THE PRINCIPAL COMMISSIONER OF INCOME TAX-2 vs. JAY CHEMICAL INDUSTRIES LTD.

C/TAXAP/610/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 610 of 2019 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX-2 Versus JAY CHEMICAL INDUSTRIES LTD. ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MS. JUSTICE SANGEETA K. VISHEN Date : 24/09/2019 ORAL ORDER (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. By this appeal under section 260-A of the Income-Tax Act, 1961 (hereinafter referred to as 'the Act'), the appellant – Revenue has called in question the order dated 26.3.2019 made by the Income Tax Appellate Tribunal, Ahmedabad Bench 'D', Ahmedabad in ITA No.2693/Ahd/2014 by proposing the following two questions stated to be substantial questions of law: - [A] “Whether the Appellate Tribunal had erred in law and on facts in upholding the order of the CIT(A) deleting

the

addition

of Rs.3,47,81,265/- made on account of disallowance u/s. 40(a)(ia) of the Act for non deduction of tax on commission

payable

foreign agents?” [B] “Whether the Appellate Tribunal Page 1 of 4

C/TAXAP/610/2019 ORDER had erred in law and on facts in upholding the order of the CIT(A) deleting

the

addition

of Rs.5,95,111/- made on account of disallowance u/s 14A of the Act?” 2. Heard Mrs. Mauna M. Bhatt, learned senior standing counsel for the appellant. 3. Insofar as proposed Question 'A' is concerned, which relates to deletion of addition of Rs.3,47,81,265/- made on account of dis- allowance under section 40(a)(ia) of the Act for non deduction of tax on commission payable to foreign agents is concerned, the Commissioner (Appeals) as well as the Tribunal have placed reliance upon the decision of the Supreme Court in the case of GE India Technology Centre P. Ltd. v. Commissioner of Income-Tax and Another, (2010) 327 ITR 456 (SC), wherein it has been held that a person paying interest or any other sum to a non- resident is not liable to deduct tax if such sums are not chargeable to tax under the Act. Section 195 contemplates not merely amounts, the whole of which are pure income payments; it also covers composite payments which has an element of income embedded or incorporated in that. The obligation to deduct tax at source is, however, limited to appropriate proportion of income chargeable under the Act forming part of gross sum of money payable to the non-residents. 4. Thus, the Tribunal has merely applied the Page 2 of 4

C/TAXAP/610/2019 ORDER decision of the Supreme Court to the facts of the present case. Under the circumstances, the proposed question does not give rise to any question of law. 5. Insofar as proposed Question 'B' is concerned, which relates to deletion of addition of Rs.5,95,111/- made on account of dis-allowance under section 14A of the Act is concerned, the Commissioner (Appeals) as well as the Tribunal have placed reliance upon the decision of the jurisdictional High Court in the case of Commissioner of Income-Tax v. Corrtech Energy P. Ltd. (2015) 372 ITR 97 (Guj) wherein the court has held that notice under sub-section (1) of section 14A provides that for the purpose of computing the total income under Chapter IV of the Act, no deduction shall be allowed in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. The court recorded that in the facts of the said case, the Tribunal has recorded a finding of fact that the assessee did not make any claim for exemption of any income from payment of tax and it was on that basis that the Tribunal held that the dis- allowance under section 14A of the Act could not be made. The court agreed with the view adopted by the Tribunal and did not find any question of law. 6. In the facts of the present case, it is an Page 3 of 4

C/TAXAP/610/2019 ORDER admitted position that the assessee had not made any claim for exemption of any income from payment of tax.