Revenue appeal partly allowed for statistical purposes. Section 40(a)(i) disallowance remitted for fresh consideration. Section 14A disallowance upheld.

The appeal by the Revenue was partly allowed for statistical purposes. The issue of disallowance under Section 40(a)(i) was remitted back for fresh consideration by the Assessing Officer due to lack of verification on agreements and DTAA definitions. The disallowance under Section 14A was upheld based on a previous ruling, and the Revenue's grievance on this ground was dismissed.

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Issues:
1. Disallowance under Section 40(a)(i) of Income-tax Act, 1961 for commission paid to non-resident selling agents and reimbursement of expenses to a subsidiary company.
2. Disallowance under Section 14A of the Act.

Issue 1 - Disallowance under Section 40(a)(i) of the Act:
The appellant, engaged in manufacturing and selling tractors, debited a sum as commission to selling agents without deducting tax at source. The Assessing Officer disallowed the sum under Section 40(a)(ia) for non-deduction of tax, stating that the services utilized in India did not fall within the exception clause of Section 9(1)(vii) (b) of the Act. A similar disallowance was made for reimbursements to overseas offices. The CIT(Appeals) deleted the disallowance, citing the decision of GE India Technology Centre (P.) Ltd. The Revenue appealed, arguing that the CIT(Appeals) did not examine the agreements and profit elements. The tribunal found lack of verification on agreements and DTAA definitions, remitting the issue back to the Assessing Officer for fresh consideration.

Issue 2 - Disallowance under Section 14A of the Act:
The Revenue raised a grievance that the CIT(Appeals) deleted a disallowance under Section 14A. The Tribunal noted a similar issue in a previous case and upheld the CIT(Appeals) decision based on the Tribunal's previous ruling. Consequently, the ground of the Revenue was dismissed.

In conclusion, the appeal by the Revenue was partly allowed for statistical purposes, with the issue of disallowance under Section 40(a)(i) remitted back for fresh consideration by the Assessing Officer. The disallowance under Section 14A was upheld based on a previous ruling.

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