ACIT, New Delhi V. M/s. Rajinder Kumar Aggarwal (HUF), New Delhi

ITA 4142/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0842 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 25-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: ANIL KUMAR CHOPRA; VINOD GARG
• Keywords: Double taxation relief; TDS
• Section: 5(2); 205; 195

Judgement Text

1 ITA NO. 4142/DEL/2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER I.T.A. NO. 4142/DEL/20 15 (A.Y 2010-11) ACIT CIRCLE-52 (1), ROOM NO. 1405, 14 TH FLOOR, E-2, BLOCK, DR. S. P. MUKHERJEE CIVIC CENTRE NEW DELHI (APPELLANT) VS RAJINDER KUMAR AGGARWAL(HUF) 40, PRITHVI RAJ MARKET NEW DELHI AAEHR026B (RESPONDENT) APPELLANT BY MS. ASHIMA NEB, SR. DR RESPONDENT BY SH. ANIL KUMAR CHOPRA, FCA & SH. VINOD GARG, ADV ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 27/03/2015 PASSED BY CIT(A)-XVIII, NEW DELHI FOR ASSESSMENT Y EAR 2010-11. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS .88,15,790/- BY NOT TREATING THE COMMISSION PAID ON EXPORT SALES AS FEE FOR TECHNICAL SERVICES U/S 9 (1)(VII). 3. THE ASSESSEE IS A HINDU UNDIVIDED FAMILY (HUF) AND IS ENGAGED IN THE BUSINESS OF EXPORT OF LEATHER FOOTWEAR MAINLY IN FR ANCE UNDER THE NAME AND STYLE OF M/S. REGENCY IMPEX. THE ASSESSEE APPOINTED M/S ACE TRADING COMPANY, FRANCE (ACE TRADING), A NON-RESIDENT OF IN DIA AS ITS AGENT IN FRANCE DATE OF HEARING 27.02.2019 DATE OF PRONOUNCEMENT 27.03.2019 2 ITA NO. 4142/DEL/2015 FOR ASSISTANCE IN PROCURING EXPORT ORDERS FOR THE A SSESSEE IN FRANCE. FOR SUCH SERVICES TO BE PROVIDED BY ACE TRADING TO THE ASSES SEE, VIDE AGREEMENT DATED 01.4.2009, THE ASSESSEE AGREED TO GIVE 8% COMMISSIO N FOB MUMBAI ON SALES TO PARTIES INTRODUCED BY ACE IN FRANCE FOR THE PERI OD 01.4.2009 TO 31.3.2010. IN TERMS OF THE SAID AGREEMENT, THE ASSESSEE PAID C OMMISSION OF RS.88,15,790/- FOR THE EXPORT TO PARTIES INTRODUCED BY ACE TRADING IN FY 2009-10 BY SUBMITTING FOLLOWING DOCUMENTS WHICH WER E PRODUCED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS : LEDGER ACCOUNT OF COMMISSION PAID ON EXPORT SALES LEDGER ACCOUNT OF M/S ACE TRADING CO SAMPLE INVOICES ISSUED BY M/S ACE TRADING COMPANY A ND CORRESPONDING SHIPPING BILLS THE COMMISSION WAS PAID TO ACE TRADING, A NON-RESI DENT AGENT (PAYEE) WHO IS A TAX RESIDENT OF FRANCE. THE PAYEE WAS SIMP LY ASSISTING IN PROCURING EXPORT ORDERS FOR THE ASSESSEE IN HIS ORDINARY COUR SE OF BUSINESS IN FRANCE. THE COMMISSION WAS PAID FOR ACTIVITIES OF THE PAYEE OUTSIDE INDIA AND THE AMOUNT IS RECEIVED BY THE PAYEE OUTSIDE INDIA THROU GH NORMAL BANKING CHANNELS. SECTION 5(2) STATES THAT TOTAL INCOME OF A PERSON, WHO IS A NON- RESIDENT, INCLUDES INCOME FROM ALL SOURCES WHICH (A ) IS RECEIVED OR DEEMED TO BE RECEIVED IN INDIA; (B) ACCRUES OR ARISES IN INDI A; OR (C) IS DEEMED TO ACCRUE OR ARISE IN INDIA. IN THE PRESENT CASE, THE COMMISSION INCOME PAID TO THE FOREIGN AGENT NEITHER ACCRUED IN INDIA NOR DEEMED TO BE ACC RUED IN INDIA AS PER DEEMING PROVISIONS OF SECTION 9 AND NOR THE SAME WA S RECEIVED NOR DEEMED TO BE RECEIVED IN INDIA. THE ASSESSING OFFICER DISALLO WED THE SAID COMMISSION PAID TO ACE TRADING ON THE GROUND THAT THE SERVICES OF ACE IN RELATION TO PROCUREMENT OF EXPORT ORDERS ARE IN THE NATURE OF F EE FOR TECHNICAL SERVICES (FTS) BOTH UNDER THE PROVISIONS OF THE ACT AND DTAA WITH FRANCE. ACCORDINGLY, IT WAS HELD THAT THE SAID AMOUNT OF COMMISSION OF R S.88,15,790/- IS LIABLE TO TDS U/S 195 AND DISALLOWED THE SAME BY INVOKING PRO VISIONS OF SECTION 40(A)(I) AS NO TDS WAS DEDUCTED THEREON. 