TANFAC INDUSTREIS LIMITED,CHENNAI vs. ACIT, CHENNAI

The assessee filed this appeal against the order of Commissioner of Income Tax (Appeals)-11, Chennai in dated 27.02.2017 for assessment year 2006- 07.

M/s. TANFAC Industries Ltd., the assessee, is engaged in manufacturing of fluoride based chemicals. While making the assessment for assessment year 2006-07, the Assessing Officer, inter alia, disallowed expenses namely Fright paid to foreign shipping company, Bank charges charged by the foreign banks on remittance of export proceeds, Testing charges paid abroad, Product development and marketing exp Paid to Ms. shorechem LLC, Journals all amounting to Rs. 44,68,625/- u/s. 40(a)(ia) for non-deduction of tax at source. Aggrieved, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal. Aggrieved, the assessee filed this appeal.

The Ld. AR submitted that the CIT(A) ought to have appreciated the fact, all the above services having been performed outside payment to such services cannot be treated as income accrued in India. When the income itself has not accrued in India, the provisions of Indian Income Tax Act is not applicable and consequently the provisions of Double taxation avoidance agreement are not applicable to such payments. The assessee furnished the break up of all the above expenses and sample vouchers of each expense was also submitted at the time of hearing vide letter dated 15.6.2015. The assessee therefore wish to submit that the CIT(A) is not correct in his statement that vouchers called for were not produced for verification and relied on the following cases in support of its grounds of appeal.

Per contra, the Ld. DR invited our attention to the findings recorded by the Ld. CIT(A) to the extent that in spite of several opportunities given, the assessee could not submit the DTAA with the country of non-residents and the supporting documents with regard to the nature of services rendered by the non-residents without verifying both the relevant particulars, it is not possible to accept the assessee’s arguments that the income on the said payments does not accrue in India etc.

We heard the rival submissions and gone through the relevant material. In the facts and circumstances of the case, it is clear that the assessee has not laid relevant material before the lower authorities and hence they could not decide it properly. Therefore, these issues are remitted back to the AO for examination and :-4-: verification as to whether the impugned payments made to the non- residents are liable to pay Income Tax in India and decide the issue in accordance with law.

In the result, the assessee’s appeal is treated as partly allowed for statistical purposes.