ASSISTANT COMMISSIONER OF INCOME TAX-23(1), MUMBAI V. M/s. AL-QURESH EXPORTS, MUMBAI

ITA 4804/MUM/2017

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5592 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 06-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RIZWAN HUSAINAR
• Keywords: Permanent establishment; Tax effect; TDS
• Section: 40(a)(ia); 195; 28

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI .. , BEFORE SHRI JOGINDER SINGH, VICE PRESIDENT, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NOS.4802, 4803 & 4804/MUM/2017 ASSESSMENT YEARS: 2010-11, 2012-13 & 2013-14 ACIT - 23(1) ROOM NO.113, 1 ST FLOOR MATRU MNDIR, TARDEO GRANT ROAD MUMBAI-400050 / VS. M/S. A L QURESH EXPORTS 310,RIZVI CHAMBERS HILL ROAD, BANDRA (W) MUMBAI-400050 ( # / REVENUE) ( $%& ' /ASSESSEE) P.A. NO.AADFA1292M $%& ' / ASSESSEE BY SHRI VIMAL PUNMIYA & RIZWAN HUSAIN-AR # / REVENUE BY SHRI SATISHCHANDRA RAJORE - DR ( #)*' + / DATE OF HEARING : 15/11/2018 *' + / DATE OF PRONOUNCEMENT 15/11/2018 ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 2 / O R D E R PER JOGINDER SINGH (VICE PRESIDENT) THESE THREE APPEALS ARE BY THE REVENUE CHALLENGING THE IMPUGNED ORDERS OF THE LD. FIRST APPELLATE AUTHORITY, MUMBAI, ALL DATED 27/04/2017. FIRST WE SHALL TAKE UP THE APPEAL IN ITA NO.4802/MUM/2017 WHEREIN THE GROUND IS PERTAINS TO SECTION 9 (I)(VII)(C) OF THE ACT ALONG WITH THE PRO VISIONS OF SECTION 195 OF THE ACT. 2. DURING HEARING THE LD. COUNSEL FOR THE ASSESSEE SHRI VIMAL PUNIMIYA ALONG WITH SHRI RIZWAN HUSAIN, CLAIMED THAT THE TAX EFFECT INVOLVED IN THE PRESENT APPEAL IS BELOW PRESCRIBED MONETARY LIMIT. THE LD. COUNSEL ALSO FURNISHED THE DETAILS OF TAX EFFEC T, THE COPY OF WHICH WAS ALSO SUPPLIED TO THE LD. DR, SHRI SATISHCHANDRA RAJORE, WHO ALSO FILED THE COMMENTS F ROM THE LD. ASSESSING OFFICER, WHICH ARE ALSO PLACED ON RECORD. THE LD. DR, ON THE BASIS OF COMMENTS OF THE LD. ASSESSING OFFICER, FAIRLY AGGRIEVED THAT THE TAX EF FECT INVOLVED IS RS.19,69,094/-, WHICH IS BELOW MONETARY ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 3 LIMIT PRESCRIBED IN CBDT CIRCULAR NO.3/2018 DATED 11/07/2018. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD . IN VIEW OF THE ABOVE, IT IS NOTED THAT THE TAX EFFECT IN THE PRESE NT APPEAL IS BELOW PRESCRIBED LIMIT OF RS.20 LAKH, VIDE INSTRUCTION/CIRCULAR NO.3 OF 2018, ISSUED BY CBDT ( F NO.279/MISC./142/ 2007-ITJ(PT) DATED 11/07/2018. A S PER THE CIRCULAR, THE DEPARTMENT WAS ADVISED/DIRECT ED BY THE BOARD NOT TO FILE APPEAL IN THE CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE FOLLOWING MONETARY LIMIT .:- SL. NO. APPEALS IN INCOME TAX MATTERS MONETARY LIMIT (IN R S.) 1. BEFORE ITAT 20,00,000/- 2. U/S 260 A BEFORE HONBLE HIGH COURT 50,00,000/- 3. BEFORE HONBLE SUPREME COURT 1,00,00,000/- IN VIEW OF THE ABOVE INSTRUCTION, SINCE, THE TAX EF FECT IS LESS THAN RS.20,00,000/- (NOT CONTROVERTED BY LD . DR ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 4 ALSO), CONSEQUENTLY, THE APPEAL OF THE REVENUE IS N OT MAINTAINABLE, THEREFORE, DISMISSED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. 