No TDS on Service by non resident agent facilitating export obligations. Check Complete Details for Following Case Citation: CIT, Chennai vs. M/s Orient Express, Madras HC, TCA Appeal No. 92/2015, Date of Pronouncement – March 2, 2015. Recently we provide complete details for No Service Tax on Free Home Delivery/Pick up of Food. Now you can scroll down below and check more details for No TDS on Service by non resident agent facilitating export obligations.
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No TDS on Service by non resident agent facilitating export obligations
The nature of transactions which are liable for TDS is the income which accrue or arise in India shall be liable for deduction of tax. There was a recent case in Madras High court that the TDS was not deducted by assessee and the same expense were disallowed by department on the note that the commission paid to the agent was not after deducting TDS, which normally should be done in any case. But the court rejected the contention of department and gave the order in the favour of assessee. I have briefed the same.
This case was observed with one of the assessee named M/S ORIENT EXPRESS, which is engaged in manufacturing and exporting of leather garments from India to abroad with the help of many agents. The case came out when the assessee claimed the expense which are in nature of commission paid to such agents for facilitating exports with the assessee which may be resident or non resident, but the department disallowed the expense on the note that it was the commission income which requires TDS to be deducted and which was not deducted by the assessee and so it was disallowed. The assessee replied for the same in the court and court approved the contention of assessee.
The appeal which department laid was that the assessee has received the technical services which are provided for running the business in India and thus TDS should be deducted for the same, but the reply given by assessee was accepted by the court. Assessee gave the following reply :
The agent services were not in nature of technical services, it was just for the smooth working of the assessee’s export obligations which were completed by the agent. The agent didn’t provided any services which are essential for the running of business, it were the services for completing the obligations which were required from the government’s end. Further it was also clarified that the agent who was providing services has no permanent establishment in India which signifies that income was not accruing or remitting to india, so no TDS is required to be deducted in such case.
The court approved the petition of assessee on the note that the services provided by the agent were in nature of completing export obligation and so it cannot be termed as technical services. Thus the question for income accrue or arise u/s 9(1)(i) in India does not arise at all. As per Sec. 9(1)(i), only such part of income as is resonably attributable to the operations carried out in India can be taxed as income from business connection in India. This proves that if no operation is carried out in India, no incoem is accruing or arising in India.
The case was between CIT Chennai V/s M/s Orient express in Madras High court dated 2nd March 2015 and the appeal of assessee was accepted and that of department was rejected.