2016 (10) TMI 1042

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.... commission expenses paid to two five foreign agents. The ld.AO has confronted the assessee to show requisite details as to how this commission payment can be allowed. In response to the query of the AO, the assessee has filed a letter through its authorized representative on 16.12.20112. The explanation of the assessee has been reproduced by the AO on page nos.2 to 5 of the assessment order. Relevant part of the explanation reads as under: "[5.1] Shri 3. M. Naik, C.A., the A.R. of the assessee vide letter dtd'. 16.12.2011 furnished detailed explanation which is reproduced hereunder: S. No. Name of the foreign agent Amount of commission 1 Contract farming India AG 2,366,785/- 2 Carl Trading Ltd 56,329/- 3. MAP Hypermarket LLC Carrefour 348508/- 4 Fresh Fruit company 100000/- 5 Peter Van Ouwerkerk 7,00,000/- "Your assessee is an exporter of bulk drugs and fine chemicals which are sold/ exported in foreign countries. During the previous year your assessee engaged several commission agents, who procure business for the assessee by booking orders for the assessee. Total amount of commission paid to agents aggre....

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.... to prove beyond doubt that the services have been rendered by the foreign agents to make him eligible for the commission. The assessee company does not have any procurement order or indent placed by the foreign agents for supply of good to concerned foreign companies. In the case of Lachminarayan Modan Lal v. CIT (1972) 86 ITR 439 9 (SC), the Hon'ble Apex Court held that even if there is an agreement between the assessee and its selling agents or payment of certain amounts as commission, assuming there was such payment, that does not bind the Income Tax Officer to hold that the payment was made exclusively and wholly for the purposes of the Assessee's business. The Supreme Court observed as follows: ".... Although there might be such an agreement in existence and the payments might have been made, it is still open to the Income-tax Officer to considered the relevant factors and determine for himself whether the commission paid to have been paid to the selling agents or any part thereof is properly deductible under section 37 of the Act." In the case of Scheneider Electric India Ltd. V. CIT 304 ITR 360, the Hon'ble Delhi High Court relying on ....

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.... non-resident, there would be no income deemed to accrue or arise in India. Under this factual and legal position, I am of the considered opinion that no tax is deductible from the payment made to non-resident agents and hence, the disallowance as envisaged in provisions of Section 40(a)(ia) are not applicable with regard to the captioned payment to five non-resident agents referred to in assessment order. Since the appellant has filed sufficient material including confirmation that the foreign agents are non-resident and they have neither carried out any operation in India nor have rendered any services in India, no tax is deductible from the payment made to them and hence, the provisions of Section 195 r.w.s. 40(a)(ia) are not applicable. I, therefore, delete this addition of Rs. 35,71,622/- made by the AO. The appellant's contention in Grounds No. 1 and 2 are Allowed." 6. With the assistance of the ld.representaties, we have gone through the record carefully. A perusal of the assessment order would indicate that the ld.AO has assigned two reasons for disallowing the claim of the assessee. In the first fold of reasoning, he observed that the assessee failed to submit any e....

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....registered. It appears to be prepared in a format style. Therefore, we are of the view that the ld.CIT(A) has erred in deleting the disallowance made by the AO. We allow ground no.1 raised by the Revenue. 7. As far as ground no.2 is concerned, it is second fold of reasoning given by the AO for making the disallowance. Since, we have confirmed the disallowance on the basic premises that evidences demonstrating rendering of services was not submitted by the assessee, therefore, we do not deem it necessary to consider other fold of reasoning. Addition of Rs. 35,71,622/- is confirmed. 8. In the next ground of appeal, the grievance of the Revenue is that the ld.CIT(A) has erred in deleting the addition of Rs. 13,38,915/-. While making the addition, the ld.AO has recorded the following finding: "[7] From Schedule 12 of P & L accounts of the assessee it is seen that the assessee claimed to have incurred commission expenses of Rs. 70,42,232/-, but assessee furnished details of commission expenses of Rs. 57,03,317/- only. During the course of assessment the assessee was asked to produce the details the remaining expenses but the assessee did not produced details of Rs. 13,38,....