TaxTMI 
TaxTMI 
2025 (8) TMI 1039
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....owance under section 40(a)(i), facts in both years are also similar, therefore, with the consent of parties both the appeals were clubbed, heard together and are decided to avoid the conflicting decision. For appreciation of fact, facts in ITA No. 674/M/2025 for A.Y. 2013-14 is treated as lead case. The assessee has raised following grounds of appeal: "1.1 The Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition made by the Assessing Officer being commission payment made to Imperial Impact Bangladesh Ltd. amounting to Rs. 1,35,69,613/- u/s. 40(a)(i) of the Income Tax Act, 1961 under a total misinterpretation of law and factual matrix of the case. 1.2 The Ld. Commissioner of Income Tax (Appeals) erred i....
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....l and engaged in the international merchant trade in the name of M/s. Kathmandu Apparel Group. The assessee while filing her return of income declared income of Rs. 5.74 crore. The case was selected for scrutiny. During assessment, the assessing officer noted that assessee has made foreign remittances to various parties which was reported in Form 15CA and 15CB. The assessee was asked to furnish details of such foreign remittances with name of parties, nature of services rendered, copy of agreement and if any TDS is made. The assessee furnished reply about foreign remittances. The assessee also furnished the details and nature of payments. All such details are scanned on page no. 2, 3 & 4 of assessment order. In the payment details, the asse....
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....2015. The assessee is getting sample testing done for its garments and the fabric used from Bureau Verital Hongkong Limited as authorized by its sales party in certain cases. The Imperial Impact Bangladesh Ltd. claims agency commission as per shipment contract entered with and it provided facilitation services for shipment of goods from Bangladesh. The payments made to Ec Vision Limited is for subscription for software used at Bangladesh and Vietnam RO for making various compliance, documentation like order details / packing list invoices, barcode stickers on cartons of the international trade executed from these countries. Utilization of services of such parties are outside India. The assessee also explained this scope of section 40(a)(i) ....
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.... that expenditure incurred in foreign currency related to merchanting business falls under the ambit of section 9(1) and accordingly, the assessee was liable to deduct TDS on the remittances to the parties in the nature of fees and technical services and Royalty. The assessee has not furnished copy of agreement with parties to whom foreign remittances were paid and agreement only with Bangladesh parties were furnished. The assessing officer disallowed 30% of remittances to Imperial Impact Bangladesh Ltd., Ec Vision Limited & Bureau Veritas Hongkong Ltd. thereby the assessing officer made 30% of total remittances. The assessing officer made three disallowances aggregating of Rs. 1.857 crore. On appeal before ld. CIT(A), the action of assessi....
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....nal in case of ACIT vs Total Oil India Pvt. Ltd. in ITA No. 4300/M/2016. Further, payment for use of software cannot be considered as Royalty as has been held in Engineering Analysis Centre of Excellence P. Ltd. (2021)125 taxmann.com 42 (SC) and CIT vs NET APP B.V (155 taxmann.com 275) SC - SLP dismissal & Shell International B.V vs DCIT (2024 160 taxmann.com 761) (Ahd. ITAT). The ld. AR while explaining the facts of her case submits that assessee is doing business of international merchant under the sole proprietorship of her firm Kathmandu Apparel Group. The assessee is trading of garment apparel to USA. The assessee is procuring such garment from Bangladesh and Hong Kong and was exporting directly to the USA. Such facts are not disputed ....
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....yments were made on the pretext of commission, is nothing but for technical and managerial work which is covered by the definition of fees for technical services. 7. We have considered the rival submissions of both the parties and perused the record carefully. We find that there is no dispute on the business model of assessee. Admittedly, the assessee remitted payment to Bangladesh based parties. The recipient has rendered services outside India. Their income is not taxable in India. The foreign agent carried out its activities of checking or packing of assessee's goods outside India. Thus, the commission income earned by agent are outside India which had not accrued in India. Certainly, the payment made to foreign agent is also not on a....