TaxTMI 
TaxTMI 
2016 (10) TMI 1042
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....e that the assessee at the relevant time was engaged in the business of running cold chain project, mainly, trading and processing of fresh fruits and vegetables in cold storage unit. It has filed its return of income on 13.9.2009 electronically declaring total income at Rs.NIL. On scrutiny of the accounts, it revealed to the AO that the assessee has claimed deduction of Rs. 35,71,622/- on account of 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 th....
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.... All these commission agents do not have any place or permanent establishment in India. They while working abroad have procured orders. The commission is paid to them in proportion to quantity of material sold through them and as a percentage of sales in foreign currency. While making the payments of commission to them no TDS liability arises as it is not required to be deducted as the services are rendered abroad. Since overseas Agents earned commission income not on account of business connection and in the absence of permanent establishment (PE) in India, these payments cannot be subject to tax in India as per relevant DTAA. Since these agents do not carry on business through PE situated in India the commission payment is not taxable....
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....er 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 the decision of the Apex Court as discussed above held that the onus is on the assessee to prove that services were rendered by the commission ....
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.... have been obtained from them, I am inclined to accept that the said expense is a genuine business expenditure. Secondly I find that nothing has been brought on record by the revenue to show that commission of Rs. 35,71,622/-paid to five different non-resident agents had any operation carried out in India as per the provisions of Section 9(i)(i) of Income tax Act, 1961. On an identical issue, the jurisdictional ITAT Ahmedabad, in case of AIA Engineering Ltd. V/s. Addl.CIT (ITA No.580/Ahd/2011) has held that income of a non-resident is deemed to accrue or arise in India only if any part of income is reasonably attributable to operation carried out by the non-resident in India and if no operation is carried out in India by the non-resident, t....
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....ment in India and how the remittances given to them are not taxable in India. The ld.CIT(A) has accepted the contentions of the assessee on both folds. It is pertinent to observe that for the allowance of any expenditure under section 37(1), the following conditions are to be satisfied i.e. (i) there must be expenditure, (b) such expenditure must not be of the nature described in sections 30 to 36, (c) the expenditure must not be in the nature of capital expenditure or personal expenses of the assessee, and (d) the expenditure must have been laid down or expended wholly and exclusively for the purpose of business or profession. The expression "wholly" refers to quantum of expenditure, while expression "exclusively" refers to the motive, obj....
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....w 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 comm....