3. NOW WE SHALL TAKE UP ITA NO.4803 & 4804/MUM/2017 WHEREIN THE ONLY GROUND AGITATED BY THE REVENUE IS WITH RESPECT TO HOLDING THE PAYMENT MADE TO FOREIGN AGENTS AS COMMISSION PAYMENT AND NO T FEE FOR MANAGERIAL SERVICES AGAINST THE OBSERVATION MADE IN THE ASSESSMENT ORDER AND FURTHER, RELYING UPON S ECTION 9(I)(VII)(C) OF THE ACT, WHICH RELATES TO WHEN A PA YER IS NON RESIDENT WHEREAS IN THE APPEALS UNDER CONSIDERATION THE PAYER IS A RESIDENT AND CONSEQUENT RELIEF GIVEN UND ER SECTION 195 OF THE ACT. THE LD. DR DEPENDED THE ADD ITION MADE BY THE LD. ASSESSING OFFICER BY INVITING OUR ATTENTION TO PARA 5, 5.3 & 5.4 OF THE ASSESSMENT OR DER. BROUGHTLY THE LD. DR RELYING UPON THE ASSESSMENT OR DER AND THE DECISION IN R.DLMIA VS CIT 106 ITR 895 (SUPREME COURT). ON THE OTHER HAND THE LD. COUNSEL FOR THE ASSESSEE FILED RETURN SUBMISSIONS WHEREIN CERTA IN CASES HAS BEEN MENTIONED. IT WAS EXPLAINED THAT THE ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 5 BUSINESS ORDERS ARE PROCURED BY NON-RESIDENTS, SETT LED ABROAD, AND SUCH ORDERS ARE COMMUNICATED BY E-MAIL OR TELEPHONICALLY. IT WAS FURTHER CLAIM THAT THE SAID NON- RESIDENTS ARE NEITHER HAVING PERMANENT ESTABLISHMEN T (PE) OR BUSINESS IN INDIA NOR THE INCOME IS TAXED I N INDIA AS THEY ARE NO ASSESSED TO TAX IN INDIA. PLEA WAS A LSO RAISED THE COMMISSION IS REMITTED THROUGH BANKING CHANNEL IN FOREIGN CURRENCY, WITH THE PERMISSION OF RESERVE BANK OF INDIA OR THE AMOUNT IS DIRECTLY DED UCTED OUT OF SALE PROCEEDS, AS PER TERMS MUTUALLY AGGRIEV ED UPON. THE CRUX OF THE ARGUMENT IS THAT THE IMPUGNED COMMISSION EARNED BY THE NON-RESIDENTS AGENTS IS NEITHER ACCRUED NOR AROSE IN INDIA AS THEIR FIELD O F OPERATION IS ABROAD THEREFORE, THEY ARE NOT LIABLE TO DEDUCT TAX UNDER SECTION 195 OF THE ACT. 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN EXPORTING OF BONELESS BUFFALO MEAT AND EGGS, DECLARED INCOME ON 27/09/2012 (A.Y.2012-13) & 26/09/2013 (A.Y.2013-4), AMOUNTING TO RS.11,04,11,700/- & RS.11,67,39,880/- ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 6 RESPECTIVELY. THE LD. ASSESSING OFFICER MADE ADDITI ON OF RS.1,33,52,553/- FOR A.Y. 2012-13 & RS.2,08,72,544/ - FOR A.Y. 2013-14 UNDER SECTION 40(A)(IA) OF THE ACT . ON APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) , THE FACTUAL MATRIX WAS CONSIDERED AND T HE ADDITION SO MADE BY THE LD. ASSESSING OFFICER WAS DELETED. THE REVENUE IS AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 3.2 IF THE OBSERVATION MADE IN THE ASSESSMENT ORDER, LEADING TO ADDITION MADE TO THE TOTAL INCOME , CONCLUSION DRAWN IN THE IMPUGNED ORDER, MATERIAL AVAILABLE ON RECORD, ASSERTIONS MADE BY THE LD. RES PECTIVE COUNSELS, IF KEPT IN JUXTAPOSITION AND ANALYZED, TH E ADDITION WAS MADE BY THE LD. ASSESSING OFFICER ON T HE PLEA THAT THE COMMISSION SO PAID TO THE FOREIGN AGE NTS, THE TDS WAS TO BE DEDUCTED AND FURTHER NO SERVICES WERE RENDERED