ACIT, CHENNAI vs. PRAKASH IMPEX, CHENNAI

This appeal filed by the Revenue is directed against the order of the ld. Commissioner of Income Tax (Appeals) 7, Chennai dated 14.03.2017 relevant to the assessment year 2012-13. The only effective ground raised in the appeal of the Revenue is that the ld. CIT(A) has erred in deleting the disallowance of ₹.82,17,946/- made under section 40(a)(i) of the Income Tax Act, 1961 [“Act” in short] paid to non-resident agents outside India for the services rendered by them outside India.

Brief facts of the case are that the assessee is engaged in the business of manufacture and export of leather and leather garments. The assessee filed its return of income on 23.09.2012 admitting total income of ₹.41,42,781/-. The assessment was completed under section 143(3) of the Act on 19.03.2015 assessing the total income of the assessee at ₹.1,23,60,726/-. The Assessing Officer while completing the assessment disallowed the commission paid to non-resident agents on the ground that no TDS was made under section 195 of the Act and therefore the provisions of section 40(a)(i) are applied.

On appeal, while accepting the submissions of assessee and by following the decision of the Tribunal in assessee’s own case for the assessment year 2008-09, the ld. CIT(A) deleted the disallowance made under section 40(a)(i) of the Act.

Aggrieved, the Revenue is in appeal before the Tribunal and the ld. DR has contended that the assessee has not proved that non residents were operating in their own respective countries and they procure the orders for the tax payers from the parties outside India and that the commission was paid to them outside India. The onus lies on the assessee to prove that non-residents were operating in their own respective countries and they procured the orders for the assessee from the parties outside India and that the commission was paid to them outside India. He also argued that the order of the Tribunal in the assessee’s own case for the assessment year 2008-09 has not been accepted by the Department and preferred further appeal before the Hon’ble High Court and the same is pending. Thus, he has pleaded that the order of the ld. CIT(A) should be reversed and restored that of the Assessing Officer.

On the other hand, by filing various decisions including the decision of the Tribunal in the assessee’s own case for earlier assessment year, the ld. Counsel for the assessee has submitted that the export commission paid to non-resident agents outside India do not attract TDS provisions. He further submits that while deleting the disallowance, the ld. CIT(A) has followed the decision of the Tribunal, which should be confirmed.

We have heard both sides, perused the materials available on record and gone through the orders of the authorities below. We have also perused various decisions filed in the form of paper book. In the previous year relevant to the assessment year under consideration, despite giving sufficient opportunities, the Assessing Officer has held that the assessee has not filed any details including copies of purchase orders sent by the agents to the assessee along with other details of agreement, payment advice, etc. Since the assessee could not file the details as called for, the claim of the assessee was disallowed under section 40(a)(i) of the Act and brought to tax. However, during the course of appellate proceedings, in order to demonstrate that what was paid to the non- resident agents was nothing but commission simpliciter, before the ld. CIT(A), the assessee has filed sample of invoice copies called for by the Assessing Officer, sample of shipping bills, debit notes raised by the non- resident agents and bank advices for his perusal and verification. Further, before the ld. CIT(A), the assessee has also furnished the details of name of the foreign agent, country of operation, number of export orders procured from outside India, percentage of commission paid on the invoice value, value of commission paid, etc. The ld. CIT(A) also reproduced the above details furnished by the assessee in his appellate order with a view that the assessee had engaged agents based in Turkey, Korea, Italy and Switzerland for procuring export orders on commission basis. After considering the above details furnished by the assessee, the ld. CIT(A) was of the opinion that the facts and circumstances of the issue are identical and thus, by following the decision of the Tribunal in the assessee’s own case for the assessment year 2008-09 in dated 30.03.2012, the ld. CIT(A) deleted the disallowance made by the Assessing Officer. Once the ld. CIT(A) has not disputed that the commission was paid for procuring export orders on commission basis, we are of the considered opinion that the ld. CIT(A) has rightly followed the decision of the Tribunal in the assessee’s own case for the assessment year 2008-09, wherein the decision of the Hon’ble Supreme Court in the case of GE India Technology Centre (P) Ltd. v. CIT 327 ITR 456 has been followed. In a recent decision, in the case of CIT v. Faizan Shoes Pvt. Ltd. [2014] 367 ITR 155, the Hon’ble Jurisdictional High Court also gave a finding that where the assessee simply paid a commission simpliciter to non-resident agent outside India for procuring export orders from overseas buyers and the non-resident agent did not provide any technical services for purposes of running business of assessee in India, the assessee was not liable to deduct tax at source on such commission paid, wherein various decisions have been referred including the decision in the case of GE India Technology Centre (P) Ltd. v. CIT (supra), which was followed by the ld. CIT(A) in that case as well as by the Tribunal in the assessee’s own case for the assessment year 2008-09. The ld. DR could not controvert the above factual aspects and could not file any order of higher Court having modified or reversed the decision of the Tribunal in the assessee’s own case for the assessment year 2008-09, which was followed by the ld. CIT(A). Just because, the Department has preferred further appeal against the order of the Tribunal for the assessment year 2008-09, we are not inclined to take a different view. Accordingly, the ground raised by the Revenue is dismissed.

In the result, the appeal filed by the Revenue is dismissed. Order pronounced on the 31st August, 2017 at Chennai.