Tribunal Upholds CIT(A) Decision on Disallowances: Export Commission, Mark to Market Loss, TDS

The Tribunal upheld the CIT(A)'s decision to delete disallowances on payments for export commission and mark to market loss, as well as professional and technical services payment without TDS deduction. The Tribunal found that no TDS was required for export commission paid outside India, accepted the foreign exchange loss evidence, and confirmed that reimbursement expenses did not necessitate TDS deduction. Consequently, all revenue appeals were dismissed on 25/11/2016, with the Tribunal finding no grounds to overturn the CIT(A)'s well-supported decisions.

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Issues Involved:
1. Deleting disallowance made on account of payment for export commission without TDS deduction.
2. Deleting disallowance on account of mark to market loss.
3. Deleting disallowance of professional and technical services payment without TDS deduction.

Issue 1: Deleting disallowance made on account of payment for export commission without TDS deduction

The common grievance of the revenue pertains to the deletion of disallowance made on account of payment for export commission on which no TDS was deducted. The CIT(A) deleted the disallowance after observing that the payment was made to a non-resident for services rendered outside India, and thus, no tax was required to be deducted under section 195 of the I.T. Act. The non-resident did not have any business connection or dependent agent in India, and the payment was not from any property, asset, or income source in India. The CIT(A) relied on various judicial pronouncements, including the Hon'ble ITAT in Armayesh Global vs. ACIT, the Hon'ble Delhi High Court in CIT vs. Eon Tech, and the Hon'ble Supreme Court in G.E. India Technology Centre Pvt. Ltd. These cases established that no TDS was required if the income was not chargeable under the provisions of the Act. The CIT(A) also referenced decisions in Adidas Sourcing Ltd., Angelique International Ltd., and WNS Global Services (UK) Ltd., which supported the non-requirement of TDS for export commissions paid to non-residents for services rendered outside India.

The Tribunal upheld the CIT(A)’s decision, noting that the issue is covered by various decisions of the Hon'ble Supreme Court, High Court, and Tribunal, confirming that export commission paid outside India for services rendered outside India was not liable for TDS deduction.

Issue 2: Deleting disallowance on account of mark to market loss

For the assessment years 2009-2010 and 2010-2011, the revenue contested the deletion of disallowance on account of mark to market loss of Rs. 7,71,555/-. The AO had disallowed this amount due to a lack of supportive details regarding foreign exchange loss on sundry creditors. During the appellate proceedings, the assessee submitted additional evidence, which was forwarded to the AO. After verification, the AO accepted the evidence in her Remand Report, acknowledging the foreign exchange loss on sundry creditors as an expenditure. Consequently, the CIT(A) allowed the assessee’s claim, and the Tribunal found no infirmity in the CIT(A)’s order, as the AO had already verified and accepted the loss.

Issue 3: Deleting disallowance of professional and technical services payment without TDS deduction

In the assessment year 2009-2010, the revenue was aggrieved by the deletion of disallowance of Rs. 72,970/- paid for professional and technical services without TDS deduction. The CIT(A) found that out of the total sum of Rs. 1,06,908/-, Rs. 72,980/- was related to reimbursement of expenses such as document attestation fees and translation charges, which did not require TDS deduction. However, for the balance sum of Rs. 34,000/- related to professional charges, TDS was required. The CIT(A) confirmed the addition of Rs. 34,000/- while deleting the addition of Rs. 72,970/-, considering the nature of the payment as reimbursement. The Tribunal upheld the CIT(A)’s decision, finding no infirmity in the deletion of the disallowance of Rs. 72,980/-.

Conclusion:

All appeals of the revenue were dismissed, and the order was pronounced in the open court on 25/11/2016. The Tribunal found no reason to interfere with the CIT(A)’s order, which was based on thorough judicial analysis and verification of facts.

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