TO THE ASSESSEE. BEFORE ADVERTING FURTHER IT IS OUR BOUNDED DUTY TO EXAMINE SECTION 194H OF THE ACT WHICH IS REPRODUCED HEREUNDER:- ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 7 194H- COMMISSION OR BROKERAGE- ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WH O IS RESPONSIBLE FOR PAYING, ON OR AFTER THE 1ST DAY OF JUNE, 2001, TO A RESIDENT, ANY INCOME BY WAY OF COMMISSION (NOT BEING INSURANCE COMMISSION REFERRED TO IN SECTION 194D) OR BROKERAGE, SHALL, AT THE TIM E OF CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE O R AT THE TIME OF PAYMENT OF SUCH INCOME IN CASH OR BY TH E ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MODE, WHICHEVER IS EARLIER, DEDUCT INCOME-TAX THEREON AT THE RATE OF TEN PER CENT : EXPLANATION- FOR THE PURPOSES OF THIS SECTION,- (I) COMMISSION OR BROKERAGE' INCLUDES ANY PAYMENT RECEIVED OR RECEIVABLE, DIRECTLY OR INDIRECTLY, BY A PERSON ACTING ON BEHALF OF ANOTHER PERSON FOR SERVICES RENDERED (NOT BEING PROFESSIONAL SERVICES) OR FOR ANY SERVICES IN THE COURSE OF BUYING OR SELLING OF GOODS OR IN RELATION TO ANY TRANSACTION RELATING TO ANY ASSET, VALUABLE ARTICLE OR THING, N OT BEING SECURITIES; (II) THE EXPRESSION 'PROFESSIONAL SERVICES' MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON A LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA; (III) THE EXPRESSION 'SECURITIES' SHALL HAVE THE MEANING ASSIGNED TO IT IN CLAUSE (H) OF SECTION 2 OF THE SE CURITIES CONTRACTS (REGULATION) ACT, 1956 (42 OF 1956)30 ; (IV) WHERE ANY INCOME IS CREDITED TO ANY ACCOUNT, WHETH ER CALLED 'SUSPENSE ACCOUNT' OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH I NCOME, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH INCOME TO THE ACCOUNT OF THE PAYEE AND THE PROVISIO NS OF THIS SECTION SHALL APPLY ACCORDINGLY. ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 8 3.3 WE SHALL ALSO EXAMINE SECTION 194J WHICH DEALS WITH FEES FOR PROFESSIONAL OR TECHNICAL SERVI CES. IT IS REPRODUCED HEREUNDER:- 194J. (1) ANY PERSON, NOT BEING AN INDIVIDUAL OR A HINDU UNDIVIDED FAMILY, WHO IS RESPONSIBLE FOR PAYING TO A RESIDENT ANY SUM BY WAY OF (A) FEES FOR PROFESSIONAL SERVICES, OR (B) FEES FOR TECHNICAL SERVICES, OR [ (BA) ANY REMUNERATION OR FEES OR COMMISSION BY WHATEVER NAME CALLED, OTHER THAN THOSE ON WHICH TAX IS DEDUCTIBLE UNDER SECTION 192, TO A DIRECTOR OF A COMPANY; OR] (C) ROYALTY, OR (D) ANY SUM REFERRED TO IN CLAUSE (VA) OF SECTION 28 ,] SHALL, AT THE TIME OF CREDIT OF SUCH SUM TO THE ACC OUNT OF THE PAYEE OR AT THE TIME OF PAYMENT THEREOF IN C ASH OR BY ISSUE OF A CHEQUE OR DRAFT OR BY ANY OTHER MO DE, WHICHEVER IS EARLIER, DEDUCT AN AMOUNT EQUAL TO TEN PER CENT OF SUCH SUM AS INCOME-TAX ON INCOME COMPRISED THEREIN : EXPLANATION.FOR THE PURPOSES OF THIS SECTION, (A) PROFESSIONAL SERVICES MEANS SERVICES RENDERED BY A PERSON IN THE COURSE OF CARRYING ON LEGAL, MEDICAL, ENGINEERING OR ARCHITECTURAL PROFESSION OR THE PROFESSION OF ACCOUNTANCY OR TECHNICAL CONSULTANCY OR INTERIOR DECORATION OR