Short Overview: Services rendered by non-resident outside India were purely in the nature of procurement services and could not be characterized as ‘managerial’, ‘technical’ or ‘consultancy’ services and thus, could not be taxed in absence of a permanent establishment in India, accordingly, liability to withhold tax under section 195 did not arise.

Assessee entered into ‘buying agency agreement’ with non-resident and claimed deduction of commission paid on account of procurement of goods from outside India. AO treated the payment to be in the nature of ‘fee for technical services’ and accordingly disallowed deduction for want of TDS under section 195.

It is held that  services rendered by non-resident were purely in the nature of procurement services and could not be characterized as ‘managerial’, ‘technical’ or ‘consultancy’ services and thus, could not be taxed in absence of a permanent establishment in India, accordingly, liability to withhold tax under section 195 did not arise.

Decision: In assessee’s favour.