DTAA: India-UK: Article 18(2): The assessee, an event management company, engaged the services of a non-resident agent to bring the foreign Artists to India. The assessee paid remuneration to the Artists and commission to the agent. It deducted tax on the remuneration paid to the Artists but did not deduct tax on reimbursements to Artists and the commission paid to the agents. The sum paid to agent could not be deemed to have arisen from the personal activities in a contracting State in status

The assessee was an event management company. The assessee engaged the services of a non-resident agent to bring the foreign Artists to India. The assessee paid remuneration to the Artists and commission to the agent. It deducted tax on the remuneration paid to the Artists but did not deduct tax on reimbursements to the Artists and the commission paid to the agents. The Assessing Officer held that the assessee should have deducted tax on reimbursements and payments to the agent and accordingly treated the assesses as an assessee in default. CIT(A) and the Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Bombay High Court upheld the decision of the Tribunal and held as under:

“i) The Artists had performed in India and for that expenses have to be incurred and reimbursement of such expenses do not constitute income derived by these Artists from their personal activities so as to be taxable under Article 18 of the Indo-UK DTAA. Thus, the reimbursement of expenses is not taxable in India.

ii) The finding of fact is that the income of the agent is not arising from the personal activities in a contracting status of entertainer or athlete. The payment in relation thereto is not in terms of Clause (2) of Article 18. It is in these circumstances that the commission income of the agent cannot be said to be taxable in India. This Clause was not applicable to him.