ADVERTISING OR SUCH OTHER PROFESSION AS IS NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECTION 44AA OR OF THIS SECTION; ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 9 ( B) FEES FOR TECHNICAL SERVICES SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VII) OF SUB-SECTION (1) OF SECTION 9; [ (BA) ROYALTY SHALL HAVE THE SAME MEANING AS IN EXPLANATION 2 TO CLAUSE (VI) OF SUBSECTION (1) OF SECTION 9; ] (C) WHERE ANY SUM REFERRED TO IN SUB-SECTION (1) IS CREDITED TO ANY ACCOUNT, WHETHER CALLED SUSPENSE ACCOUNT OR BY ANY OTHER NAME, IN THE BOOKS OF ACCOUNT OF THE PERSON LIABLE TO PAY SUCH SUM, SUCH CREDITING SHALL BE DEEMED TO BE CREDIT OF SUCH SUM TO THE ACCOUNT OF THE PAYEE AND THE PROVISIONS OF THIS SECTION SHALL APPLY ACCORDINGLY. IF THE FACTS OF THE PRESENT APPEALS ARE ANALYZED, I N THE LIGHT OF AFORESAID SECTIONS, WE FIND THAT THE LD. A SSESSING OFFICER HOLD THE COMMISSION PAYMENT TO SUCH AGENTS AS MANAGERIAL SERVICES AND ADDED AS INCOME OF THE ASSESSEE. THE STAND OF THE ASSESSEE IS THAT IT IS N OT MANAGERIAL SERVICES AND THE COMMISSION WAS PAID TO FOREIGN AGENTS AS BUSINESS WAS PROVIDED BY THEM TO THE ASSESSEE BY REMAINING IN THE FOREIGN TERRITORY AND THEY ARE NOT HAVING ANY PERMANENT ESTABLISHMENT IN INDIA . THE BUSINESS ORDERS ARE PROCURED BY SUCH NON-RESIDE NTS WHO ARE SETTLED ABROAD, AND SUCH ORDERS ARE COMMUNICATED EITHER BY E-MAIL OR TELEPHONICALLY TO THE ASSESSEE. THE COMMISSION IS REMITTED THROUGH BANKIN G ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 10 CHANNELS, IN FOREIGN CURRENCY, WITH PERMISSION OF R ESERVE BANK OF INDIA OR THE AMOUNTS WERE DIRECTLY DEDUCTED OUT OF THE SALE PROCEEDS, AS PER MUTUALLY TERMS AND CONDITIONS. THUS IT CAN BE CONCLUDED THAT THE COMMISSIONS SO EARNED BY NON-RESIDENTS AGENTS NEITH ER ACCRUED NOR AROSE IN INDIA BECAUSE THEIR FIELD OF OPERATION IS FOREIGN TERRITORY THEREFORE, THE AMOUN TS ARE NOT LIABLE TO DEDUCTS TAX AT SOURCE UNDER SECTION 1 95 OF THE ACT. SECTION 195(2) OF THE ACT REDS AS UNDER:- (2) WHERE THE PERSON RESPONSIBLE FOR PAYING ANY SUC H SUM CHARGEABLE UNDER THIS ACT (OTHER THAN SALARY) TO A NON-RESIDENT CONSIDERS THAT THE WHOLE OF SUCH SUM WOULD NOT BE INCOME CHARGEABLE IN THE CASE OF THE RECIPIENT, HE MAY MAKE AN APPLICATION TO THE ASSESSING OFFICER TO DETERMINE, BY GENERAL OR SPECIA L ORDER], THE APPROPRIATE PROPORTION OF SUCH SUM SO CHARGEABLE, AND UPON SUCH DETERMINATION, TAX SHALL BE DEDUCTED UNDER SUB-SECTION (1) ONLY ON THAT PROPORTION OF THE SUM WHICH IS SO CHARGEABLE. IF THE TOTALITY OF FACTS ARE KEPT IN JUXTAPOSITION WITH THE PROVISIONS OF THE ACT ONE CLEAR FACT IS OOZING OUT THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE DEPARTME NT SUBSTANTIATING THAT THE SO CALLED NON-RESIDENT AGEN TS WERE WORKING WITHIN THE TERRITORY OF INDIA OR THEY WERE HAVING PERMANENT ESTABLISHMENT IN INDIA. AS MENTION ED ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 11 EARLIER THE COMMISSION AMOUNT WAS DIRECTLY CREDITED IN FOREIGN CURRENCY IN THEIR