JUPITER COMTEX PRIVATE LIMITED,VATVA vs. ASST. CIT CIRCLE 2(1)(1), VEJALPUR

The learned NATIONAL FACELESS APPEAL CENTRE (NFAC) has grievously erred both in law and on facts in dismissing the appeal of the appellant and upholding the addition/disallowance of Rs. 9,66,471/- made by Ld AO by wrongly invoking section 40(a)(i) of the Income tax Act, 1961. There being no liability to make TDS on payment of sales commission to foreign agent rendering service of sales outside India, the disallowance ought to be deleted, it be deleted now. Asst. Year : 2012-13 - 2–

The LD NFAC further erred in law and on facts in not appreciating that the payee foreign agent had rendered services outside India for effecting sales as per evidences furnished and there was no justification to apply section 40(a)(i) to make disallowance of expenditure on commission. It be so held now and disallowance of Rs. 9,66,471/-be deleted now.

The LD NFAC further grievously erred in law and on facts in relying on the decisions of AAR which have been duly considered in a series of judgment [ITA NO: 2028/AHD/2013] AND SINCE THE PAYEE HAD NO PERMANENT ESTABLSIHMENT OR PLACE OF BUSINESS IN India, was not liable to income tax and hence the judgments cited were clearly applicable. It be so held now and disallowance made b and confirmed by Ld NFAC be deleted.

The LD NFAC further also erred in law and on facts in not appreciating that the appellant had vide its replies including dated 13.08.2022 had furnished documentary evidences including agreement with foreign agent and invoices etc and as such, considering direct judgments of Apex Court and Juri ictional High Court, there was no liability to make TDS and hence disallowance made u/s 40(a)(i) of the Act ought to be held to be unjustified. It be so held now and addition/ disallowance of Rs. 9,66,471/- confirmed by Ld NFAC be deleted now.

The LD NFAC erred in law and on facts in not properly considering the submission, explanations and evidences as well as binding judgments o the issue while confirming disallowance of Rs. 9,66,471/ The order passed is therefore against the sanction of law and in violation of rules of natural justice. It be so held now and order so passed be cancelled.

The LD NFAC ought to have allowed the appeal in toto

The appellant craves leave to add, alter, modify or delete any of the grounds at the time of hearing.

Brief facts of the case are that in the original order passed u/s.143(3) AO made addition in respect of non-deduction of TDS from the commission payments made outside India the assessee however had failed to discharge the obligation. Therefore, the expenditure claimed under the head Commission expenses paid to non-residents is Asst. Year : 2012-13 - 3– disallowed and added back to income u/s 40(a)(i), of Income tax Act. Thus, an amount of Rs. 9,66.,471/ on which TDS has not been deducted, is disallowed and added in the hands of the assessee The CIT(A) passed order on 10.03.2016 vide order Appeal No.CIT (A)-2/321/DC Cir. 2(1)(2)/2014-15 and upheld the order of the AO in respect of remitted the issue of addition on account of disallowance of foreign commission amounting Rs. 9,66,471/-, The ITAT vide its order dated 25.05.2022 in ITA no. 938/Ahd/2016 had remitted the issue of addition on account of disallowance of foreign commission amounting Rs. 9,66,471/- back to the file of AO to take action in accordance with the law. During the course of set aside assessment proceedings, the reply of the assessee was considered by the A.O. and after considering the reply the A.O. again made addition on account of disallowance of foreign commission amounting to Rs. 9,66,471/-

Aggrieved by the Assessment Order, assessee preferred an appeal before the Ld. CIT(A), who dismissed the appeal of the assessee by observing as follows:

Heard the argument of both the parties and perused the material available on record.

We have gone through the records. The issue is whether the commission of Rs.9,66,471/- paid to non-resident agents for procuring export orders is chargeable to tax in India and, consequently, whether tax was deductible under section 195 of the Act. The commission was paid to non-resident agents for services rendered outside India. The assessee furnished agreements, invoices and other supporting Asst. Year : 2012-13 - 5– documents and submitted that the agents had no permanent establishment or business operations in India.

1 The Hon’ble Supreme Court in CIT v. Toshoku Ltd., 125 ITR 525 (SC), held that commission earned by non-resident agents for services rendered outside India does not accrue or arise in India merely because the orders were obtained for an Indian assessee. Further, in GE India Technology Centre Pvt. Ltd. v. CIT, 327 ITR 456 (SC), it was held that tax is deductible under section 195 only where the payment is chargeable to tax in India.

2 In the present case, the Revenue has not brought any material on record to establish that the non-resident agents rendered services in India or had any permanent establishment or business operations in India. The finding of the Ld. CIT(A) that the commission was taxable merely because it became payable in connection with export orders executed in India is therefore not sustainable.

3

Ground No. 7 is general in nature and requires no separate adjudication.

In the result, the appeal of the assessee is allowed.