DCIT 23(3), MUMBAI vs. S.R. BROTHERS, MUMBAI

The revenue has filed the present appeal against the order dated 28.11.2014 passed by the Commissioner of Income Tax (Appeals) 34, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2011-12.

The revenue has raised the following ground:-

The brief facts of the case are that the assessee filed the return of income on 28.09.2011 declaring total income to the tune of Rs.1,66,12,319/-. The assessee has filed revised return on 13.10.2011 by declaring total income to the tune of Rs.1,67,05,230/-. The return of income was processed u/s.143(1) of the Income Tax Act, 1961 ( in short “the Act”). The case was selected for scrutiny under manual selection. Notice u/s.143(2) of the Act dated 24.09.2012 was issued and duly served upon the assessee. Thereafter, notice u/s.142(1) of the Act were also issued on 26.07.2013 and 24.10.2013. The assessee is a partnership firm and is engaged in business of exporting gift articles and promotional items. During the assessment, the assessee observed that the assessee claimed the commission on exports of Rs.70,09,316/- and did not deduct TDS on the said payment. The notice was given to the assessee and reply was considered. The services of the persons against whom the commission was claimed, was treated as technical in nature to which section 9(1)(vii) of the Act applied, therefore, the said income was disallowed u/s.40(a)(i) of the Act and added to the income of the assessee. Feeling aggrieved the assessee filed an appeal before the CIT(A) who allowed the claim of A.Y. 2011-12 the assessee, therefore, the revenue has filed the present appeal before us. ISSUE NO.1 & 2:- 4. Issue no.1 and 2 are interconnected, therefore are being taken up together for adjudication. Under these issues the revenue has raised the question of deletion of the addition made u/s.40(a)(i) of the Act amounting to Rs.70,09,316/-. On appraisal of the details furnished by the assessee, the Assessing Officer was of the view that the person who received the commission for rendering their services like booking of orders, getting samples approved, release of shipment through documents and handling outstanding payments are technical services which falls u/s.9(1)(vii) of the Act. Hence, the claim of the assessee was declined and the said commission was added to the income of the assessee. The CIT(A) allowed the claim of the assessee. Before going further it is necessary to advert the finding of the CIT(A) on record:- “2.4 Decision in the ground of appeal no.1:- 3.4.1 I have duly considered the submissions of the appellant and find that this issue was also involved in the appeals of the appellant in A.Y.2009-10 and 2010-11, wherein vide appellate order dated 08.11.2012 and 28.08.2013 respectively, the addition made on the above ITA No.733/M/2015 A.Y. 2011-12 account has been deleted. I also find that the payment of commission made to the non residents in this year are to the same parties, as in the earlier assessment year and the terms of the contract regarding commission payment also remains same, as in A.Y.2010-11. I, therefore, hold that the issue involved in this year is covered by may order dated 28.08.2013 in the appellant’s case in A.Y.2010-11. Accordingly, I delete the above addition and allow the ground of appeal