The Indore Income-Tax Appellate Tribunal (ITAT) rendered its decision
Withholding tax does not apply to sales made by a non-resident
Through India's independent commission agent
The case's facts:
RSV Global (taxpayer)1
Is a collaboration company engaged in trading various agro commodities viz. Yellow. Yellow.
Peas, plants, trees.
· Taxpayer imported during fiscal year (FY) 2014-15, corresponding to assessment year (AY) 2015-16
Yellow peas from AST Enterprise Inc., Dubai ('PKT') and Ethiopian Niger seeds
(AST).
• PKT and AST are non-residents, and transactions were made through Indian agencies. Ashapura's
Commodities, PKT and A.G. Goel & Sons for AST.
· Taxpayers have not withheld tax on the payments made to PKT and AST for the import of agro
Commodity.
· Taxpayer's enquiry by the Assessing Officer (AO) on the grounds of non-taxation
Submitted that taxes were not withheld as PKT and AST confirmed they had no business
Connecting in India.
· The AO did not recognize the taxpayer's arguments and kept the taxpayer in default for not
Withholding taxes (payments to PKT and AST). The AO therefore raised a tax demand
Amount of tax and interest thereon under the Income Tax Act , 1961 (ITA).
· On appeal, the Commissioner for Income Tax Appeals [CIT(A)] upheld the AO 's order on the grounds that the appeal was filed.
Agents worked primarily or entirely for PKT / AST. For PKT, 52 per cent of PKT 's revenues
PKT's earned handler.
· Under CIT(A), the taxpayer lodged an appeal with the Indore Income Tax Bench.
Appeal Court (ITAT).
· The following facts / controversies submitted by taxpayers before ITAT are relevant:
• PKT or AST had no business relation in India and verified the same;
· Agents were independent commission agents and worked for other traders
Even. Even. They did not stock products on behalf of PKT / AST. The agents confirmed these facts;
1 RSV Global v. Income Tax Officer, Bhopal [2020] 115 taxmann.com 335 (Indore-Trib.)
© 2020 Deloitte Tohmatsu India LLP
* Agents had no power to contract on behalf of PKT / AST. In case of AST, the contract
Their agents, the seller and the buyer also signed for approval to bind the parties;
PKT / AST secured, concluded and executed orders;
· No clear arrangement between PKT / AST and the agent;
· There was no room for the PKT / AST agent and they issued PKT / AST instructions, as they did.
Orders from others.
Circular 23/1969 of 23 July 1969 and CIT v. Hindustan Shipyard Ltd.2
Taxpayers,
Disputed that:
O Prima facie developed that PKT / AST had no business relation in India.
O There must be more than a sale and purchase transaction between the principal and
principal.
O No investigation was performed on PKT / AST and there was no evidence of true and intimate
Creating a business link in India.
O It was Revenue that had a business connection with PKT / AST in India and
Revenue hadn't done the same.
ITAT 's decision:
· ITAT noted that PKT reported that it had no daily agent in India and was exporting through
Brokers who were independent commission officers. Similarly, other actors had
Stated their agents were autonomous.
· Under ITA rules, whether a broker, general commission agent or any other agent operates primarily or
On behalf of the non-resident, he is not considered an independent agent. The responsibility
Proving that agents should not receive orders on behalf of the non-resident was with the taxpayer.
· The ITAT noted:
· Invoices claimed that the product was sold by the agent;
· Agent received over 50% of the commission from the non-resident;
The taxpayer submitted different documents showing that the agent was a general commission
Citizen. Citizen.
· ITAT depended on Circular 23/1969 of 23 July 1969 and CIT v. Hindustan Shipyard Ltd.2
And kept this:
The agent may be the main client, but the law allows non-resident to be the main client.
The worker.
· Receipt of 52% of non-resident revenue did not mean that the agent acted primarily on behalf of the non-resident
The non-resident's.
· Given the above, the ITAT held that the taxpayer was not required to withhold tax from payment
Produced to non-residents (i.e. PKT / AST) and, therefore, should not be considered by default for not
Tax withholding.
2 CIT v. Shipyard Ltd. [1977] 109 ITR 158(AP)
Commentaries:
The ruling defines the idea that an independent agent receives more than half of revenue
The non-resident principal alone would not result in a non-resident business in India. The The The
Ruling will apply to non-residents selling goods through independent agents in India.
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