ACCOUNTS, ABROAD, AND EVE N NO PART OF THE PAYMENT WAS CREDITED IN THEIR ACCOUNT I N INDIA. WE HAVE PERUSED THE PAPER BOOK, CONTAINING VARIOUS DOCUMENTS, MODE OF PAYMENT, PAYMENT OF SALE S COMMISSION ETC., WHICH CLEARLY SHOWS THAT IT WAS MA DE THOUGH BANKING CHANNELS AND THE COMMISSION RANGE IN FROM 25 PAISA TO RS.1/- OF THE SALES AS A COMMISSIO N. IDENTICALLY IS THE OBSERVATION OF THE LD. FIRST APP ELLATE AUTHORITY. IN VIEW OF THE FACTS THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CIT VS REDIFF.COM INDI A LTD (ITA NO. 3061/MUM/2009), CIT VS EON TECHNOLOGY PVT LTD-64 DTR 257, DCIT VS DIVIS LABORATORIES LTD-131 ITD 271(HYD)COMES TO THE RESCUE OF THE ASSESSEE. TH E HON'BLE JURISDICTIONAL HIGH COURT IN CEAT INTERNATI ONAL S.A VS CIT (1999 237 ITR 859 (BOM) OBSERVED/HELD AS UNDER:- 10. FROM A PLAIN READING OF THE ABOVE CLAUSES, IT I S CLEAR THAT IN ORDER TO FALL WITHIN THE DEEMING PROVISION OF SECTION 9 , THE INCOME SHOULD BE BY WAY OF ROYALTY OR FEES FO R TECHNICAL SERVICES. 'ROYALTY' IS DEFINED IN EXPLANA TION 2 TO ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 12 CLAUSE (VI) AND 'FEES FOR TECHNICAL SERVICES' IN EX PLANATION TO CLAUSE (VII). 11. WE ASKED MR. R. V. DESAI, LEARNED COUNSEL FOR T HE REVENUE, AS TO UNDER WHICH OF THE ITEMS OF THE DEFINITION OF 'ROYALTY' OR 'FEES FOR TECHNICAL SERVICES', ACCORDING TO HIM, TH E INCOME FOR THE SERVICES FALLING UNDER CLAUSE (A) WOULD FALL. I N REPLY, MR. R. V. DESAI SUBMITTED THAT THE ONLY CLAUSES UNDER WHIC H IT COULD FALL IS CLAUSE (IV) OF EXPLANATION 2 WHICH TALKS OF IMPARTING OF ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, C OMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXPERIENCE OR SKILL. HE SU BMITTED THAT IN THE ALTERNATIVE, IT CAN BE REGARDED AS FEES FOR TECHNICAL SERVICE, VIZ., FOR MANAGERIAL, TECHNICAL OR CONSULT ANCY SERVICES. WE HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSION. THE TRIBUNAL HAS HELD THAT 25 PER CENT. OF THE COMMISSI ON ATTRIBUTABLE TO SERVICES FALLING UNDER CLAUSE (A) O F THE AGREEMENT CANNOT BE TREATED AS 'ROYALTY' OR 'FEES F OR TECHNICAL SERVICES'. THE TRIBUNAL APPEARS TO BE CORRECT IN IT S ABOVE CONCLUSION. OBVIOUSLY, THE PAYMENT IS FOR FORGOING IN FAVOUR OF THE INDIAN COMPANY EXPORT IN VARIOUS MARKETS OR TRA NSFERRING CERTAIN EXPORT ORDERS TO THE INDIAN COMPANY. BY DOI NG, SO, THE ASSESSEE DID NOT IMPART ANY INFORMATION CONCERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNOWLEDGE, EXP ERIENCE OR SKILL NOR RENDER ANY MANAGERIAL, TECHNICAL OR CONSU LTANCY SERVICE. IN FACT, THE ASSESSEE HAD MERELY AGREED TO FORGO IN FAVOUR OF THE INDIAN COMPANY CERTAIN EXPORTS IN VAR IOUS MARKETS AND TO TRANSFER CERTAIN EXPORT ORDERS TO TH E INDIAN COMPANY. WE ASKED MR. DESAI AS HOW THESE ACTS CAN B E REGARDED OR CONSTRUED AS IMPARTING INFORMATION CONC ERNING TECHNICAL, INDUSTRIAL, COMMERCIAL OR SCIENTIFIC KNO WLEDGE EXPERIENCE OR SKILL OR TENDERING MANAGERIAL, TECHNI CAL OR CONSULTANCY SERVICES. THERE WAS NO SATISFACTORY ANS WER, WE HAVE