ACIT, CHENNAI vs. M/S. GOOD LEATHER COMPANY, CHENNAI

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ITA 3078/CHNY/2016Status: DisposedITAT Chennai17 April 2017AY 2013-145 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the commission paid to non-resident agents for procuring orders was a commission simpliciter and not 'fees for technical services'. Therefore, the assessee was not liable to deduct tax at source on such payments.

What were the facts?

The Revenue appealed against the deletion of an addition made by the Assessing Officer (AO) under Section 40(a)(ia) for non-deduction of TDS on payments to overseas commission agents. The AO disallowed Rs. 70,94,092/-. The CIT(A) deleted this addition, following a High Court decision.

What were the issues?

Whether commission paid to overseas agents for procuring orders constitutes 'fees for technical services' requiring TDS deduction under Section 195, leading to disallowance under Section 40(a)(ia).

Which sections of the Income-tax Act were involved?

Section 40(a)(ia),Section 195,Section 9(1)(vii)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI

Before: SHRI A.MOHAN ALANKAMONY & SHRI DUVVURU RL REDDY

Hearing: 17.04.2017

आदेश / O R D E R

Per A. Mohan Alankamony, AM:-

1.

This appeal by the Revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-5, Chennai dated 23.08.2016 in passed U/s.250(6) r.w.s. 143(3) of the Act.

2.

The Revenue has raised several grounds in its appeal, however the crux of the issue is that the Ld.CIT(A) has erred in deleting the addition of Rs.70,94,092/- made by the Ld.AO invoking the provisions of Section 40(a)(ia) of the Act due to non- deduction of tax at source by the assessee on payment made to overseas commission agents U/s.195 of the Act.

3.

The brief facts of the case are that the assessee is a firm engaged in the business of trading of finished leather, shoe uppers and other related goods, filed its return of income for the assessment year 2013-14 on 20.09.2013. Subsequently the case was selected up for scrutiny and finally order U/s. 143(3) was passed on 31.12.2015 wherein the Ld.AO disallowed Rs.70,94,092/- invoking the provisions of Section 40(a)(ia) of the Act since payments were made to foreign agents on which tax were not deducted at source U/s. 195 of the Act. On appeal, the Ld.CIT(A) following the decision of the jurisdictional High Court in the case CIT vs. Faizan Shoes Pvt. Ltd. reported in 367 ITR 155 held the issue in favour of the assessee and thereby deleted the addition made by the Ld.AO. Aggrieved by the order of the Ld.CIT(A), the Revenue is now in appeal before us.

4.

At the outset the Ld.AR submitted that the Chennai Bench of the Tribunal in the assessee’s own case for the AY 2011-12 in vide order dated 02.01.2015 on the identical issue also held the issue in favour of the assessee following the decision of the Hon’ble jurisdictional High Court CIT vs. Faizan Shoes Pvt. Ltd. (supra). He therefore pleaded that for the relevant assessment year also the addition made by the Ld.AO may be deleted. Though the Ld.DR vehemently opposed to the submission of the Ld.AR, he could not successfully controvert to his submissions.

5.

We have heard the rival submissions and carefully perused the material available on record. We find merit in the submission of the Ld.AR. As pointed out by him, the issue raised by the Revenue is held against the Revenue by the Hon’ble jurisdictional High Court in the case CIT vs. Faizan Shoes Pvt. Ltd. (supra). Following the decision of the Hon’ble jurisdictional High Court, the Chennai bench of the Tribunal for the AY 2011- 12 also held the issue in favour of the assessee. The relevant portion of the order of the Tribunal is extracted herein below for reference:

“6. We have heard both sides, perused the materials on record and gone through the orders of authorities below. The issue involved in this appeal is whether the ‘commission’ payments made to the non-resident foreign agents, TDS has to be deducted or not. In a recent judgement of the Hon’ble Jurisdictional High Court in the case of CIT v. Faizan Shoes Pvt. Ltd. (supra), dismissing the appeal of the Revenue has held as under:

“Held, dismissing the appeal, that on a reading of section 9(1)(vii), commission paid by the assessee to the non- resident agents would not come under the term "fees for technical services". For procuring orders for leather business from overseas buyers, wholesalers or retailers, as the case may be, the non-resident agent was paid 2.5 per cent commission on free on board basis. This was a commission simpliciter. What was the nature of technical service that the non-resident agents had provided abroad to the assessee was not clear from the order of the Assessing Officer. The Opening of letters of credit for the purpose of completing the export obligation was an incident of export and, therefore, the non-resident agent was under an obligation to render such services to the assessee, for which commission was paid. The non-resident agent did not provide technical services for the purposes of running of the business of the assessee in India. Therefore, the commission paid to the non-resident agents would not fall within the definition of 'Tees for technical services" and the assessee was not liable to deduct tax at source on payment of commission.”

7.

Respectfully following the above judgement of the Hon’ble Jurisdictional High Court in the case of CIT v. Faizan Shoes Pvt. Ltd. (supra), the ground raised by the Revenue is dismissed.”

Since the Ld.CIT(A) had only followed the decision of the Hon’ble jurisdictional High Court and the Chennai bench of the Tribunal for the earlier assessment year in the assessee’s own case had also made a finding that the facts in both the case are identical and held the issue in favour of the assessee following the decision of the Hon’ble jurisdictional High Court, we do not find it necessary to interfere with the order of the Ld.CIT(A).

6.

In the result, the appeal filed by the Revenue is hereby dismissed.

Order pronounced in the court on the 17th April, 2017.

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