TaxTMI 
TaxTMI 
2017 (8) TMI 1687
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....ring of different types of yarn. The substantial part of the production is exported and the turnover of the assessee during the relevant previous year was Rs 194 crores. The ld AO during the course of assessment proceedings called for the details of foreign travelling expenses debited in the profit and loss account to the tune of Rs 42,65,989/-. The assessee submitted the various details in respect of the same showing ht enames of the persons, copy of the bills of air tickets and exchange of money taken for the trip, etc. The ld AO after going through the details of foreign travel expenses held that no export was made to some of the places visited by the Managing Director and other executives of the company and as such he held that in absence of any business relation of the said foreign travel expenses with the business of the assessee company, the entire expenditure thereon was disallowed. It was submitted that the ld AO failed to appreciate the fact that the meetings have to take place for the purpose of promotion of export and various places have to be visited to do so. It was also pointed out that none of the said travel expenses disallowed by the ld AO was in respect of wife o....
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....ppellant and that there was substantial increase in the export of the appellant during the relevant previous year and the appellant is not having any establishment of sales office outside India and it is therefore, necessary for the top Executives of the Company to periodically visit the foreign countries for the purpose of maintaining the relationship with the existing buyers and/or to search for foreign new buyers. The facts and circumstances remain the same in this assessment year as in the earlier assessment years. Apart from the charts showing details of foreign travels undertaken by the employees and top executives of the appellant company, I find that none of the disallowances has been made on the basis of any material brought on record by the appellant. I also find that the disallowance as made by the Assessing Officer in assessment year 2008-09 has been deleted by my predecessor-in-office and his order has been confirmed by the appellant and reproduced hereinabove. Considering the facts of the case, and the past history of the case, the disallowance as made by the Assessing Officer on this issue is hereby deleted. The appellant get relief of Rs. 42,65,989/- and these groun....
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....ol Board issue consent to operate only on installation and operation of proper ETP . For installation of ETP , lot of civil work is involved and civil work also plays major role along with mechanical equipments, such as RCC made equalization tank, RCC made Aeration tank, Clarifier etc. As per technical specifications, the assessee had to construct tanks, drain system, foundation etc which are part of ETP. The total cost of asset was valued at Rs 1,88,42,111/- and out of that, a sum of Rs 48,83,295/- was spent towards the construction of train and construction expenses for building materials. The assessee had also capitalised the preoperative expenses amounting to Rs 1,77,407/- and interest of Rs 1,92,126/- to the value of ETP and claimed additional depreciation thereon . The ld AO treated the costs incurred towards construction activities as spent towards building and refused to treat the same as part and parcel of value of plant and accordingly denied additional depreciation u/s 32(1)(iia) of the Act thereon. The ld AO also refused additional depreciation on the pre-operative expenses and interest that were capitalized to the cost of the plant. However, he granted depreciation at ....
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....lf-contained area, structure or building containing one or more units with auxiliary and associated infrastructure, such as (amongst others) ..... (iii) Effluent/Waste Handling/ Treatment area. Something which is a structure or part of a structure may nevertheless be plant, if it fulfils the function of plant in the trader's operations. He placed reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs Anand Theatres reported in (2000) 5 SCC 393 (SC). He further placed reliance on the decision of Hon'ble Calcutta High Court in Tribeni Tissues Ltd vs CIT reported in 190 ITR 487 (Cal) wherein it was held that Tube well and Weighing machine used in the production of paper are held to be 'Plant'. Based on these observations, the ld CITA agreed to the contentions of the assessee that ETP was necessary for the purpose of pollution control and construction of drain etc was essential part of ETP and was not in the nature of building. The assessee company having fulfilled the conditions precedent, is entitled for claim of normal and additional depreciation by treating the same as 'Plant'. Moreover, the pre-operative expenses and interest till the date of installation was ....
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....b of Rule 8D(2). Accordingly he deleted the remaining portion and directed the ld AO to disallow only one day interest attributable to investment of Rs 2 crores made by the assessee. Aggrieved, the revenue is in appeal before us on the following ground:- 4. That in the facts and in law of the case the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer u/s 14A of the I.T. Act, 1961 amounting to Rs. 12,92,208/- for earning exempted income by accepting new thing against the principle of accepting new evidence and also over ruled the provision laid down in Rule 3D of the Income Tax Rules, 1962. 4.3. We have heard the rival submissions. From the perusal of the balance sheet, we find that the assessee had made investments in the following entities :- 31st March, 2011 31st March, 2010 Rs. Rs. Rs. Rs. 6. INVESTMENTS A. Long Term Trade Investments: (Fully paid unquoted "Class A" Shares of M/s VS Lignite Power Private Limited) 7,70,371 Equity Shares of Rs. 10/- each 77,03,710 77,03,710 14,85,629, 0.01% Cumula....
