VIRUPAKSHA ORGANICS LIMITED,HYDERABAD vs. DY. COMMISSIONER OF INCOME TAX, CIRCLE-17(2), HYDERABAD

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ITA 1211/HYD/2018Status: DisposedITAT Hyderabad23 June 2021AY 2014-154 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the principle of estoppel does not apply in income tax proceedings, and deductions must be decided based on statutory provisions. It further ruled that foreign sales commission expenses are not exigible to TDS if services are not rendered in India.

What were the facts?

The assessee claimed foreign sales commission expenses without deducting TDS. Both the lower authorities disallowed these expenses under Section 40(a)(i) of the Income Tax Act.

What were the issues?

Whether foreign sales commission expenses are disallowable for non-deduction of TDS when services are rendered outside India. Applicability of the principle of estoppel in income tax proceedings.

Which sections of the Income-tax Act were involved?

Section 40(a)(i)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, HYDERABAD BENCHES “B” : HYDERABAD

Before: SHRI S.S.GODARA & SHRI LAXMI PRASAD SAHU

O R D E R PER S.S.GODARA, J.M. :

This assessee’s appeal for AY.2014-15 arises from the CIT(A)-5, Hyderabad’s order dated 08-05-2018 passed in case No.0223/2017-18/CIT(A)-5, in proceedings u/s.143(3) r.w.s.92CA(3) of the Income Tax Act, 1961 [in short, ‘the Act’]. Heard both the parties. Case file perused.

2.

The assessee’s sole substantive grievance canvassed in the instant appeal challenges correctness of both the learned lower authorities’ action making Section 40(a)(i) disallowance of Rs.16,61,611/- claimed towards foreign sales commission without deducting TDS thereupon.

3.

We noted that the Assessing Officer’s assessment order dt.29-12-2017 taken into consideration the assessee’s alleged agreement to the impugned disallowance as upheld in the CIT(A)’s order. The very factual position continues before us as well as per the department’s contentions that the assessee is estopped from challenging the impugned foreign sales commissions disallowance once conceded throughout in both the lower proceedings.

4.

We find no merit to sustain the Revenue’s instant technical arguments as well those supporting the impugned disallowance on merits. We make it clear that the question as to whether the principles of estoppel applies in income tax proceedings or not is no more res integra as per CIT Vs. C.Parakh & Co (India) Ltd., [291 ITR 661] (SC) that a deduction has to be decided on the basis of statutory provisions than estoppel only. Coupled with this, it has already come on record that the assessee’s payee(s) had not rendered any services in India since it has claimed foreign sales commission only. Case law CIT Vs. M/s.Faizan Shoes Pvt. Ltd., [367 ITR 155] and Welspun Corporation Ltd., Vs. DCIT Dt.03-01-2017 hold that such foreign sales commission expenses are not exigible to TDS deduction once the concerned recipients have not rendered any services in India. Hon'ble apex court’s landmark decision in GE India Technology Centre P. Ltd. v. CIT (2010) [327 ITR 456] also holds that chapter-XVII of the Act requiring TDS deduction applies only in case the corresponding income is assessable in the payees’ hands and not otherwise. We follow the very reasoning mutatis mutandis to decline Revenue’s argument seeking to invoke Section 40(a)(ia) qua assessee’s overseas commission payments disallowance payments. Both the learned lower authorities’ impugned action invoking the same to this effect stands reversed therefore.

5.

This assessee’s appeal is allowed in above terms.

Order pronounced in the open court on 23rd June, 2021

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