ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), AHMEDABAD, AHMEDABAD vs. MS. JAGSON COLORCHEM LIMITED, PHASE -II GIDC ESTATE VATVA

ITA 1437/AHD/2024Status: DisposedITAT Ahmedabad03 February 2026AY 2018-19Bench: SHRI TR SENTHIL KUMAR (Judicial Member), SHRI NARENDRA PRASAD SINHA (Accountant Member)7 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that disallowance under section 40(a)(i) is only applicable if tax is deductible at source, which the AO failed to establish. Citing precedents (including the assessee's own prior case and Supreme Court judgments), the Tribunal reiterated that commission for services rendered by non-residents outside India for procuring export orders is not taxable in India, thus no TDS obligation arises under section 195 and no disallowance under section 40(a)(i) can be made.

What were the facts?

The assessee paid commission of Rs. 5,63,28,206/- to foreign agents for services rendered outside India but did not deduct TDS, claiming the income was not taxable in India. The Assessing Officer disallowed the amount under section 40(a)(i) for non-deduction of TDS. The CIT(A) allowed the assessee's appeal, deleting the addition, leading the Revenue to appeal to the ITAT.

What were the issues?

Whether commission payments to foreign agents for services rendered outside India are liable for TDS under Section 195, and consequently, disallowance under Section 40(a)(i) for non-deduction of TDS, when the income is not chargeable to tax in India.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 40(a)(i),Section 195,Section 4,Section 5,Section 9,Section 139(1)

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD

Before: SHRI TR SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Karan Shah, A.R
For Respondent: Shri Abhijit, Sr. D.R
Hearing: 20.01.2026Pronounced: 03.02.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the Revenue against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 06.06.2024 for the Assessment Year (A.Y.) 2018-19 in the proceeding u/s 143(3) of the Income Tax Act.

2.

The brief facts of the case are that the assessee had filed its return of income for the A.Y. 2018-19 on 05.10.2018 declaring total income of Rs. 12,69,39,970/-. The case of assessee was selected for limited scrutiny ACIT vs. Ms. Jagson colorchem limited, AY- 2018-19 2 under CASS and one of the issue was “compliance with TDS provisions on payments

The order continues below.

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