AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2023 (7) TMI 851
X X X X Extracts X X X X
X X X X Extracts X X X X
.... clauses (a) to (d) of the above referenced rule. 2. The CIT(A) has erred in law and on facts in not appreciating that mere statement of the assessee before the Id. CIT(A) that he was prevented by the sufficient cause to produce such evidence before the AO does not satisfy the conditions of Rule 46A(1) without substantiating it with relevant and cogent documentary evidence. 3. The CIT(A) has erred in law and on facts in admitting the additional evidence as cleared from the following observation mentioned on page 28 of his impugned order which is tantamount to putting cart before the horse, as after admitting the additional evidence, the CIT(A) sent it for AO's comments, which is total in contravention of the mandate of Rule 46A(1) of the IT Rules, 1962:- "After admitting the additional evidence u/s 46A, copy of the same was sent to the AO to directing him to comments on admissibility and the merit of the additional evidence subsisted by the appellant before me on 22.07.2020." 4. The CIT(A) has erred in law and on facts in stating that the AO has admitted the veracity of the evidence, without appreciating that veracity of evidence has no nexus wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of tax and claim of commission expenses. As various opportunities were provided to the assessee during the course of assessment proceedings and the order has been passed by taking into consideration the submission of the assessee then. It is requested that the submission of the assessee now may be taken on record if found admissible. The assessee submitted his rejoinder on the report of the Ld. AO before the Ld. CIT(A) which is reproduced by the Ld. CIT(A) in para 7 of his order. The grievance of the Revenue, inter alia is that the Ld. CIT(A) has not given any finding on Ld. AO's report and assessee's rejoinder thereof. It is also a grievance of the Revenue that the Ld. CIT(A) admitted the additional evidence and then sent it to the Ld. AO for his comments which is contrary to the Rule. It is also the view of the Revenue that veracity of evidence has no nexus with the circumstances enumerated in Rule 46A(1)(a) to (d). 4. We have heard the Ld. Representative of the parties and perused the records. It may be observed that Rule 46A(1) permits production of additional evidence in any of the circumstances enumerated in clause (a) to (d) thereof. In the assessment order the Ld. AO sta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ia which has been deleted by the Ld. CIT(A). The relevant facts are that the assessee is engaged in the business of providing information technology consultancy services where he provides staff augmentation on contractual basis for different project of the client. He filed his return electronically on 27.07.2017 declaring income of Rs. 23,31,430/-. The return was processed under section 143(1) of the Act. His case was selected for limited scrutiny under CASS. 6.1 In response to statutory notices issued during assessment proceedings, the assessee filed reply online through e-assessment portal from which the Ld. AO found that the assessee provides IT services to clients in Australia and declared receipt of Rs. 2,75,42,184/- on account of "sale of services" out of which sale of Rs. 2,32,02,000/- was made to M/s. Tech Mahindra Australia alone. On examining the details of expenses the Ld. AO found that an amount of Rs. 1,54,83,082/- was claimed to have been paid to the above said two persons of Australia. 6.2 The Ld. AO required the assessee to explain the reasons for not withholding any tax on "commission" payments made by him. The assessee replied thus: ".... The payee ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the Service Agreements with M/s Tech Mahindra, 3. The assessee confirmed that the said Agents had no direct role in "Getting" the contract with M/s Tech Mahindra. Having admitted of no direct role played by the Agents, the assessee however, claims that both of the said agents had crucial role to play in timely informing the assessee about the business opportunity available with M/s Tech Mahindra, which ultimately led the assessee to avail such opportunity and procure/get the contract with M/s Tech Mahindra 4. As for the reply from M/s Tech Mahindra regarding employment of Sh. Rajesh Dudeja with their Australian Branch, the assessee was not aware of the same. Nor is the assessee concerned with the employment status of Sh. Rajesh Dudeja with M/s Tech Mahindra. The agreement executed by the assessee with Sh. Rajesh Dudeja is an independent & separate agreement. Rather, his employment with M/s Tech Mahindra could have afforded him inside information regarding availability of business opportunities with M/s Tech Mahindra. 