RAJIV MALHOTRA Vs. STATE

JUDGEMENT

(1.) A.S. Narang, Member 1. In this case an application under Section 245Q(1) of the Income-tax Act, 1961, (hereinafter referred to as "the Act") seeking advance ruling from the Authority has been filed on October 21, 2005. Shri Rajiv Malhotra, the applicant is the proprietor of Lotus Exhibition Marketing Services (for short "LEMS"), which is based at A-28, Lajpat Nagar-II, New Delhi. The applicant is engaged in the organization of India International Food and Wine Shows (IFOWS) for which purpose he is intending to organize "4th India Food and Wine Show" and for this participation of foreign concerns, undertakings and Government Departments is desired. The applicant wants to appoint agents abroad to furnish information about terms and conditions to foreign participants in respect of their participation in the Food and Wine Show in India and for booking space in the exhibition. It has been stated by the applicant that the agents would be rendering services abroad in the territory allotted to them and would be entitled to receive commission abroad for the services so rendered to foreign participants. Since the services are rendered by nonresident agents outside India and according to the terms of the agency agreement, the payment is also receivable by the agent abroad, the agent is not liable to tax, in view of the provisions of Section 5(2) read with Section 9(1) of the Act. The terms and conditions with the agent are set out in the agreement form annexed to the application along with general regulations for foreign exhibitors. It has been stated by the applicant that the Agence Delalande and Fleuri at 11 Rue Alessandro Volta 33700 Merignac, France (hereinafter referred to as "the agent"), will be responsible for planning, directing and executing the sales campaign and the services to be provided by the agent are as follows: (i) The agent will be responsible for liaison with Government departments and trade associations to endeavour, where and when appropriate, to obtain national pavilions/joint participations. (ii) The agent will be responsible for distributing to exhibitors the contract forms, invoices for space and shell scheme sales and for the distribution of all relevant materials and application forms for stand fitting, furniture and other on-site services. (iii) The agent will attend where appropriate, exhibitor meetings and will ensure that adequate briefings are given to them prior to their departure for India to participate in IFOWS. (iv) The agent will provide support to LEMS with regard to all promotional activities related to IFOWS that it may decide to undertake in the agent's territory. Particularly, the agent will assist LEMS during its meetings with potential exhibitors, Government bodies and export promotion bodies taking place in the agent's territory. (v) The agent acknowledges that the exhibitors are required to make all the payments directly to LEMS. The agent will assist LEMS and make its best efforts to induce exhibitors to fulfil their contractual obligations with regard to the payments owned to LEMS. (vi) The agent will never accept in his favour any payments that exhibitors owe to LEMS unless authorized by LEMS in writing. Even if the agent accepts any payments after having received written authorization from LEMS, such action should not result in any extra cost for LEMS. (vii) The agent will assist LEMS and ensure that the exhibitors adhere to the general regulations governing their participation in IFOWS. (viii) The agent will ensure that the exhibitors submit the contract form, catalogue entry form and forms for onsite services to LEMS as per the stipulated deadlines.

(2.) On the facts stated above, the applicant has referred the following question for ruling by the Authority: Whether any tax liability especially liability for deducting any tax at source arises on payments which are remittable to non-resident by the applicant as per agreement ?

(3.) THE request for reframing the questions has been accepted.