TaxTMI 
TaxTMI 
2019 (2) TMI 2144
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....lours. During the year under consideration, the assessee claims to have received sale orders from parties located abroad through foreign agents. On receipt of the orders so arranged by the foreign agents, the material was shipped and commission became payable to the said agents. In the course of the scrutiny assessment, the Assessing Officer (AO) noticed that the assessee has debited expenses toward such export commission. The AO made enquiries in this regard and was of the view that the commission expenses could not be substantiated by the assessee. The AO accordingly disallowed the commission expenses amounting to Rs. 2,00,97,986/- claim under Section 37(1) of the Act. Coupled with this, the AO also noted that the assessee failed to deduct the tax on commission payment to non-resident foreign agents having regard to the provision of the Section 195 of the Act. The AO accordingly invoked provision of Section 40(a)(i) of the Act and disallowed the commission expenses on the grounds of non-deduction of TDS as well. As a result, the assessee income was increased by AO to this extent. 4. Aggrieved, the assessee preferred appeal before the CIT(A). The CIT(A) took note of the detaile....
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....yment. All the aforesaid details have been submitted to the AO in the assessment proceedings which were not found acceptable by the AO. 3.7. As discussed in the preceding paras, in the present appellate proceedings, the appellant submitted the additional evidences in the form of various details and evidences which are noted as under:- a) The ledger account of Commission Expenses b) Application the Bank for Remitting the Commission to the Commission Agent alongwith the Debit Note of the Agent and the Form No. 15CB c) Bank Advice of the Remittance of Commission to the Commission Agent d) The ledger account of Commission Expenses Payable which have been paid in the subsequent year e) Application the Bank for Remitting the Commission to the Commission Agent alongwith the Debit Note of the Agent and the Form No. 15CB f) Bank Advice of the Remittance of Commission to the Commission Agent g) Commission Agreement with the various commission agents for the F.Y. 2012-13 h) No PE Declaration of the various commission agents 3.8. The AO has objected to the admission of the additional evidences the support....
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....sposal of the appeal on merits it was justified in holding that the CIT(A) ought to have exercised its power to admit additional evidences. In the instant case the certificate of the IRCTC and the certificate of the Chartered Accountant of the IRCTC in Form No.26A in respect to Rule 31ACB was necessary to be considered for disposal of the appeal on merits. - ACIT Vs. Jogindersingh ITA No. 2942/Delhi/2011 (Hon'ble Delhi ITAT) - Ashokkumar B. Patel in ITA No. 1804/Ahd/2009 (Hon'ble ITAT, Ahmedabad) has held that the purpose of Rule-46A is to ensure that there is no miscarriage of justice and though exception provided in Rule-46A did not exist the evidences should be admitted after affording opportunity to the A.O. - Keshav Mills Co. Ltd. Vs. CIT (1965) 56 ITR 365 - Hon'ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Kamlaben Sureshchandra Bhati (2014) 44 Taxmann.com 459 - have held that the admission of additional evidences could not be stated to be in breach of requirement of Rule 46A, particularly when interest of revenue was safeguarded by calling for remand report and permitting AO to comment on such additional ....
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....sion agents. None of the activity of soliciting the clients and procuring the orders is in India. The goods are being delivered by the appellant company in the other country. The activities of procuring the payment on behalf of the appellant company are also done abroad. The AO was, therefore, not right in holding that the source of income lies in India as the sales have been made from India. The provisions of Income Tax Act clearly provide that the tax would be deducted on the income which is taxable in India. The activity of earning the income is not the sale but soliciting the sales by commission agents. Though this activity is linked to the sales of the company, but it cannot be said that the income has been derived from sales which has been made from India. The income has been derived from the activity of soliciting the sales on behalf of the appellant company. The agents have carried out all the activity on the foreign soil and none of their activity is in India. Therefore, it cannot be said that the income has accrued or arisen in India and the source of income was in India. There is no fact brought out by the AO in the order as well as observed by me during the course of ap....
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....nt to whom the commission payment has been made, are in the nature of soliciting orders for the appellant and no other services, which can be categorized as technical services, have been offered. The reliance is also placed on the judgment of Honourable Gujarat High Court in the case of Vinayak Exports [Tax Appeal No.404 of 2011 dt. 12.06.12] and the judgment of Bangalore Bench of ITAT in the case of Exotic Fruits P. Ltd. vs. ITO (INTL)[40 Taxman.com 348]. Recently the honourable High Court of Rajasthan has also expressed similar opinion in the case of Modern Insulators Ltd [2015] 55 taxmann.com 260 (Rajasthan). Therefore, in view of the preceding discussion, the AO was not justified to hold that the commission payable to the overseas agents was deemed to accrue or arise in India and is taxable under the Act in view of the specific Provisions of sections 5 (2)(b) read with section 9 (1) (i) of Income Tax Act. 2.3.2 Regarding the issue of obtaining no deduction certificate under section 195, it is seen that for the applicability of the provisions of this section, the sum must be chargeable under the provisions of the Income Tax Act. Section 195 provides fo....
