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Income Tax Appellate Tribunal, “B” BENCH, KOLKATA
Before: Shri M. Balaganesh
This appeal of the revenue arises out of the order of the Learned CIT(A), I, Kolkata in Appeal No. 646/CIT(A)-I/C-1/07-08 dated 18/12/2012 for the assessment year 2005-06 against the order of assessment framed by the Learned AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
The only issue to be decided in this appeal is as to whether the addition of Rs. 34,99,272/- could be made towards agency dealership commission in the facts and circumstances of the case.
The brief facts of this issue are that the assessee is a company engaged in the business of manufacturing and sale of Mobile cranes, Fork Lift trucks and generators. In the assessment proceedings, the Ld. AO disallowed agency dealership commission of Rs. 34,99,272/- paid to M/s Md.Al Samaraie of Isam Bureau Group, Baghdad, Iraq during the financial year 2004-05 relevant to asst year under appeal. On first appeal, the Ld. CITA deleted the addition by placing reliance on the decision of this tribunal in assessee’s own case for the earlier year. Aggrieved, the revenue is in appeal before us on the following ground:- “1. The ld. CIT(A) has erred in deleting the addition of Rs.34,99,272/- on account of agency dealership commission. “
The Ld. DR vehemently supported the order of the Ld. AO. In response to this, the Ld. AR vehemently relied on the order of the Ld. CITA .
We have heard the rival submissions and perused the materials available on record. We find that the Ld.AO had recorded that the payment was not approved by the United Nations Security Council but had not disclosed under which provision of law and transaction between two independent parties is required to be approved by the United Nations Security Council. The assessee had remitted the dealership/agency commission as per agreement through nationalized Banks after complying with all the requisite formalities for sending remittance through nationalized Banks. The question of approval by the United Nations Security Council therefore does not and cannot arise at all. We also find that the issue is squarely covered in favour of the assessee by the order of co- ordinate bench of this tribunal in assessee’s own case for Asst Year 2004-05 in dated 10.12.2015, wherein it was held that :-
“7. … ….. … In the present case, the assessee produced all the evidences relating to the transactions it had with the party who procured the above said goods for food for Oil programme and all the payments were routed though valid channels by way of Banks where it is shown that the expenditure by way of commission incurred in relation to business, having relevant material on record and accepting the same as genuine transactions, but, however, basing on a report which is not part of the assessment, disallowing the claim is unjustified. With reference to the Circular No:786 dt07-02-2000 issued by the CBDT it is very clear that no tax is deductible u/s 195 of Act on export commission and related charges payable to a non- resident for services rendered outside India is an allowable expenditure. A coordinate Bench of ITAT at Kolkata 'B' Bench, Kolkata in the assessee's own case for A.Y 2003-04 by an order dt30-03-2007 in ITA 2811Ko1l2007 decided the same identical issue in favour of the assessee. The relevant portion of such order is at para 6.21 is reproduced as under:
"As discussed earlier the stand taken by the learned CIT(A) that in the absence of deduction of tax at source from the payment it is hit by the provisions of section 40(a)(ia) of the Act, also is not tenable. There is nothing on record to show that any part of the activities of the Iraqi Agent has performed in India. The payment was also received by them in Jordan. Absence of any Permanent Establishment or Business connection of agent in India, also takes the case out of the purview of the deeming provisions regarding accrual of income in India as envisaged in section 5(2) of the ACT. Hence, by taking into consideration all the aspects of the case, it is found that in this case, neither was the commission payment received by the non-resident agent in India nor any income accrue or arise nor deemed to accrue or arise to it in India. Hence, there was no liability on the part of the appellant company to deduct tax any tax from the amount of commission payment made by it to the Iraqi Agent in terms of provisions of section 195 of the Act. It has also got to be held that looking to the complexities of International transactions, the rate of commission payment in this case can not be considered to be too high, excessive or unreasonable. In any case, there is nothing on record to show that the full amount as claimed by the appellant company was not actually paid or that some part of it was routed back to the appellant company or its Directors in an indirect or underhand way. Therefore there is no case for disallowing the commission payment in this case from any angle whatsoever. Taking into consideration all these aspects, we hold the Commission payment under consideration is fully allowable. We, therefore, reverse the orders of the lower authorities and delete the entire disallowance in this regard.”
7.1 Therefore, in the light of observations of above, we deem it proper to hold that the payment of commission to a agent outside India is a business expenditure is allowable and we confirm the order passed by the ld. CIT(A).”
Respectfully following the above decision, we find no infirmity in the order of the Ld. CITA. Accordingly, the ground raised by the revenue is dismissed.
In the result, the appeal of the revenue is dismissed.
THIS ORDER IS PRONOUNCED IN OPEN COURT ON 29 -01-2016