MRS.SUDERSHAN RANI RALLEN,CHENNAI vs. ACIT CIRCLE - XII, CHENNAI

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ITA 131/CHNY/2022Status: DisposedITAT Chennai27 June 2023AY 2009-103 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 disallowance for commission to foreign parties was not sustainable as the assessee had discharged its onus by providing invoices and payments were made through banking channels. The disallowance under Section 14A was also not sustained due to lack of evidence showing borrowed funds were used for investments or business expenditure was incurred to earn exempt income.

What were the facts?

The assessee paid commission to foreign agents without deducting TDS and claimed expenses for which no agreements were provided. The AO disallowed these amounts, and the CIT(A) confirmed a portion of the commission disallowance and the entire disallowance under Section 14A.

What were the issues?

Whether disallowance of commission paid to foreign agents without TDS is justified, and whether disallowance of expenses under Section 14A is sustainable without evidence of borrowed funds or business expenditure for earning exempt income.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 37(1),Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, CHENNAI

Before: HON’BLE SHRI MAHAVIR SINGH, VP & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM

आयकर अपीलीय अिधकरण “बी” �ायपीठ चे�ई म�। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHENNAI माननीय �ी महावीर िसंह, उपा ! एवं माननीय �ी मनोज कुमार अ&वाल ,लेखा सद) के सम!। BEFORE HON’BLE SHRI MAHAVIR SINGH, VP AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपील सं./ (िनधा*रण वष* / Assessment Year: 2009-10) Mrs. Sudershan Rani Rallan ACIT, बनाम L/H of late Shri Purushotam Nath Rallan Circle-XII, 8/32, Karpura Street, Periamet, Chennai. / Vs. Chennai-600 003. �थायीलेखासं./जीआइआरसं./PAN/GIR No. AFXPP-3810-P (अपीलाथ�/Appellant) : (� थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Shri Raghav Rajeev Menon (Advocate) – Ld. AR � थ�कीओरसे/Respondent by : Shri D.Hema Bhupal (JCIT)- Ld. DR सुनवाईकीतारीख/Date of Hearing : 27-06-2023 घोषणाकीतारीख /Date of Pronouncement : 27-06-2023 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2009-10 arises out of the order of learned Commissioner of Income Tax (Appeals)-5, Chennai [CIT(A)] dated 10-03-2020 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143 r.w.s. 147 of the Act on 31-10-2014. The grievance of the assessee is two folds i.e., (i) Disallowance u/s 40(a)(i) for want of TDS on certain foreign payments; (ii) disallowance u/s 14A. The registry has noted delay of 657 days in the appeal. Since the period of delay fall within the exclusion period of Covide-19 Lockdown period, the delay is condoned and the appeal is admitted for adjudication on merits. Having heard rival submissions, the impugned issues are adjudicated as under. The assessee is manufacturer and trader of raw and finished leather.

2.

Disallowance u/s 40(a)(i) / 37(1) 2.1 The assessee paid commission to foreign agents but did not deduct any tax at source against the same. Accordingly, the sum of Rs.31.11 Lacs was disallowed under this head. The Ld. CIT(A), considering the remand report of Ld. AO, deleted addition to the extent of Rs.29.65 Lacs. However, the commission paid to two parties for Rs.1.45 Lacs was confirmed u/s 37(1) since the assessee did not provide any agreement in support of services rendered by these parties. Aggrieved, the assessee is in further appeal before us. 2.2 We find that the payment of commission is to foreign parties through baking channels. The assessee produced relevant invoices etc. and discharged the onus as required u/s 37(1). Therefore, impugned disallowance could not be sustained in law. We order so.

3.

Disallowance u/s 14A 3.1 The assessee earned exempt income of Rs.33.14 Lacs and submitted that no disallowance is required u/s 14A since the investment in mutual fund was done in individual capacity. However, Ld. AO computed interest disallowance and indirect expense disallowance u/r 8D(2) for Rs.4.76 Lacs. The Ld. CIT(A) confirmed the same against which the assessee is in further appeal before us. 3.2 We find that there the investment in mutual fund is in individual capacity. Nothing has been brought on record to show that borrowed funds were used to make the investments or the assessee incurred any business expenditure to earn the exempt income. In the absence of such finding by Ld. AO, the impugned disallowance could not be sustained in law. We order so.

4.

The appeal stand allowed. Order pronounced on 27th June, 2023

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