TaxTMI 
TaxTMI 
TaxTMI 
2014 (8) TMI 1180
X X X X Extracts X X X X
X X X X Extracts X X X X
..../c. with State Bank of Patiala, Kanpur Learned ACIT [3] has alleged us that we have not withdrawn 90000 EUROS from this a/c. on 01.04.2003 as alleged ,when the rate was 1 EURO - Rs. 51, with an intention to park the funds in foreign currency in order to take the benefit on devaluation of RUPEES against EURO as and when it occurs. The Learned ACIT [3] further added that we have withdrawn 90000 EUROS on 31.12.2003 when the exchange rate was 1 EURO - Rs. 57 and has added Rs. 622130.00 as GAINS ON FLUCTUATION ON FOREIGN EXCHANGE. In this context we have to submit that the Learned ACIT [3] has completely ignored the fact that our Opening Balance in EEFC A/c. as on 01.04.2003 was only EURO 1000 then how could we withdraw 90000 EUROS on 01.04.2003? 5. THAT an Ad hoc addition of Rs. 1000000.00 on account of Foreign Traveling is again against the facts and a biased opinion has been framed. The disagreement shown by the Learned ACIT [3] and our reply in respect of the same is explained in the chart as below: S. No. Date Travel Amount INR Reason of disagreement by ACIT(3) Our explanation 1. 05.08.03 468040 10000 $ have been purchased from bank but no support as tickets etc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t only a tourist resort ,it is a also a big saddlery centre and is the holder of third largest Equestrian fare in the world every two years having the largest population of horse heads of /Arabian bread. 5 12.02.04 230028 82500 Purchase of foreign currency but no evidences produced. This pertains to sales trip undertaken by partner Farhan Rasool to Europe and also to visit BETA fare at BIRMINGHAM, U.K. This trip has generated a direct business of Rs. 3422673.00 and a proposed business of above Rs. 50.00 Lacs. 6 22.03.04 40346 Payment of credit card This pertains to the credit card expenses incurred exclusively during the above stated trip [point no. 5 ] where the business to the tune of Rs. 3422673.00 was generated. The said expenses were incurred during the above said trip in foreign lands between 18.02.04 to 02.03.04 as is evident from the credit card statement itself. Total 1435224 At one point of time when the Learned ACIT [3] says that there is no proper evidence of Rs. 1435224.00 out of the traveling expenses of Rs. 1643117.00 then why only Rs. 1000000.00 have been disallowed ? This clearly states that the AO was herself not very sure ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th his business in India to a person outside the country is nothing but a fee which has been paid by the resident assessee to the non-resident for the technical services rendered by him." 6. Learned D.R. of the Revenue supported the assessment order whereas Learned A.R. of the assessee supported the order of learned CIT(A). 7. We have considered the rival submissions. We find that this issue regarding requirement of TDS out of payment of commission to a non-resident foreign agent for his services rendered outside India is squarely covered in favour of the assessee by a recent Tribunal decision rendered in the case of Asstt. CIT v. Lohia Starlinger Ltd. [2014] 65 SOT 155 (URO)/49 taxmann.com 87 (Luck.). The relevant Paras of this Tribunal decision are reproduced below: '9.3 Now we examine the second aspect i.e. allowability u/s 40(a)(i) of the Act. In this regard, we find that a clear finding is given by CIT(A) in Para 4.3 of his order that in view of Board's Circular No. 786 dated 07/02/2000, commission income of LEG is not liable to be taxed in India. To overcome these findings of CIT(A), the Assessing Officer has raised the additional ground and as per this additional....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Circular No. 23 dated 23rd July, 1969, it has been clarified that where the non-resident agent operates outside the country, no part of his income arises in India. In this Board Circular No. 786, which is after insertion of explanation No. 2, it has been reiterated that the clarification in Circular No. 23 still prevails and therefore, no tax is deductible u/s 195 in respect of payment of export commission where the services are rendered by non-resident outside India. 9.5 Hence, in our considered opinion, we are now left with to consider the amendment in section 195(1) by way of insertion of explanation 2 with retrospective effect from 01/04/1962 as reproduced above. As per this explanation 2 to section 195(1), in our considered opinion, it was clarified that the provisions of section 195(1) applies and extends to all persons, resident or non-resident etc. In our considered opinion, it means that even if a person is making payment outside India to a person outside India but the income of the recipient is taxable in India then the payer has to deduct tax even if the payer is non-resident and he is not having a resident or place of business or business connection in India. In our c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ary company is for avoidance of welfare legislation, corporate veil can be ignored. There is no quarrel on this proposition but in the present case, in our considered opinion, the facts of the present case do not suggest that the creation of subsidiary company was for avoidance of any welfare legislation or for avoidance of tax. We find that in the present case, the subsidiary company is acting as over all agent for promoting sales of the assessee company in South America and Europe etc., which are new business places for the assessee company. In view of these facts, we find that this judgment of Hon'ble Apex Court, cited by Revenue, is not relevant in the present case. 9.7 Now we consider the applicability of various judgments cited by Learned A.R. of the assessee. 9.8 The first judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Allahabad High Court rendered in the case of CIT v. Model Exims (supra). This judgment is dated 17/12/2013 and hence, this judgment is after both the amendments cited by Revenue in additional ground No. 11. In this case also, the issue in dispute before the Hon'ble Allahabad High Court was regarding payment of commiss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....way of insertion of explanation therein and hence, by respectfully following this Tribunal decision, we decline to interfere in the order of CIT (A) on this issue. These grounds of the Revenue are rejected. 8. Ground No. 7 is as under: "7. The learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in restricting the addition of Rs. 10.00,000/- on account of disallowance of foreign travelling expenses to Rs. 2,00,000/- without appreciating the facts that the assessee was making foreign trips to destinations where actually no business activities are carried out." 9. On this issue also, Learned D.R. of the Revenue supported the assessment order whereas Learned A.R. of the assessee supported the order of learned CIT(A). 10. We have considered the rival submissions. We find that this issue was decided by learned CIT(A) as per para 12 of his order, which is reproduced below for the sake of ready reference: "12. I have considered the submissions and arguments of the authorized representative of the assessee and the contents of the assessment order. The assessee's business involves travelling outside India. The visit to Europe and USA has been just....