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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI RAM LAL NEGI
PER D. KARUNAKARA RAO, AM: The captioned appeal is filed by the Revenue on 8.7.2014 and the Cross Objection No. 219/M/2015 is filed by the assessee on 29.12.2015 for the assessment year 2005-06. Since, the issues raised in these appeals are inter-connected, therefore, they are clubbed, heard together and disposed off in this consolidated order. Appeal wise adjudication is given in the following paragraphs of this order. (By Revenue)
Firstly, we shall take up the Revenue‟s appeal. In this appeal, Revenue raised 4 grounds in toto and they revolve around the relief granted by the CIT (A) on merits relating to the addition of Rs. 1,80,65,031/-, the commission paid by the assessee on account of „export commission‟. Briefly stated relevant facts of the case are that the assessee is engaged in the business of „manufacturer & exporters of leather shoes‟. Assessee filed the return of income declaring the total income of Rs. 68,89,760/-. Assessment was completed u/s 144 r.w.s 147 of the Act and the assessed income was determined at Rs. 2,49,64,700/-. In the assessment, AO invoked the provisions of secion 40(a)(ia) of the Act and made a disallowance of Rs. 1,80,75,031/-. Aggrieved, assessee carried the matter in appeal before the first appellate authority.
During the proceedings before the first appellate authority, after considering the submissions of the assessee, CIT (A) granted relief to the assessee by holding that the said payment is not hit by the CBDT Circular No.7 of 2009, dated 22.10.2009, which is prospective in nature. Relevant discussion is given in paras 39- 44 of the CIT (A)‟s order. Aggrieved, Revenue is in appeal before the Tribunal.
During the proceedings before us, Ld Counsel for the assessee submitted that the issue under consideration stands covered by the order of the Tribunal in the case of M/s. Perfect Cotton Company vs. ACIT in ITA No.353/M/2011 (AY 2007-2008) and ITA No. 7028/M/2013 (AY 2009-2010), dated 31.8.2015. In this regard, Ld Counsel for the assessee brought our attention to the said order of the Tribunal (supra), wherein one of us (AM) is a party to the said order, and read out the relevant paras 4 to 7 of the said Tribunal‟s order, which is relevant for the proposition that prior to CBDT Circular 786, dated 7.2.2000, the TDS was not required to be done and no addition can be made u/s 40(a)(ia) of the Act. For the sake of completeness of this order, relevant paras 6 & 7 of the said Tribunal‟s order are extracted as under:-
We have heard both the parties and perused the orders of the Revenue Authorities as well as the cited decision of the ITAT, Lucknow Bench in the case of M/s. S.K. International and the relevant material placed before us. On perusal of the said decision of the Coordinate Bench, ITAT, Lucknow (supra), we find an identical issue was decided by the Tribunal against the Revenue. Para 9 of the said order of the Tribunal is relevant in this regard. Considering the significance of the said para, we find it relevant to extract the said para 9 and the same reads as under:
“9. As per the above discussion, we have seen that even after considering Circular No.7/2009, dated 22.10.2009 as per which Circular No.786 dated 7.2.2000 was withdrawn, it comes out that in the facts of the present case, no TDS was required to be deducted because as per this Circular in the case of payment of commission to foreign agents, nothing was required to be seen and examined and it could be concluded that no TDS was required to be deducted. Now in the absence of this Circular, such decision has to be taken after examining these aspects as whether the payment was made in India or outside etc. Since, in the present case, this is not a case
of revenue that the services were rendered in India or the payment was made in India and the incomes in the hands of the non-resident agent can be considered as deemed as accrue or arise in India by way of operation of section 9(1), no disallowance can be made u/s 40(a)(i) of the Act. We have also considered the Explanation to section 9(2) and have seen that this Explanation also has no relevance in the present case and therefore, we decline to interfere in the order of the CIT (A).” From the above, we find the proposition laid down in the said order of the 7. Tribunal (supra) that prior to the issue of CBDT Circular No. 786, dated 7.2.2000, TDS was not required to be deducted and as a consequence, no addition can be made u/s 40(a)(i) in respect of those payments is squarely applicable to the instant case too. Considering the same as well as following principle of consistency, we are of the opinion that in the present case, no TDS is required to be deducted on the commission payments made to the non-residents. Accordingly, the decision of the CIT (A) on this issue is required to be reversed. Accordingly we order and the grounds raised by the assessee are allowed.”
Considering the above, we are of the opinion that the decision taken by the CIT (A) on this issue is fair and reasonable and it does not call for any interference. Accordingly, all the grounds raised by the Revenue are dismissed.
In the result, appeal of the Revenue is dismissed. C.O.No.219/M/2015 (AY 2005-2006)
This Cross Objection is filed by the assessee against the legal issue relation to reopening of the assessment. During the first appellate proceedings, CIT (A) dismissed the assessee‟s ground relating to the issue of reopening and its validity. At the outset, Ld Representatives of both the parties mentioned that the adjudication of this issue becomes academic if the Revenue appeal is dismissed. Considering the fate of the Revenue‟s appeal as decided by us in the above paragraphs of this order, we are of the opinion the adjudication of the legal issue raised by the assessee becomes academic exercise. Accordingly, we dismissed the CO raised by the assessee as academic.
In the result, CO is dismissed as academic.
Conclusively, appeal of the Revenue as well as the CO raised by the assessee are dismissed. Order pronounced in the open court on 22nd April, 2016. (RAM LAL NEGI) ACCOUNTANT MEMBER भुंफई Mumbai; ददनांक 22 .4.2016
4 व.नन.स./ OKK , Sr. PS
आदेश की प्रतिलऱपि अग्रेपिि/Copy of the Order forwarded to : अऩीराथी / The Appellant 1. प्रत्मथी / The Respondent. 2. 3. आमकय आमुक्त(अऩीर) / The CIT(A)- 4. आमकय आमुक्त / CIT 5. ववबागीम प्रनतननधध, आमकय अऩीरीम अधधकयण, भुंफई / DR, ITAT, Mumbai गार्ड पाईर / Guard file. 6. सत्मावऩत प्रनत ////
आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt.