By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi Chartered Accountants
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Section 9, read with section 195 and Article 7 of DTAA between India and USA
Income cannot be said to have deemed to accrue or arise in India when the assessee pays commission to non-resident for the services rendered outside India and the non-resident does not have a permanent establishment in India. Consequently, section 195 is not attracted and so the assessee is not liable to deduct TDS from the said payment.
FACTS
The assessee exported granite to USA and paid commission on export sales made to a US company but it did not deduct tax u/s. 195.
The Assessing Officer held that the sales commission was the income of the payee which accrued or arose in India on the ground that such remittances were covered under the expression fee for technical services’ as defined u/s. 9(1)(vii)(b). He thus held that the assessee was liable deduct tax u/s. 195 and he was in default u/s. 201(1) for tax and interest.
On Appeal, CIT (Appeals) held that commission does not fall under managerial, technical or consultation services and therefore, no income could be deemed to have accrued or arisen to the non-resident so as to attract provisions of withholding tax u/s. 195.
On Appeal-
HELD THAT
The order of CIT(A) was to be upheld as the non-resident recipients of commission rendered services outside India and claimed it as business income and had no permanent establishment in India. Thus, provisions of section 9 and section 195 were not attracted.
