Subscribe to the Bombay Chartered Accountant Journal Subscribe Now!

July 2009

S. 40 (a)(i), read with S. 195, of the Income-tax Act, 1961 – In view of Board’s Circular No. 786, dated 7-2-2000, no income had accrued or arisen in India either u/s.5(2) or u/s.9 in respect of selling commission, brokerage and other related charges paid

By C. N. Vaze, Shailesh Kamdar, Jagdish T. Punjabi, Chartered Accountants
Reading Time 2 mins
fiogf49gjkf0d

New Page 1

  1. [2009] 116 ITD 328 (Gauhati)


Jt. CIT v. George Williamson (Assam) Ltd.

A.Y. : 1995-96. Dated : 31-8-2007

S. 40 (a)(i), read with S. 195, of the Income-tax Act, 1961
– In view of Board’s Circular No. 786, dated 7-2-2000, no income had accrued
or arisen in India either u/s.5(2) or u/s.9 in respect of selling commission,
brokerage and other related charges paid to non-resident agents in respect of
sale of tea outside India and, therefore, no tax was deductible u/s.195.
Hence, disallowance made by Assessing Officer was liable to be deleted.

During the relevant assessment year, the Assessing Officer
disallowed the expenditure on selling commission, brokerage and other expenses
in relation to overseas sales paid to non-residents without tax deduction
u/s.195. On appeal, the Commissioner (Appeals) deleted the additions so made.

On revenue’s appeal : the ITAT held that :

1) S. 195 casts an obligation on an assessee to deduct
tax from the payments made to non-residents which are chargeable to tax
under the Act.

2) In Circular No. 786, dated 7-2-2000, the Board has
explained the applicability of S. 195, read with S. 40(a)(i), in relation to
commission paid to foreign agents. As per the said Circular, in respect of
commission and brokerage paid to foreign agents on export sales, no income had
accrued or arisen in India either u/s.5(2) or u/s.9 and no tax was, therefore,
deductible u/s.195. Consequently, expenditure on commission and related
charges payable to non-resident agents could not be disallowed u/s.40(a)(i) on
the ground that tax had not been deducted.

You May Also Like