S.9(1) (vii): Income deemed to accrue or arise in India-Fees for technical services-Buying agency service
commission-Procurement and incidental services rendered is not managerial or technical services, it being
nature of Commission is not taxable in India.
The assessee is a tax resident of Hong Kong. Its sourcing division provided buying agency services to various customers including an Indian company, an associate enterprise. For such services the assessee entered into a "buying agency services agreement" with the Indian company for sourcing of merchandise in respect to which the assessee received buying commission at 8.25 per cent. of the value of merchandise. The assessee provided services which included centralised media and advertisement planning, market research, public relations, sports marketing and other marketing services such as catalogue production, development of retail shop systems, etc. Another division of the assessee's group, provided certain regional marketing and administrative support services to the group's Asia-Pacific distribution entities (including the Indian company). Under the buying agency services agreement, the assessee was required to provide services to the Indian company in relation to purchase of goods from outside India, for and on behalf of the Indian company in accordance with the terms of the agreement. For the year under consideration, the assessee received remuneration in the form of buying commission at 8.25 per cent of the invoice amount of the merchandise. During the course of the assessment proceedings, the Assessing Officer held that the buying commission income received by the assessee was in the nature of fees for technical services and should be taxable in India in the hands of the assessee. Accordingly, it considered to be taxable on gross basis at 30 per cent on the ground that the agreement for providing such services was entered into on June 18, 1999. The Dispute Resolution Panel confirmed the view of the Assessing Officer. On appeal to the Tribunal, held, that the assessee was to receive commission for procuring the products for the Indian company and rendering incidental services for purchases. The services rendered by the assessee in this case were
purely in the nature of procurement services and could not be characterised as "managerial", "technical" or
"consultancy" services. Accordingly, the consideration received by the assessee was appropriately classified as
"commission" as against "fees for technical services". It was not taxable in India. Appeal ofassessee was allowed (A. Y. 2007-2008)
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