The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) ruled that Tax Deducted at Source (TDS) is not suitable to commission for professional service by a Nonresident.
The petitioner M/s. IRunway India Private Limited poses a business of furnishing the technology, consulting, and litigation assistance services with a focus on the intellectual property domain, especially patents, to companies, law firms, and the additional investment related to the technology and the licensing firms. The appellant taxpayer has entered into the iRunway Sales Contractors Agreement with Mr. Neeraj Gupta, a non-resident, and tax-resident of the USA, in which the taxpayer claimed itself specific sales consulting services. In consideration thereof, a sales commission of 8% to 10% aggregating to Rs. 4,505,685 was subjected to pay via taxpayer to Neeraj Gupta for FY 2014-15.
AO ruled that the sales commission of Rs 4,505,685 subjected to pay to Neeraj Gupta a non-resident and the tax-residents of USA was treated as FTS and not permit the u/s 40(a)(ia) of the Act by alleging that the Assessee had not deducted tax u/s 195 of the Act. On appeal by the Assessee, the CIT(A) confirmed the order of the AO. thus, the taxpayer furnished a petitioner to ITAT.
The petitioner submitted that Mr. Neeraj Gupta was a tax resident of the US for the FY 2014-15. A non-resident Company is chargeable to income tax in India said the appellant, along with other things.
The sales commission furnished to Mr. Neeraj Gupta would not be entitled to the sum chargeable to tax in India and hence the taxpayer would not secure a responsibility to deduct tax at source u/s 195 of the Act.
The Tribunal sees that Article 15 of the India-US tax treaty furnishes that the income made by the individual through the performance of the professional services will be subjected to tax in the country in which he is a resident only where the professional has a fixed base constantly available to him in India towards the intention of performing the activities or lives in India for the time duration of more than the 90 days in the related taxable year.
“The Coram of Mr. N. V. Vasudevan andMrs. Padmavathy S ruled that the sales commission paid to Mr. NeerajGupta is not taxable under Article 15 also of the India-US Tax Treaty as it does not satisfy either of the criteria specified therein. We, therefore, hold that the disallowance of the sum paid to him u/s.40(a)(ia) of the Act cannot be sustained and the addition is directed to be deleted”.
