TaxTMI 
TaxTMI 
2026 (4) TMI 1547
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....2025 passed for A.Y. 2021-22. 2. The assessee has raised the following grounds of appeal: "1. The Ld. CIT(A) and Ld. AO has erred in law and on facts in disallowing expenses claimed as commission paid on exports of-Rs.88,61,356 u/s 40(a)(i) of the Act, on account of non-deduction of tax at source. 2. The Ld. CIT(A) and Ld. AO has erred in law and on facts in disallowing interest expenses of Rs. 2,70,98,027 u/s36(1)(iii) of the Act. 3. The Ld. CIT(A) and Ld. AO has erred in law and on facts in disallowing employees contribution towards Provident Fund and Employee State Insurance Scheme of Rs. 7,11,142 u/s 36(1)(va) of the Act. 4. Both the lower authorities have passed the orders without properly appreci....
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....ight to receive commission arose in India upon execution of such orders and therefore the income was deemed to accrue or arise in India under section 9(1)(i) of the Act. The Assessing Officer further observed that the assessee had not made an application under section 195(2) of the Act to determine taxability and had unilaterally assumed that the payments were not chargeable to tax. Secondly, the Assessing Officer disallowed interest expenditure of Rs.2,70,98,027/- under section 36(1)(iii) of the Act by holding that borrowed funds were utilized for capital workin- progress and therefore proportionate interest ought to have been capitalized till such assets were put to use. The Assessing Officer noted that the assessee had mixed funds and fa....
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....t, the assessee contended that it had substantial interest-free funds and therefore presumption should be drawn that investments in CWIP were made out of such funds. The assessee placed reliance on CIT vs. Reliance Industries Ltd. (410 ITR 466, SC), CIT vs. Torrent Power Ltd. (363 ITR 474, Guj), CIT vs. Suzlon Energy Ltd. (354 ITR 630, Guj) and other judgments. The CIT(A), however, held that the assessee failed to establish nexus and confirmed the disallowance. 6. With regard to employees' contribution to PF/ESI, the CIT(A) upheld the addition by holding that delayed deposits beyond due dates prescribed under respective Acts are not allowable under section 36(1)(va) of the Act, relying upon statutory provisions and audit report observati....
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....in it was held that commission earned by non-resident agents for services rendered abroad cannot be deemed to accrue or arise in India. Similar view has been taken in DCIT vs. Mc Fills Enterprises Pvt. Ltd. (101 taxmann.com 212, Ahd) and other decisions. Respectfully following the binding precedents in the assessee's own case, we hold that the disallowance of Rs.88,61,356/- is unsustainable and is hereby deleted. 10. The relevant findings of the Tribunal in ITA No.1849/Ahd/2016 & others, as extracted, read as under: "...it is an undisputed fact that the non-resident agents have rendered services outside India for procuring export orders and no part of such services has been carried out in India. The agents do not have any perman....
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....1,356/- made under section 40(a)(i) of the Act is unsustainable and the same is hereby deleted. 14. Ground No. 2 relates to disallowance of interest under section 36(1)(iii). We find that this issue is also covered in favour of the assessee by the decision of the Tribunal in ITA No.1849/Ahd/2016 & others, wherein the Tribunal has held as under: "...it is evident from the balance sheet that the assessee is having substantial interest-free funds in the form of share capital and reserves which are far in excess of the investments made in capital work-in-progress. In such circumstances, a presumption arises that the investments are made out of interest-free funds available with the assessee. Accordingly, no disallowance of interest ....