ALSO CAREFULLY PERUSED THE LANGUAGE OF THE DEF INITION OF 'ROYALTY' AS CONTAINED IN EXPLANATION 2 TO CLAUSE ( VI) AND 'FEES FOR TECHNICAL SERVICES' IN THE EXPLANATION TO CLAUS E (VII) OF SUB- SECTION (1) OF SECTION 9 OF THE ACT. WE, HOWEVER, FAIL TO UNDERSTAND HOW SERVICES REFERRED TO IN CLAUSE (A) O F THE AGREEMENT CAN BE REGARDED AS 'ROYALTY' OR 'FEES FOR TECHNICAL SERVICES'. COMMISSION ATTRIBUTABLE TO SERVICES REFE RRED TO IN CLAUSE (A) OF THE AGREEMENT, THEREFORE, CANNOT BE T REATED AS 'ROYALTY' OR 'FEES FOR TECHNICAL SERVICES' FALLING UNDER CLAUSES ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 13 (VI) AND (VII) OF SECTION 9(1) OF THE ACT. THE TRIBUNAL, IN OUR OPINION, WAS RIGHT IN HOLDING SO. IN THE LIGHT OF FOREGOING DISCUSSION AND THE JUDICI AL PRONOUNCEMENTS NO PART OF THE REMITTANCE TO THE COMMISSION AGENT WAS TAXABLE IN INDIA. THEREFORE, T HE ASSESSEE WAS NOT UNDER OBLIGATION TO DEDUCT TAX AT SOURCE FROM THE COMMISSION PAYMENT TO NON-RESIDENTS AS DISCUSSED HEREINABOVE AND SINCE THERE WAS NO OBLIGA TION TO DEDUCT TAX AT SOURCE THE VERY FOUNDATION OF IMPU GNED DISALLOWANCE UNDER SECTION 40(A)(IA) CEASES TO HOLD GOOD IN LAW. EVEN OTHERWISE SECTION 9 OF THE ACT DEALS W ITH INCOME DEEMED TO ACCRUE ARISE IN INDIA. AS PER SUB SECTION (I)(B) WHICH DEALS WITH THE CASE IS NON-RES IDENT, NO INCOME SHALL BE DEEMED TO ACCRUE ARE ARISE IN IN DIA TO HIM. IN THE PRESENT CASE THE FOREIGN AGENTS ARE NOT RESIDING IN INDIA AND THEIR OPERATION OF ACTIVITY I S ALSO ABROAD, THE COMMISSION IS PAID THROUGH BANKING CHAN NEL IN FOREIGN CURRENCY, WITH THE PERMISSION OF THE RES ERVE BANK OF INDIA, THEREFORE, INCOME IN THEIR HANDS ARO SE OUT SIDE INDIA, WHICH CANNOT BE SAID TO BE TAXABLE IN I NDIA. THE NATURE OF ACTIVITIES BY THE FOREIGN AGENTS IS L IMITED TO ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 14 FOREIGN TERRITORY AND THEY ARE NOT DOING ANY BUSINE SS ACTIVITY IN INDIA, CONSEQUENTLY, THE LD. FIRST APPE LLATE AUTHORITY WAS JUSTIFIED IN DELETING THE IMPUGNED DISALLOWANCE/ADDITIONS, RESULTING INTO DISMISSAL OF APPEALS OF THE REVENUE. THE STAND OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), IS THEREFORE, UPHELD. FINALLY:- (I) THE APPEAL IN ITA NO.4802/MUM/2017 IS DISMISSED AS NOT MAINTAINABLE ON LOW MONETARY LIMIT. (II) WHEREAS APPEALS IN ITA NO.4803 & 4804/MUM/2017 ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN OPEN COURT IN THE PRES ENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCL USION OF THE HEARING ON 15/11/2018. SD/- (N.K. PRADHAN) SD/- (JOGINDER SINGH) ' # / ACCOUNTANT MEMBER / VICE PRESIDENT MUMBAI; 0 DATED : 15/11/2018 G{|TX{ G{|TX{ G{|TX{ G{|TX{? ?? ? P.S/. P.S/. P.S/. P.S/. $.. , ,, , ITA NO.4802,4803 & 4804/MUM/2017 AL QURESH EXPORTS 15 !&$'()*)+' / COPY OF THE ORDER FORWARDED TO : 1. 123 / THE APPELLANT 2. 423 / THE RESPONDENT. 3. 5 5 6' , (1) / THE CIT, MUMBAI. 4. 5 5 6' / CIT(A)- , MUMBAI 5. 8#9$'$5 1+1 . / DR, ITAT, MUMBAI 6. :%;/ GUARD FILE. ! / BY ORDER, / (DY./ASSTT. REGISTRAR) / ITAT, MUMBAI