ASST CIT 22(3), MUMBAI vs. SARUDHA INDUSTRIES, MUMBAI

The only grievance of the Revenue is that Ld.CIT(A) erred in allowing the overseas commission disallowed by the Assessing Officer u/s. 40(a)(ia) of the Act.

At the outset, Learned Counsel for the assessee submitted that identical issue arouse in the Assessment Year 2007-08 wherein the (A.Y: 2011-12) M/s. Sarudha Industries, Assessing Officer while completing the assessment for Assessment Year 2007-08 disallowed overseas commission paid by assessee invoking provisions of section 40(a)(ia) of the Act for not deducting TDS. Learned Counsel for the assessee submitted that in this Assessment Year also the Assessing Officer made similar disallowance observing that in earlier Assessment Year similar disallowance was made and the appeal is pending before the ITAT. Ld. Counsel for the assessee referring to the order of the Tribunal in ITA.No. 7067/Mum/2013 dated 09.05.2017 submitted that the issue has been decided by the Tribunal for the Assessment Year 2007-08 which the Assessing Officer has referred to in the Assessment Order. Learned Counsel for the assessee submitted that the Tribunal deleted the disallowance made u/s. 40(a)(ia) of the Act in respect of overseas commission paid by the assessee. Learned Counsel for the assessee submitted that facts are identical and therefore following the order of the Tribunal, the order of the Ld.CIT(A) be sustained for the current year also.

We have heard the rival submissions, perused the orders of the authorities below. We notice that the Assessing Officer disallowed commission paid to foreign agent for non-deduction of TDS. It is also observed in the Assessment Order that similar disallowance was made in (A.Y: 2011-12) M/s. Sarudha Industries, early Assessment Years and the appeal is before the Tribunal. On a perusal of the order of the Tribunal for the Assessment Year 2007-08, we find that the Tribunal deleted the disallowance following the decision of the Hon'ble Bombay High Court in the case of CIT v. Gujarat Reclaim and Rubber Products Ltd., [383 ITR 236] observing as under: - “3. At the outset, learned A. R. of the assessee relied on the order of Hon'ble Bombay High Court in the case of CIT vs. Gujarat Reclaim and Rubber Products Ltd. [2016] 383 ITR 236 (Bom) wherein it was held by Hon'ble Bombay High Court that payment of commission to the non-resident agent not incurred in India, tax need not be deducted at source from such commission. Learned D.R. was fair enough to concede the position.

We have heard the rival submissions, carefully considered the same along with the orders of the tax authorities below. In view of the decision Bombay High Court (supra), we are of the view that this issue is no more Integra and since the assessee was not liable to deduct the tax at source on the commission paid to non-resident, Therefore, the provisions of section 40(a)(ia) will not apply. Therefore, we do not find any infirmity or illegality in the order of CIT(A) deleting the disallowance.”

There is no dispute that the facts for Assessment Year 2007-08 and the current Assessment Year are similar. Thus, respectfully following the said decision, we uphold the order of the Ld.CIT(A) in deleting the disallowance u/s. 40(a)(ia) of the Act. Ground raised by the Revenue is rejected.

In the result, appeal of the Revenue is dismissed.