TaxTMI 
TaxTMI 
TaxTMI 
2012 (12) TMI 691
X X X X Extracts X X X X
X X X X Extracts X X X X
....re and sale of chemicals and bulk drugs. The assessee filed its return for the assessment year under consideration declaring total loss of Rs. 1,42,63,470/-. In course of assessment proceedings, the AO noticed that the assessee has claimed expenditure of Rs. 16,81,130/- towards payment of commission to foreign agents but no tax has been deducted at source. The AO asked the assessee to explain as to why commission payment will not be disallowed u/s 40(a)(i) since no tax has been deducted at source on the payment made. The assessee in its reply explained that export commission was paid to foreign agents for the services rendered by them in connection with effectuating exports sales and the payments are made directly to the bank account of the agent through telegraphic transfer. The assessee relying upon a circular No.786 of CBDT dated 7-2-2000 stated that as the foreign agents operate in their respective countries and no part of the income arises in India, tax is not required to be deducted at source on the payments made to the foreign agents. The AO rejected the contention of the assessee by observing that non residents were paid by way of telegraphic transfer obtained from banks at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t. The learned AR further submitted that only because the commission amount was transmitted to foreign agents through telegraphic transfer, it cannot be said that the banks acted as agent on behalf of the foreign agents and received payment on their behalf in India. In support of his contention, the learned AR relied upon a decision of ITAT, Mumbai Bench in the case of Armayesh Global v. Asstt. CIT [2011] 45 SOT 69 (Mum) (URO) and a decision of ITAT, Hyderabad Bench in the case of Dy. CIT v. Divis Laboratories Ltd. [2011] 131 ITD 271. 6. We have heard rival submissions and perused the material on record. As revealed from the assessment order, the AO has come to the conclusion that the commission payments were deemed to have been received in India only because the telegraphic transfer of the remittances towards commission was made from a bank in India. Apart from these things, the AO has got no other material on record to show that the foreign agents either rendered any services in India or have any permanent establishment in India. Only because the remittances towards commission were telegraphically transferred to the foreign agents from the banks in Hyderabad will not lead to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the payment made to the non-residents. Thus, the judgment in the case of Transmission Corporation (supra) does not advance the case of the department in the present appeal. Finally, it may be pertinent to note that Circular No.786 dated 7-2-2000 i.e., the same has been issued after the judgment was rendered in the case of Transmission Corporation (supra) i.e., on 17-8-1999. The facts in the assessee's case remain governed by the Board Circular and hence, in the final analysis, respectfully following the earlier order of the Tribunal in the assessee's own case, we uphold the order of the CIT (A) deleting the disallowance." 7. In case of Divis Laboratories Ltd. (supra), the ITAT, Hyderabad Bench while interpreting the provisions contained under s. 195 held that unless the income is liable to tax in India, there is no obligation to deduct tax. In order to determine whether the income can be deemed to accrue or arise in India, it has to be consistent in the context of section 9. As per section 9, the basic criteria provided in the section is about accrual of or arising of income In India by virtue of connection with the property in India or control or management vested in India. Unl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....C is not net interest but the interest earned by the assessee. He therefore recomputed the deduction claimed u/s 80HHC by restricting the deduction to Rs. 18,22,222/-. The assessee being aggrieved of the disallowance made by the AO challenged the same before the CIT (A). 11. In course of hearing before the CIT (A), the assessee contended that interest was earned mainly from margin money deposits and electricity deposits with banks and authorities for the purpose of business. These deposits were made from the funds borrowed from banks for which the assessee incurred interest expenditure. Hence, the interest received by the assessee is required to be set off against the interest paid by the assessee before excluding 90% thereof as per clause (baa) of Explanation to section 80HHC of the Act. In support of his contention, the assessee further relied on the decision of Hon'ble Delhi High Court in case of CIT v. Sri Ram Honda Power Equipments [2007] 289 ITR 475. The CIT (A) following the decision of the ITAT, Special Bench Delhi in the case of Lalsons Enterprises (supra) and the decision of Hon'ble Delhi High Court in the case of Ram Honda Power Equipments (supra) and in the case of Kas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. (supra), the Hon'ble Supreme Court on interpreting clause (baa) of section 80HHC held in the following manner:- "The facts of this case very briefly are that Bharat Rasayan Limited for short" the assessee" filed al return of income-tax claiming a deduction of Rs. 72,76,405 under section 80HHC of the Act. In the assessment order, the Assessing Officer held that ninety per cent of the gross interest has to be excluded from the profits of the business of the' assessee under Explanation (baa) to section 80HHC of the Act and deducted ninety per cent gross interest of Rs. 50,26,284 front the profits of the business of the assessee . The assessee preferred an appeal contending that only ninety per cent of the net interest should have been deducted from the profits of the business of the assessee under Explanation (baa) to section 80HHC, but the Commissioner of Income- tax (Appeals) rejected this contention of the assessee. Aggrieved, the assessee filed an appeal before the Income Appellate Tribunal (for short "the Tribunal") and the Tribunal allowed the appeal of the assessee and held that the assessee was entitled to deduct the expenses from the interest received and only ninety per ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s 234B and 234C of the Act, 1961 should be computed after allowing the MAT credit. 5. The decision of the ld. CIT (A) is erroneous in view f the provision of section 219 of the IT Act as per which, MAT credit is not in the nature of advance tax". 17. Ground Nos. 4 and 5 relate to common issue as to whether interest u/s 234B and 234C of the Act just computed after allowing MAT credit. Briefly, the facts are the AO while completing the assessment computed the tax payable by the assessee and charged interest under sections 234B and 234C of the Act. Before allowing MAT credit u/s 115JAA of the Act. 18. The assessee challenged the same before the CIT (A). The CIT (A) following the decision of the ITAT, Chennai Bench in the case of Chemplast Sanmar Ltd. v. Dy. CIT [2004] 3 SOT 620, Synthetic Industrial Chemicals Ltd v. Dy. CIT [2004] 90 ITD 851 (Cochin), Philips India Ltd. v. Asstt. CIT [2005] 92 ITD 441 (CHD) directed the AO to re-compute interest u/s 234B and 2324C after allowing MAT credit. 19. The learned DR supporting the order of the AO and relying on a decision of Hon'ble Supreme Court in the case of Jt. CIT v. Rolta India Ltd. [2011] 330 ITR 470 submitted that interest under ....