3 ITA NO. 4142/DEL/2015 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE SUPPORTED BY DOCUMENTS FILED AND SETTLED LEGAL POSI TION BASED ON JUDICIAL PRECEDENTS, HELD THAT THE SAID COMMISSION PAID TO F OREIGN AGENT FOR PROCUREMENT OF EXPORT ORDERS IS IN THE NATURE OF BU SINESS INCOME OF THE FOREIGN AGENT AND NOT FTS, THUS NOT LIABLE TO TDS AND DELET ED THE ADDITION, THEREBY ALLOWING THE APPEAL OF THE ASSESSEE. 5. THE LD. DR SUBMITTED THAT THE CIT(A) HAS NOT AT ALL GIVEN ANY INDEPENDENT FINDING OF ITS OWN BUT REPRODUCE THE CO NTENTIONS RAISED DURING THE APPELLATE PROCEEDINGS BY THE ASSESSEE. THE CIT(A) SHOULD HAVE AT LEAST GIVEN THE DISTINGUISHING FACTORS FOR THE OBSERVATIONS OF ASSESSING OFFICER IN THE ASSESSMENT ORDER OF CIT(A). THUS, THE LD. DR SUBMI TTED THAT ON THIS GROUND ITSELF, THE ORDER OF THE CIT(A) WILL NOT SUSTAIN. 6. THE LD. AR SUBMITTED THAT THE CIT(A) HAS RIGHTLY ACCEPTED THE CONTENTIONS OF THE ASSESSEE AS THE ISSUE IS SQUARE LY COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS OF THE JURISDICTIONAL HIGH COURT AS WELL AS TRIBUNAL. THEREFORE, THE LD. AR RELIED UPON THE OR DER OF THE CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE ISSUES INVOLVED IN THIS APPEAL RELATES TO APPLICABILITY OF TDS U/S 195 ON PAYMENTS ABROAD OF EXPORT COMMISSION TO NON- RESIDENT THE FOREIGN AGENT FOR THE PROCUREMENT OF EXPORT ORDERS FOR THE ASSESSEE AND CONSEQUENTLY DISALLOWANCE U/S 40(A)(I) OF THE INCOME TAX ACT, 19 61. AS POINTED OUT BY THE LD. AR THE ISSUE IS COVERED IN FAVOUR OF THE ASSESS EE IN CASE OF DIT VS. PANALFA AUTOELEKTRIK LTD. 378 ITR 205 WHEREIN IT IS HELD TH AT COMMISSION PAID BY THE ASSESSEE TO ITS FOREIGN AGENT FOR ARRANGING OF EXPO RT SALES AND RECOVERY OF PAYMENTS COULD NOT BE REGARDED AS FEE FOR TECHNICAL SERVICES U/S 9(1)(VII). IN THE PRESENT CASE, THE COMMISSION WAS PAID TO ACE TR ADING, A NON-RESIDENT AGENT (PAYEE) WHO IS A TAX RESIDENT OF FRANCE. THE PAYEE WAS SIMPLY ASSISTING IN 4 ITA NO. 4142/DEL/2015 PROCURING EXPORT ORDERS FOR THE ASSESSEE IN HIS ORD INARY COURSE OF BUSINESS IN FRANCE. THE COMMISSION WAS PAID FOR ACTIVITIES OF T HE PAYEE OUTSIDE INDIA AND THE AMOUNT IS RECEIVED BY THE PAYEE OUTSIDE INDIA T HROUGH NORMAL BANKING CHANNELS. SECTION 5(2) STATES THAT TOTAL INCOME OF A PERSON, WHO IS A NON- RESIDENT, INCLUDES INCOME FROM ALL SOURCES WHICH (A ) IS RECEIVED OR DEEMED TO BE RECEIVED IN INDIA; (B) ACCRUES OR ARISES IN INDIA; OR (C) IS DEEMED TO ACCRUE OR ARISE IN INDIA. IN THE PRESENT CASE, THE COMMISSION INCOME PAID TO THE FOREIGN AGENT NEITHER ACCRUED IN INDIA NOR DEEMED TO BE ACC RUED IN INDIA AS PER DEEMING PROVISIONS OF SECTION 9 AND NOR THE SAME WA S RECEIVED NOR DEEMED TO BE RECEIVED IN INDIA. THUS, THERE IS NO NEED TO INT ERFERE WITH THE FINDINGS OF THE CIT(A). THE APPEAL OF THE REVENUE IS DISMISSED. 8. IN RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27TH MARCH, 2019 . SD/- SD/- (N. K. BILLAIYA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 27 /03/2019 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 5 ITA NO. 4142/DEL/2015 DATE OF DICTATION 27.02.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.02.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 2 7 .0 3 .2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 2 7 .0 3 .2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 2 7 .0 3 .2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK