2015 (1) TMI 738 - AT - Income Tax

Tribunal upholds CIT(A) decision on salary discrepancies, no TDS deduction for non-resident MD (A)

Dy. Commissioner of Income-tax -2(3), Mumbai. Versus M/s. Swift Freight India Ltd.

The Tribunal upheld the CIT(A)'s decision to delete additions related to discrepancies in receipts and the salary paid to the Managing Director. The ... Non deduction of TDS on freight income - CIT(A) deleted the addition relying on TDS certificates given as additional evidence - violation of the provisions of Rule 46A by CIT(A) on admitting additional evidence not giving AO an opportunity of hearing - Held that:- As it is clear from the record which was considered by ld. CIT(A) that the same is not an additional evidence but the break-up of gross receipts and various expenditure were furnished after taking the same from the record already available before the AO. Therefore, we do not find any merit or substance in the objection raised by the revenue, that CIT(A) has violated the provisions of Rule 46A while considering the break-up of receipts and expenses. It is pertinent to note that when the gross receipts of the assessee is much more than the receipts shown as per TDS certificate then there is no question of showing less receipt by the assessee . Accordingly, in the facts and circumstances of the case we do not find any error or illegality in the order of ld. CIT(A) qua this issue. - Decided in favour of assessee. Salary paid to Non-resident Managing Director - non deduction of TDS - disallowance u/s. 40a(iii) - CIT(A) deleted the addition - Held that:- salary in question was paid to Mr. Jayant Bhardwaj, MD of the assessee in US. The assessee produced the passport and visa of the MD to show that he was a non-resident Indian during the year under consideration and, therefore, the salary received by him outside India for the services rendered outside India are not taxable in India. Since the fact that the MD of the assessee is a non resident during the year has not been disputed by the Revenue , therefore, the salary paid outside India at US for the services to the US branch would not be taxable in India as per the provisions of Section 9 of the Income tax Act, thus no corresponding disallowance can be made under section 40(a)(i) of the Income tax Act, 1961. - Decided in favour of assessee. Issues Involved:1. Deletion of addition due to discrepancy in receipts shown in books and TDS certificates.2. Admittance of additional evidence by CIT(A) in contravention of Rule 46A of the I.T. Rules.3. Deletion of addition related to salary paid to the Managing Director without TDS deduction.Issue 1: Deletion of Addition Due to Discrepancy in ReceiptsThe Revenue challenged the deletion of an addition of Rs. 75,99,593/- made by the AO due to a discrepancy between the income credited in the P&L Account and the receipts as per TDS certificates. The AO noted that the receipt as per TDS certificates was Rs. 10,54,03,747/-, while the income credited in the P&L Account was Rs. 9,78,04,154/-, resulting in a difference of Rs. 75,99,593/-. The AO added this amount to the income, citing the assessee's failure to reconcile the difference.The CIT(A) deleted the addition, accepting the assessee's explanation that the amount credited in the P&L Account was net of gross receipts after deducting various expenses. The assessee provided a reconciliation showing that the gross receipts were Rs. 49,86,94,825/-, and the amount shown in the TDS certificate was part of this total. The CIT(A) concluded that there was no undisclosed income in the books.Issue 2: Admittance of Additional Evidence by CIT(A)The Revenue contended that the CIT(A) erred by admitting additional evidence during the appellate proceedings without giving the AO an opportunity to examine it, violating Rule 46A of the I.T. Rules. However, the CIT(A) clarified that the break-up of gross receipts and expenses was derived from records already available before the AO and was not new evidence. The Tribunal found no merit in the Revenue's objection, noting that the gross receipts were significantly higher than the TDS certificate amount, thus supporting the CIT(A)'s decision.Issue 3: Deletion of Addition Related to Salary Paid to Managing DirectorThe AO disallowed Rs. 44,66,000/- paid as salary to the Managing Director (MD) without TDS deduction, invoking Section 40A(i) of the Income Tax Act. The assessee argued that the MD was a non-resident, the salary was paid for services rendered outside India, and the US branch of the assessee was independently assessed and taxed in the USA. The CIT(A) accepted this argument and deleted the addition.The Tribunal upheld the CIT(A)'s decision, confirming that the MD was a non-resident during the relevant period, and the salary paid for services rendered outside India was not taxable in India. Consequently, no TDS was required to be deducted, and the disallowance under Section 40A(i) was not applicable.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of the additions related to the discrepancy in receipts and the salary paid to the MD. The Tribunal found no error or illegality in the CIT(A)'s order.