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Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH
Before: Shri Rajpal Yadav & Shri Amarjit Singh
PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-
This Revenue’s appeal for A.Y. 2010-11, arises from order of the CIT(A)- 9, Ahmedabad dated 16-08-2016, in proceedings under section 143(3) r.w.s. 147 of the Income Tax Act, 1961; in short “the Act”.
The revenue has raised following grounds of appeal:- “1. The Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs.75,94,236/- made u/s.40(a)(ia) of the Act.
The Ld. CIT(A) has erred in law and on facts in not appreciating that vide circular no. 7 dated 22/10/2009 which has retrospective effect on circular no. 23 dated 23/07/1969 and Circular No. 786 dated 07/02/2000 wherein it was permitted any interest payment without deducting of TDS and therefore such transactions are liable for deduction of TDS u/s. 195(1) of the Act.
On the facts and circumstances of the case, the Ld. Commissioner of Income tax (A) ought to have upheld the order of the Assessing Officer to the above extent.
I.T.A No. 2824/Ahd/2016 A.Y. 2010-11 Page No 2 DCIT vs. M/s. Raghuvir Exim Ltd.
It is, therefore, prayed that the order of the Ld. Commissioner of Income tax (A) may be set-aside and that of the Assessing Officer be restored to the above extent.”
In this case, assessment u/s. 143(3) was completed on 19th March, 2013 3. determining total income of Rs. 62,02,980/-. Subsequently, the case was reopened u/s. 147 of the act on the ground that assessee has not deducted TDS u/s. 195 of the act in respect of commission payment of Rs. 75,94,236/- made to the non-residents. Consequently, the assessing officer has disallowed the commission expenses as per the provision of section 40(a)(ia) of the act.
Aggrieved assessee filed appeal before the ld. CIT(A). The ld. CIT(A) has deleted the impugned addition on the ground that assesse is not required to deduct TDS on such commission payment to non-residents who do not have any permanent establishment or presence in India. The assessee has used the services of various persons stationed abroad for procuring the purchase orders. The services have been rendered and utilized outside India. The payments of commission were also made to these persons outside India in foreign currency in their bank accounts. The ld. departmental representative has placed reliance on the order of the assessing officer. On the other hand, ld. counsel has furnished paper book containing the following judicial pronouncements and circulars:- i. DCIT v. Welspun Corporation Ltd. for A.Y. 2010-11 vide reported in [2017] 77 taxmann.com 165 (Ahmedabad- Trib.) ii. Decision dated 20.01.2016 by Hon'ble High Court of Madras in case of CIT v. Farida Leather Company for A.Y. 2010-11 vide reported in [2016] 66 taxmann.com 321 iii. Decision dated 27.09.2016 by Hon'ble High Court of Gujarat in case of ABM Steels (P.) Ltd. for A.Y. 2004-05 vide reported in [2016] 75 taxmann.com 182 (Gujarat) iv. Circular No. 7/2009 [F.NO.500/135/2007-FTD-I] dated 22.10.2009
I.T.A No. 2824/Ahd/2016 A.Y. 2010-11 Page No 3 DCIT vs. M/s. Raghuvir Exim Ltd.
We have heard the rival contentions and perused the material on record carefully. The assessing officer has disallowed commission of Rs. 75,94,236/- u/s. 40(a)(ia) of the act on the ground that assessee has not deducted tax u/s. 195 of the act in respect of payment of commission made to non-resident parties. The ld. CIT(A) has deleted the addition on the ground that the services of the commission agents have been rendered and utilized outside India . .After considering the above facts we observe that all non-resident parties are placed outside India and they have procured orders from the purchase parties based in abroad. In this connection, we have also perused the provision of section 5 and 9 of the act. As per section 5(2) of the act scope of income in the case of non-resident is as under:- (i) Income is received or deemed to be received in India. (ii) Income accrues or arises or is deemed to accrue or arise to him in India.
We have further noticed that in the case of the assessee the non-residents have not any permanent establishment in India. The non-residents have rendered their services outside India and their services have been utilized out of India. The payment made to the non-residents were not fees or technical services. In view of the provision of section 5 r. w. s. 9 of the act in the case of non-resident only the income received/deemed to be received or income arising or deemed to accrue or arise in India is chargeable to tax and not income received or accrued outside India. In view of the above facts and findings, we upheld the decision of the ld. CIT(A). Accordingly, the appeal of the revenue is dismissed.
In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 14-05-2018 (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 14/05/2018
I.T.A No. 2824/Ahd/2016 A.Y. 2010-11 Page No 4 DCIT vs. M/s. Raghuvir Exim Ltd.
आदेश क" ""त"ल"प अ"े"षत / Copy of Order Forwarded to:-
Assessee
Revenue
Concerned CIT
CIT (A)
DR, ITAT, Ahmedabad
Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील"य अ"धकरण, अहमदाबाद