DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-2(1)(1), AHMEDABAD, AHMEDABAD vs. KEWALRAM TEXTILES PVT. LTD, AHMEDABAD

"The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary".

"It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored". Assessment Year 2017-18

The assessee is engaged in the business of trading (export) of yarn. The original return of income was filed by the assessee on 14-10-2017 declaring total loss of Rs. (-) 15,11,271/-. The case was selected for scrutiny in CASS and notice u/s. 143(2) of the Act was issued on 13-08-2019. Thereafter, notice u/s. 142(1) of the Act along with detailed questionnaire was served on 12-01-2019. In response to notices issued, the assessee filed reply on various dates along with details. The Assessing Officer observed that the assessee company paid commission to non- resident amounting to Rs. 3,42,79,595/- during the year and had not deducted TDS on commission payment to non-resident. The said details were asked by issuing notice u/s. 142(1) and further a show cause notice dated 15-11-2019 as to why the commission to the non-resident should not be disallowed. In response to, the assessee filed its reply on 11-11-2019 stating that this issue is an identical issue in earlier year and addition on the same ground was deleted by the CIT(A). The Assessing Officer after taking cognizance of the copy of agreement observed that all the agreements on plane paper and not signed by authorized signatory of assessee company which indicated that these documents are filed only for completing submission formalities. In fact all the details filed by the assessee and the commission paid is not same in relation to all agents. Thus, the Assessing Officer observed that the genuineness of commission expense was not proved by the assessee. Therefore, the Assessing Officer disallowed the commission expenses u/s. 37 to the extent of RS. 3,42,39,594/-.

Being aggrieved by the assessment order, the assessee filed appeal before the ld. CIT(A). The CIT(A) allowed the appeal of the assessee.

The ld. D.R. submitted that the assessee has not proved the genuineness of the commission expenses as the details filed before the Assessing Officer was not registered document or signed document in presence of both the parties. The ld. D.R. further submitted that the assessee also failed to provide documents towards export commission paid to non-resident agents, methods and email communication, Form 15CA, 15CB and also has not submitted any proof regarding bank statement reflecting the payment either in dollar or Indian rupee for showing the genuinenity of the commission paid. The ld. D.R. relied upon the assessment order and the order of the CIT(A).

The ld. A.R. submitted that the entire show cause notice was on the TDS and not related to the disallowance u/s. 37 of the Act. In fact, in all the earlier assessment years, the TDS has been allowed and the Assessing Officer has to follow the assessee’s earlier assessment years in which the juri ictional CIT(A) has allowed the appeal of the assessee on identical issue. The ld. A.R. relied upon the order of the CIT(A) and the order of the Tribunal in assessee’s own case.

We have heard both the parties and perused the material available on record. The Assessing Officer made addition under the head commission expenses paid to non-resident but the assessee company is in the line of exports and commission paid to essential and integral part of the business as mentioned by the CIT(A) in para 7 of the order. Disallowance on the same ground i.e. genuineness and non- deduction of TDS in assessee’s own case has been deleted by the CIT(A) from assessment year 2010-11 to 2014-15 and in fact the Tribunal vide order dated 06-05-2021 deleted this addition of overseas commission expenses being ITA 719/Ahd/2014 and 3412/Ahd/2016 of assessment year 2010-11 and 2011-12. The issue has been decided by Hon’ble Apex Court in case of CIT vs. Toshoku Ltd. 125 ITR 525 where it was stated that commission agent who does not carry out any business operation in India and as a selling agent outside India is not chargeable to tax in India and the receipt in India of the sale proceeds remitted by the purchasers from abroad did not amount to an operation carried out by the non-resident commission agent in India as per clause (a) of Explanation to section 9(1)(i) of the Act. Thus, the CIT(A) has rightly observed the same and allowed the appeal of the assessee. Therefore, the CIT(A) was right in deleting the addition. Hence the appeal of the Revenue is dismissed.

In the result, the appeal of the Revenue is dismissed.

Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,