOME-TAX & ANR., REPORTED IN [2010] 327 ITR 456 ( SC) = 2010- TII-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 N ON-RESIDENT IS NOT LIABLE TO DEDUCT TAX IF SUCH SUM IS NOT CHARGEA BLE TO TAX UNDER THE ACT,' COUNSEL FOR THE REVENUE, HOWEVER, DREW OU R ATTENTION TO THE EXPLANATION 2 TO SUB-SECTION [1] OF SECTION 195 OF THE ACT WHICH WAS INSERTED BY THE FINANCE ACT OF 2012 WITH RETROS PECTIVE EFFECT FROM 1ST APRIL 1962. SUCH EXPLANATION READS AS UNDE R:- EXPLANATION 2 - FOR THE REMOVAL OF DOUBTS, IT IS HE REBY CLARIFIED THAT THE OBLIGATION TO COMPLY WITH SUBSEC TION (1) AND TO MAKE DEDUCTION THEREUNDER APPLIES AND SHALL BE DEEMED TO HAVE ALWAYS APPLIED AND EXTENDS AND SHALL BE ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 17 - DEEMED TO HAVE ALWAYS EXTENDED TO ALL PERSONS, RESI DENT OR NON-RESIDENT, WHETHER OR NOT THE NON-RESIDENT PERSO N HAS- [I] A RESIDENCE OR PLACE OF BUSINESS OR BUSINESS CONNECTION 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 COMPLY 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 BUSINESS OR BUSINESS CONNECTIONS IN INDIA OR ANY OTHER PERSONS IN ANY MANNER WHATSOEVER IN INDIA. THIS EXPRESSION WHICH I S ADDED FOR REMOVAL OF DOUBT IS CLEAR FROM THE PLAIN 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 TECHNOLOGY CENTRE P. LIMITED [SUPRA], SUB-SECTION [1] OF SECTION 195 OF THE ACT WOULD NOT APPLY. THE FUNDAMENTAL PRINCIPLE 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 CASE, THE REVENUE HA S 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 FACTS & CIR CUMSTANCES. ONCE AN INCOME IS NOT CHARGEABLE TO TAX IN INDIA THEN THE Q UESTION OF DEDUCTING TDS UNDER THE PROVISION OF SECTION 195 OF THE ACT D OES NOT ARISE. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT-A. HENCE THE GROUND OF APPEAL RAISED BY THE REV ENUE IS HEREBY DISMISSED. 14. IN THAT VIEW OF THE MATTER, WE DO NOT HESITATE TO CONCLUDE THAT THE COMMISSION INCOME IN THE HANDS OF THE FOREIGN AGENT S IS NOT CHARGEABLE TAX IN INDIA IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE AND THEREFORE THE ASSESSEE IS NOT LIABLE TO DEDUCT TDS. THE OBSERVATION MADE BY THE LEARNED CIT(A) DOES NOT CALL FOR ANY INTERFE RENCE IN VIEW OF THE ABOVE CONCLUSION MADE BY US RESPECTFULLY FOLLOWING THE JUDGMENTS PASSED BY THE CO-ORDINATE BENCH AS WELL AS JUDGMENT PASSED BY THE APEX COURT WE ARE THEREFORE FIND NO MERIT IN THE APPEAL PREFER RED BY THE REVENUE. HENCE, SAME IS DISMISSED. ITA NO.370/AHD/18 [ACIT VS. M & B ENGINEERING LIMITED] A.Y. 2013-14 - 18 - 7. A PERUSAL OF THE ORDER OF THE CIT(A) SHOWS THAT THE FIRST APPELLATE AUTHORITY HAS APPRECIATED THE FACTS IN PERSPECTIVE AND APPLIED THE LAW CORRECTLY. IN VIEW OF THE DECISION OF THE CO-ORDIN ATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE CONCERNING AY 2014-15, WE DO NO T SEE ANY PERCEPTIBLE REASON TO RE-EXAMINE THE ISSUE. NO NEW FACTS WERE PLACED BEFORE US ON BEHALF OF THE REVENUE FOR DOING SO. WE THUS DECLIN E TO INTERFERE WITH THE ORDER OF THE CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 22/10/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 22/10/201 9