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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SHRI AMARJIT SINGH&
PER Ms. MADHUMITA ROY - JM:
The instant appeal has been filed by the Assessee before us against the order dated 23.11.2016 passed by the Commissioner of Income Tax(Appeals)-2, Ahmedabad [Ld.CIT(A) in short] for Assessment Year (AY) 2012-13 arising out of the order dated 16.03.2016 passed by the DCIT, Circle-2(1)(2), Ahmedabad.
The sole ground raised in the instant appeal is against the confirmation of disallowance of commission amounting to Rs.8,83,193/- to K.N. Mehta and Rs.4,06,954/- to Arif Wibowo – Endrati.
The facts of the case is this that the assessee during the year under consideration has debited an expenditure of Rs.95,35,571/- against commission to the foreign agents under the head ‘other expenses’. The assessee during the assessment proceeding was
- 2 - ITA No.3515/Ahd/2016 K. Patel Chemo Pharma P.Ltd. vs. DCIT Asst.Year – 2012-13 requested to furnish the details and the documentary evidence regarding such payments of commission expenses. The copy of the agreement of evidences with regard to the services rendered by the foreign agents was also directed to be filed by the assessee by the AO. The entire aspect of the matter, as to whether the income of non-resident agent can be deemed to accrue or arise in India and further that tax deduction whether would be mandatory u/s.195 under Export Commission paid to the non-residents agents were considered by the AO on the basis of the documents supplied by the assessee. However, the AO being dissatisfied with the submissions and/or insufficient documents produced before him disallowed the entire expenses of Rs.52,08,982/- claimed by the assessee under the head ‘commission expenses’ paid to non-residents with the following observation:-
“3.7 The assessee Company has also failed to comply with the provisions of section 195(2) of the Income Tax Act 1961 while deciding the issue of applicability or otherwise of withholding tax u/s. 195 of the Income Tax Act 1961. Having failed to make an application before the Assessing Officer as prescribed u/s.195(2) of the Act, to determine the chargeability and TDS liability, the assessee acted unilaterally by not deducting tax at source u/s.195 of the Act. The extract of section 195(2) is reproduced below: [ 195(2): where the person responsible for paying any such sum chargeable under this Act (other than [***] [***] [***] [***] salary) to non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the [Assessing] Officer to determine, [ by general or special order], the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub- section (1) only on that proportion of the sum which is so chargeable.] 3.8 From the above discussion it is deducted that, the assessee was under obligation to deduct tax at source as envisaged u/s.195 of the Act from the payments made to non- resident agents towards the services rendered by them. The assessee however had failed to discharge the obligation. Therefore the expenditure of Rs.52,08,982/- claimed under the head Commission expenses paid to non-residents is disallowed in accordance with the section 40(a)(i) of Income tax Act and added back to the total income of the assessee being expenses incurred without deducting tax at source. Penal proceedings under section 271(1)(c) of the Income tax Act, 1961 are initiated separately as the assessee furnished inaccurate particulars of its income.”
- 3 - ITA No.3515/Ahd/2016 K. Patel Chemo Pharma P.Ltd. vs. DCIT Asst.Year – 2012-13 4. In appeal, the Ld. CIT(A) partly allowed the appeal. Amongst the non-residents commission his agents’ question of genuineness, identity as also export details in regard to the commission payments made to Shri K.N. Mehta and Arif Wibowo – Endrati. Arose in the absence of details evidences on that aspect. The copies of emails exchanged between the parties were not sufficient to prove the services rendered by those two parties, neither the same could establish the identity and genuineness of the claim as observed by the Ld. CIT(A). The Ld. CIT(A) upheld the invocation of such provision of section 40(a)(ia) as made by the AO in respect of these two agents namely K.N. Mehta and Arif Wibowo – Endrati and thus disallowance made on that basis by the AO found to be correct and justified and confirmed by the Ld. CIT(A).
At the time of hearing of the instant appeal before us, the Ld. Representative of the assessee took us to the application for additional evidence submitted by him on 22.04.2018 which according to him could prove the export details, services rendered by the foreign agents. The identity and genuineness could also be established through those documents as submitted before us which were unable to be placed before the authorities below as contended by the Ld. Representative of the assessee. He, therefore, prayed before us to remit the matter to the file of the AO to verify the same.
The Ld.DR fairly agreed to the said proposal made by the assessee’s representative.
We have heard the Ld. Representatives of the respective parties. We have perused the relevant materials available on record. Taking into consideration of the entire aspects of the matter, we consider it fair and proper and in the interest of justice, set aside the orders passed by the authorities below on this issue in dispute and rest of the matter to the file of the AO to decide the same afresh on the basis of the additional evidence already available on record before us as well as other documentary evidence which the
- 4 - ITA No.3515/Ahd/2016 K. Patel Chemo Pharma P.Ltd. vs. DCIT Asst.Year – 2012-13 assessee may choose to file. While doing so, the assessee should be given an opportunity of hearing to meet the ends of justice and shall co-operate the AO as and when called for.
In the result, assessee’s appeal is allowed for statistical purposes.
This Order pronounced in Open Court on 31/08/2018
Sd/- Sd/- (AMARJIT SINGH) ( Ms. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 31/ 08 /2018
ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS
आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-2, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//
उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation .. 6.8.2018 (dictation-pad 9-pages attached at the end of this appeal-file) 2. Date on which the typed draft is placed before the Dictating Member …7.8.18 3. Other Member… 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….31.8.18 7. Date on which the file goes to the Bench Clerk…………………31.8.18 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………