5. Since the services were provided by them in Australia, the income embedded in these payments accrued to the Agents outside India and ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it is apparent that the case was taken for limited scrutiny for the reason of commission payment outside India but no corresponding TDS statement has been filed. Thus, the primary issue in the instant case is non deduction of TDS on the payment of commission made to agents outside the India. However, the AO in his assessment order has also raised/examined the issue of genuineness/nature of the commission expenses and based on his certain observations in assessment order, has held that such payments as non genuine and bogus. 8.2.2 The appellant has claimed that since the commission payment has been made to foreign agents in course of his regular business there is no need for deduction of TDS on such payments as both the agents whom such payments have been made are permanent resident of Australia. The appellant has filed form 15CA in terms of provision of Rule 37BB of IT Rules, 1962 during the appellate proceedings as part of additional evidences and which was forwarded to the AO for his comments on the merit. The AO in his report has admitted the veracity of the evidences. The assessee has filed Form 15CA for each of the transaction that was made outside the country. This c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....appears on re< merely book entries coupled with TDS the amount which will be claimed as a refund by the recipient being a loss making concern, In our considered view the assessee has produced only skeletal paper work of the arrangement without any iota of evidence about actual business services rendered." 8 2 5 In the above cited case, it is noticed that agents were supposed to maintain certain documents such as invoices, letter heads and transaction details which they were not able to produce before the bench when they were asked to: "...Except confirming the amount and giving details, Assessee and KSSD both have not produced any other document, letter head, invoice etc. as pr the MOU.' "All these conditions of MOU clearly show that the Asessee and Agent were supposed to maintain copious records for the transactions of trade inquiries, sales and realization of sale proceeds by cash or cheques.' 8.2.6 I have examined the observation of the AO and the facts of the case in the light of appellant's submission in this regard. From the submission and the facts of the case it Is revealed that mandatory documents and documents as per the contrac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....should not consider the same as a reasonable estimate." 8.2.8 In the light of the facts of the case and respectfully following the decision of the Hon'ble Apex Court, I am inclined to accept the contention of the appellant with respect to the genuineness of commission payment made to the agents abroad. Hence, the addition of Rs. 1,54,83,082/- made by the AO on alternative consideration is also deleted." 8. This has brought the Revenue before us and ground Nos. 6 to 9 relate thereto. 9. The Ld. DR submitted that the services provided are technical in nature. What is material is the nature of services provided. The invoices throw light on the nature of services provided. The covenants also suggest that the services contain an element of consultancy and therefore the impugned payments qualify as FTS. 10. The Ld. AR on the other hand relied upon the order of the Ld. CIT(A). He submitted that the agents provided only assistance in procuring orders. No technical services were provided. The contract between the assessee and the agents is merely for services of procuring orders. 11. We have given careful thought to the submission of the parties and perused the reco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....u of services provided by them in Australia; income accrued to them outside India and cannot be deemed to have been accrued in India. Hence, their income is not liable for income tax in India. Therefore, no liability to deduct TDS arises thereto. 14. It has been held in the following decisions that where payment of commission has been made by the assessee to non-resident agents for rendering services of procuring sales order etc. it was not FTS but business profit and in absence of PE of such agents in India, such commission payment was not taxable in India:- i) ACIT vs. Kapoor Industries Ltd. (2021) 187 ITD 603(Delhi-Trib.) ii) Apurva Goswami vs. Dy. DIT (Int. Taxation) (2022) 196 ITD 10 (Delhi Trib) iii) Pr. CIT vs. Puma Sports India (P.) Ltd. (2021) 434 ITR 69 (Kar) SLP filed by the Department stands dismissed as reported in (2022) 285 Taxman 191 (SC). 15. Once we hold that the impugned payment by the assessee is not FTS the assertions made in the grounds of the Revenue do not have legs to stand. Moreover, these grounds do not arise out of the order of the Ld. CIT(A). We, therefore, reject them. 16. Ground No. 10 is of general nature. 17. A....