TaxTMI 
TaxTMI 
2013 (10) TMI 873
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....on Rs. 32,370/- 5. Disallowance of interest Rs. 19,553/- Rs. 78,94,615/- Assessed income Rs. 89,33,945/- 2.1Aggrieved, the assessee preferred first appeal and the ld. CIT(A) allowed part relief. The assessee-company is further aggrieved and has raised the following grounds in its second appeal:- "In view of the facts and circumstances of the case, the Id.CIT(A), Ajmer has erred in :- 1. Treating the overseas parties (to whom the assessee sold goods) as "overseas commission agents" without appreciating the assessee's own reply dated 02.12.2011; 2. Treating the overseas parties (to whom the assessee sold goods) as "overseas commission agents" without appreciating the copies of contracts / sale invoices properly; 3. Treating the overseas parties (to whom the assessee sold goods) as "overseas commission agents" when the assessee failed to explain as to how the buyers of goods could also be the commission agents; 4. Allowing the overseas commission to the local agents as well as overseas buyers on the same sale invoice when it is a simple transaction of sale / purchase; 5. In holding that there was no liabilities for TDS u/s 195 of the I.T. ....
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....ng the year, in the profit and loss account, the assessee has debited agency commission of Rs. 23,35,975/- and overseas commission of Rs. 76,81,286/-. The agency commission is stated to have been paid to the local agents for their services provided for introducing to overseas parties who are big adatias, to whom assessee-company sells goods on principal to principal basis. In the invoices from the gross amount of sales a deduction upto 12.5% has been found given in the name of 'commission'. The assessee received net of the invoice price. In its books after recording gross sales, the deduction is separately recorded as 'overseas commission'. The A.O. has accepted local commission paid but has disallowed overseas commission of Rs. 76,81,286/- u/s 37(1) of the Act with the following reasons: i) No services have been rendered by the overseas agents in as much as no details/documents of further sales by these agents have been furnished by the assessee. ii) From the perusal of sample contract notes furnished by the assessee with overseas agents it is evident that the same is a contract for purchase and sale of goods and commission has been merely deducted from the sales invoice at a fl....
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....ly by stating that residency certificates have not been submitted. (iv) The commission income of the non-resident is not chargeable to tax in view of Circular No. 23 dt. 23.07.1969 and Circular No. 786 dt. 07.02.2000. Circular No. 7 dt. 22.10.2009 cannot be applied retrospective to make it applicable to payments made before that date. Further, it is clear from the decision of Hon'ble Supreme Court in case of G.E. Technology Centre Vs. CIT dt. 09.09.2010 that TDS liability arises only when any sum chargeable to tax under the Act i.e. u/s 4, 5 and 9 of the I.T. Act is paid to a non resident. In the present case, the services are rendered outside India and amount is not taxable as it does not accrued or arise in India. Thus, it is held that there was no liability for deduction of tax at source u/s 195 of the I.T. Act on the overseas payments made to the NR commission agents. Accordingly, no disallowance u/s 40(a)(ia) for non deduction of tax at source can be made in the appellant's case." 3. After considering the rival submissions we are in agreement with the finding of the ld. CIT(A). The assessee has been exporting its goods to the non-residents introduced to it by local agents on....
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....at a higher rate as compared to few purchases made from other parties at lower rates i.e. @Rs.l24.04/kg and Rs.121.15/Kg. (ii) In respect of finished fabric, assessee has not submitted any evidence to substantiate the % of shrinkage taken by it in the cost sheets @6.75%. If the % of actual shrinkage would come less than 6.75% as taken by the assessee, then surely the cost arrived through the cost sheet will be reduced resulting in the fact that the rate charged by the sister concern is higher than the rate as per assessee's sheet." Thus he has disallowed a sum of Rs. 1,18,014/- being 1% of purchases of Rs. 1,18,01,350/- made from M/s PSL International P. Ltd by considering it as excessive and unreasonable to that extent. 4.1 As against the above, the ld. CIT(A) has held as under: "I have considered the contentions of the appellant as well as assessment order. It is seen that as regarding the yarn purchase of Rs. 63,45,267/-, it was explained by the assessee that from the outside parties assessee has purchased yarn @ Rs. 121.15 to Rs. 163.84 per kg while average rate of purchases from sister concern is Rs. 125 per kg. The AO himself has accepted that purchase rate from outside p....