LAKSHMI SARASWATHI TEXTILES (AMI) LTD,CHENNAI vs. DCIT, CORP CIR-6(2), CHENNAI

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ITA 3384/CHNY/2018Status: DisposedITAT Chennai28 February 2020AY 2010-114 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that since the services were rendered outside India and the agents had no place of business or business connection in India, the commission paid was not chargeable to tax in India. Therefore, no TDS was required, and the disallowance was unjustified.

What were the facts?

The assessee paid commission to foreign agents for services rendered outside India without deducting tax at source. The Assessing Officer made a disallowance under Section 40(a)(i) of the Income Tax Act.

What were the issues?

Whether disallowance under Section 40(a)(i) is justified for non-deduction of tax at source on commission paid to foreign agents for services rendered outside India.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 195(1)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI MAHAVIR SINGH & SHRI M. BALAGANESH

Pronounced: 28.02.2020

आदेश / O R D E R

PER M. BALAGANESH, ACCOUNTANT MEMBER:

1.

This appeal of the assessee arise out of the order of the Ld. Commissioner of Income Tax (Appeals)-16, Chennai vide proceedings in dated 24.09.2018 against the order passed by the ITO, Company Ward-VI(1), Chennai (AO) u/s. 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’) dated 01.03.2013 for the Assessment Year (A.Y) 2010-11.

(A.Y 2010-11) M/s.Sri Lakshmi Saraswathi Textiles (Arni) Ltd. :- 2 -: 2. The only effective ground to be decided as to whether the Ld.

CIT(A) was justified in upholding the disallowance made u/s. 40(a)(i) of the Act for non deduction of tax at source on commission paid to foreign agents in respect of services rendered by them outside India and in view of the fact that the said agents does not have any place of business or business connection in India.

3.

We have heard the rival submissions and perused the material available on record. We find that the assessee is a public limited company manufacturing cotton yarn. During the year under consideration, the assessee paid a sum of Rs. 1,60,863/- towards commission to its foreign agents in respect of services rendered by them outside India without deduction of tax at source. We find that the undisputed fact herein is that the foreign agents had rendered the services to the assessee outside India. Accordingly, we hold that the amount paid to them by the assessee does not fall within the ambit of income chargeable to tax in India in terms of s. 195(1) of the Act.

When the commission paid to them is not chargeable to tax in India, there is no question of deduction of tax at source and consequential disallowance u/s. 40(a)(i) of the Act in the hands of the assessee. We find that this issue was also subject matter of adjudication by this Tribunal in assessee’s own case in & 1000/Mds/2011 for (A.Y 2010-11) M/s.Sri Lakshmi Saraswathi Textiles (Arni) Ltd. :- 3 -: A.Y 2006-07 and 2007-08 dated 23.03.2012, wherein this Tribunal by placing reliance on the decision of Hon’ble Supreme Court in the case of GE India Private Technology Centre vs. CIT reported in 327 ITR 456 (SC); CBDT Circular No.786 dated 07.02.2000 and Special Bench decision of this Tribunal in the case of ITO vs. Prasad Productions Ltd. 125 ITD 263 had held that the payments made to foreign agents would not be liable for deduction tax at source and consequently no disallowance u/s. 40(a)(i) of the Act could be made in the hands of the assessee payer.

4.

In the above said observations and respectfully following the judicial precedent relied upon hearing above, we direct the Ld. AO to delete the disallowance u/s. 40(a)(i) of the Act in respect of commission payments made to non-resident foreign agents.

Accordingly, the grounds raised by the assessee are allowed.

5.

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

Order pronounced on 28th day of February, 2020 in Chennai.

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