No TDS u/s 195 on commission to non-resident agents for services outside India without PE/business connection, as income neither accrues/arises nor deemed to in India u/s 5(2)/9; no disallowance u/s 40(a)(ia).

आदेश /ORDER

Per, Dr. Arjun Lal Saini, AM:

Captioned appeal filed by the Revenue, pertaining to Assessment Year 2012-13, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad, dated 08.09.2025, which, in turn, arises out of an assessment order passed by the Assessing Officer (AO) u/s 143(3) of the Act, dated 27.03.2015.

2. The grounds of appeal raised by the Revenue are as under:

“1. The CIT(A) has erred in ignoring the settled principle laid down by the Hon'ble Supreme Court in Transmission Corporation of AP Ltd. vs. CIT (239 ITR 587), wherein it has been categorically held that in all payments to non-residents, tax has to be deducted u/s 195, subject to determination of income component. The obligation to approach the assessing officer u/s 195(2) cannot be by passed unilaterally by the assessee.

2. The CITIA) has erred in summarily extend the ITAT's finding in sister concern's case without independent fact-verification since the reliance on the argument of "income not accruing or arising in India" is not tenable without detailed verification of services rendered, place of performance, and actual role of SAFCO in generating sales for the assessee.

3. The CIT(A) has erred in failing to consider that section 172 provides for taxation of occasional shipping operations of non-residents, and is not intended to apply to regular/recurring transactions routed through agents in India and the assessee has made systematic and continuous payments to foreign shipping lines, which are not in the nature of "occasional" operations.

4. Any other ground that the Revenue may rise before or during the proceedings before the Hon'ble ITAT.

5. It, is therefore, prayed that the order of the CIT(A) be set aside and that of the assessing officer be restored to the above extent.”

3. The relevant material facts, as culled out from the material on record, are as follows. The assessee has e-filed its return of income on 30.09.2012, declaring total income of Rs. 4,69,490/-. Thereafter, the assessee’s case was selected for scrutiny through CASS. Accordingly, first statutory notice u/s 143(2) of the Income tax Act, 1961 was issued on 07.08.2013 which was served upon the assessee on 21.08.2013. Thereafter, notice u/s 142(1) of the Income tax Act, 1961, along with detailed questionnaire was issued on 24.07.2014 which was duly served upon the assessee on 25.07.2014. In response thereto, the assessee attended from time to time and furnished various details called for during the course of the proceedings. The assessee has declared income from Hulled Sesame Seeds & Natural Sesame Seeds Trading, which is verified with the relevant evidences produced during the course of the proceedings. During the course of assessment proceedings, it was found that the assessee has claimed foreign expenses of Rs.2,23,96,972/- to SAFCO and ocean freight of Rs 43,84,038/- to various parties in the profit and loss accounts for the year under consideration. Considering, the section 195(1) of the Act, the AO noted that the assessee has made foreign commission payment to non-resident agent and ocean freight, however, the TDS was not made deducted while making the payment/crediting in its accounts which is required to be disallowed. The assessing officer, therefore, issued show cause notice u/s. 142(1) of the Act, on 17.03.2015, for the proposed addition of Rs. 2,23,96,972/-, and Rs.43,84,038/-, which was duly served upon the assessee- firm on 17.03.2015 which is reproduced in the assessment order page nos. 2 to3 by t