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..... Accordingly, the Ground No. 4 raised by the revenue is partly allowed. 5. The last issue to be decided in this appeal is as to whether the ld CITA was justified in deleting the disallowance of commission paid in the sum of Rs 3,73,78,133/- in the facts and circumstances of the case. 5.1. The brief facts of this issue is that the ld AO observed that the assessee had debited a sum of Rs 3,43,34,391/- on account of payments made to 4 foreign agents without deducting any tax as under:- Sl. Commission on Export Sales Sales to be procured as per agreement Party's Address Paid Provision 2010-11 Total TDS Deducted (a) COMMISSION TO FOREIGN AGENT 1. Ipon Textile Dis Ticaret Ltd. In Turkey ISTOC, Ticaret Merkezi, 38, Asa No. 5.7, Mahmutbeym Bagcillar, Instanbul Turkey 2304953 5027524 7332477 - 2. Fotex BVBA In all countries of Asia & Europe Pieter Paul Rubensstraat, 55B9600, Ronse-Belgium 3602561 4116419 7718980 - 3. Suha Kutal Mustafa Gulbaran In Turkey Rentks Teksil Sanayl Ve Ticaret Ltd., New York 40257 0 40257 - 4. Excel Global In all countries of Asia &\ Europe P.O. ....
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.... commission in the case of Indian agents was the only difference from the case of foreign agents. The ld AO also brought out the differential factors in the agreement entered into for payment of commission to foreign agents vis a vis Indian agents. He observed that the services rendered by the said foreign and Indian agents were not proved by the assessee and accordingly he sought to disallow the commission payments as expenditure not incurred for the purpose of business as under:- (i) Rs 3,43,34,391/- representing commission paid to foreign agents (ii) Rs 22,39,082/- representing commission paid to Indian agents for export sales (iii) Rs 8,04,660/- representing commission paid to Indian agents for domestic sales Thus a sum of Rs 3,73,78,133/- was disallowed by the ld AO in the assessment towards commission as not incurred for the purpose of business. 5.2. The assessee submitted various details together with supporting evidences justifying the payment of commission before the ld CITA. The ld CITA fairly called for a remand report from the ld AO in this regard. The ld AO in his remand report submitted on 30.6.2014 stated that all the evidences were s....
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....ages of the paper book submitted by the assessee comprising of (i) copy of ITAT order for Asst Year 2008-09 (enclosed in pages 1 to 9 of PB) ; (ii) copy of notice u/s 142(1) dated 3.5.2013 (enclosed in pages 51 to 57 of PB) ; (iii) copy of notice dated 29.11.2013 by the ld AO (enclosed in pages 58 to 59 of PB) ; (iv) copy of letter dated 10.12.2013 of assessee (enclosed in pages 60 to 61 of PB) ; (v) copy of letter dated 16.12.2013 of assessee (enclosed in pages 62 to 66 of PB) ; (vi) copy of letter dated 27.12.2013 of assessee (enclosed in pages 69 to 75 of PB); (vii) copy of letter dated 17.1.2014 of assessee (enclosed in pages 76 to 79 of PB); (viii) details of commission and brokerage along with agreements with the agents (enclosed in pages 82 to 108 of PB) ; (ix) various payment advices to State Bank of India for payment of Commission along with debit note and details of commission paid on export (enclosed in pages 109 to 141 of PB) and (x) details of commission and brokerage on export sales along with details and their debit notes and proforma invoices (enclosed in pages 142 to 279 of PB) . The ld DR argued that the services rendered by the so called commission agents (both I....
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....n compensation they are entitled from the assessee. We find from page 206 of the paper book containing sample sales contract raised by the assessee on the foreign buyer in Turkey, the name of the said commission agent and email dated 10.12.2010 is referred to. Apart from this, we also find lot of email correspondences between the assessee and the said commission agent enclosed in pages 207 to 241 of the paper book defining the various sizes and specifications required by the foreign buyer for export of the products from India. These documents conclusively prove that the said commission agent had indeed rendered services to the assessee outside India for which commission is paid to them . 5.3.2. With regard to commission paid to Fotex BVBA, Belgium , we find that in page 145 of the Paper book, a certificate issued by the said party that they are acting as selling agent of the assessee in Belgium and that they do not have any permanent establishment in India. They have further certified that they had not rendered any services to the assessee in India and that the entire services were rendered only outside India. We also find from pages 101 & 102 of the paper book, the commission a....
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....f Rs 40,257/-, we find from page 100 of the paper book, the commission agreement entered into by the assessee with the said party defining the scope of services to be rendered by them outside India and the commission compensation they are entitled from the assessee. We find from page 107 of the paper book containing the debit note raised by the said commission agent on the assessee claiming the commission as per the agreement together with the bank remittance documents thereon. These documents conclusively prove that the said commission agent had indeed rendered services to the assessee outside India for which commission is paid to them. 5.3.5. In view of the aforesaid facts and findings, we are convinced of the fact that the aforesaid overseas commission agents had indeed rendered due services to the assessee for which commission had been paid to them and the same requires to be allowed in full. It is well settled that the said commission payments would not fall under the ambit of disallowance u/s 40(a)(i) of the Act and hence we find that the ld CITA had rightly deleted the same. 5.3.6. The assessee had paid commission to Indian agents for export sales made by the assessee ....