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.... The last issue which is to be adjudicated is that whether the commission payment was genuine and the services were rendered. The AO has briefly dealt with the issue in Para- 5 of his order. The appellant, during the course of appellate proceedings, has submitted evidences which could not be produced during the course of assessment proceedings. The evidences were in the nature of various email correspondences which were undertaken by the appellant with various commission agents regarding the payments and also the bills in respect of which commission has been paid. It has also submitted various debit notes issued by different agents to whom the commission have been paid. Various evidences submitted by the appellant were forwarded to the AO for its comments an observation. The reports given by the AO vide its letter dated 21/10/2014 and 17/02/2015 have been reproduced in the preceding pages of this order. As discussed earlier, the evidence submitted by the appellant has been admitted as sufficient opportunity was not given during the course of assessment proceedings to produce the evidences in respect of the rendering of services. The AO has commented in its remand report on the deta....
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....the land as regards applicability of IDS provisions to commission paid to overseas/non-resident agents by Indian Exporters. In view of the preceding discussion, it is clear that the appellant was not liable to deduct tax on the commission paid foreign agents. Therefore, the disallowance of Rs. 28,24,281/- under section 40(a)(ia) made by the AO is directed to be deleted. The ground of appeal is accordingly allowed." 3.11. Since the appellant has submitted the complete details about the nature of services rendered, genuineness of the claim and the copies of the invoices of the commission agents establishing the identity of the commission agents, bank advice / remittance of commission to the agents, commission agreements with the agents and also declaration from the agents about their non existence of PE in India, amply establishes the genuineness of the claim of commission to the agents. The AO has not given any adverse comments upon the merits over the issue on the additional evidences available before him in the remand proceedings. In absence of the same, the additional evidences and the details and evidences submitted during the assessment proceedings re....
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.... ● ITO, International Taxation, Chennai Vs. Prasad Production [(2010) 125 ITD 263 Chennai) (SB) ● ACIT, Circle - 16(3)(Hyderabad-Trib) vs. Priyadarshini Spinning Mills (P.) Ltd. (2012) ITA No, 1776 (2011) ● ACIT (International Taxation) vs. Star Cruise India Travel Services Pvt. Ltd. [14 ITR (T) 282 (Mum.) ● CLSA Limited vs. ITO (International Taxation) [56 SOT 254 (Mum.) ● ACIT Vs. Moderal Insulators Ltd. [56 DTK 362 (ITAT, Jaipur)] ● Ishikawajama - Harima Heavy Industries Ltd. Vs. Director of Income Tax [207 CTR 361] ● DCIT Vs. Eon Technology Pvt. Ltd. [46 SOT 323 (Delhi ITAT) ● Sukani Enterprises Vs. ACIT [ITA No. 1330/Mum/2011] (ITAT, Mumbai) ● ITO Vs. Pipavav Shipyard Limited [(2014) 42 Taxmann.com 159] ● ACIT 17(2), Mumbai Vs. Vilas N. Tamhankar (2015) [55 Taxmann.com 413] ● CIT V. Vinayak Exports 82 CCH 0032 (Guj) (2012) ● CIT Vs. Fluidtherm Technology (P.) Ltd. (2015) 57 taxmann.com 87(Madras) ● CIT Vs. Orient Express (2015) 56 taxmann.com 331 Madras) ● Asst. CIT v. Ind....
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....are allowed, subject to verification. 4. In the result, the appeal is allowed." The CIT(A) accordingly accepted the plea of the assessee for allowability of commission payments. 5. The aggrieved revenue has preferred appeal before the tribunal. The assessee has also filed cross objection to support the order of the CIT(A). 6. When the matter was called for hearing the learned DR for the revenue relied upon the order of the AO. 7. Per contra the learned AR for the assessee relied upon the order of the CIT(A) and also documentary evidences placed by way of paper book as well as judicial pronouncements viz. Pr. CIT vs. Nova Technocast Pvt. Ltd. [2018] 94 taxman.com 322 (Gujarat); Pr. CIT vs. MGM Exports Tax Appeal No. 309 of 2018 (Guj.) judgment dated 11/04/2018; ABM Steels (P.) Ltd. vs ACIT (2016) 75 taxman.com 182 (Guj.) and several other decisions of the coordinate bench of tribunal in this regard. 8. We have carefully considered the rival submissions and perused the orders of the authorities below as well as the material referred to and relied upon as well as case laws cited. The solitary issue in controversy is whether the commission expenses paid to no....