P.Murali, CHENNAI V. DCIT, CHENNAI

ITA 2031/CHNY/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4165 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 11-04-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 30-09-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: S SRIDHAR
• Section: 143(3); 142(1)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . , . , BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI DUVVURU R L REDDY , JUDICIAL MEMBER ./ I T.A. NO. 2 031 /MDS/201 5 / ASSESSMENT YEAR :20 1 1 - 1 2 SHRI P. MURALI, PROP. M/S. VIRALLI ENTERPRISES, NO. 114/2, ANNA SALAI NAGALKENI, CHROMEPET, CHENNAI 600 0 44 . [PAN: A EE P M4547A ] VS. THE DEPUTY COMMIS SIONER OF INCOME TAX, CIRCLE I , TAMBARAM RANGE, CHENNAI. ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI S. SRIDHAR , ADVOCATE / RESPONDENT BY : SHRI A.V. SREEKANTH , J CIT / DATE OF HEARING : 11 . 0 4 .201 7 / DATE OF P RONOUNCEMENT : 23 . 0 6 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX ( APPEALS ) 1 0 , C HENNAI , DATED 10 . 0 9 .20 1 5 RELE VANT TO THE ASSESSMENT YEAR 20 1 1 - 1 2 . THE ONLY EFFECTIVE GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF FOREIGN AGENCY COMMISSION PAYMENTS UNDER SECTION 40(A)(I) R.W.S. 195 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. I.T.A. NO . 2031 /M/ 15 2 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LEATHER TANNERY AND EXPORTS AND FILED ITS RETURN OF INCOME ON 30.09.2011 ADMITTING TOTAL INCOME OF .63,25,660/ - . THE RETURN FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER S ECTION 143(2) AND 142(1) OF THE ACT WERE ISSUED ON THE ASSESSEE. ASSESSMENT UNDER SECTION 143(3) OF THE A CT WAS COMPLETED BY ASSESSING TOTAL INCOME OF THE ASSESSEE AT . 8 9 , 3 0,2 35/ - AFTER MAK ING VARIOUS DISALLOWANCE S . 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) AND CHALLENGED THE DISALLOWANCE OF EXPORT COMMISSION PAID TO THE NON - RESID ENT . AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) HAS CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AND THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION IN THE CASE OF FAIZON SHOES PVT. LTD. 367 ITR 155 (MAD) AND PRAYED THAT THE SAME SHOULD BE FOLLOWED. 5. ON THE OTHER HAND, THE LD. DR HAS SUPPORTED THE ORDERS OF AUTHORITIES BELOW . I.T.A. NO . 2031 /M/ 15 3 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WITH REGARD TO THE ISSUE AS TO WHETHER THE TDS HAS TO BE DEDUCTED OR NOT WHEN THE COMMISSION PAYMENT MADE TO THE OVERSEAS AGENTS, WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. FAIZAN SHOES PVT. LTD. [2014] 367 ITR 155, WHEREIN BY DISMISSING THE APPEAL OF THE REVENUE, THE HON BLE HIGH COURT HAS HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT ON A READING OF SECTION 9(1)(VII), COM MISSION PAID BY THE ASSESSEE TO THE NON - RESIDENT AGENTS WOULD NOT COME UNDER THE TERM 'FEES FOR TECHNICAL SERVICES'. FOR PROCURING ORDERS FOR LEATHER BUSI NESS 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 UND ER 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 N ON - 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. 6 . 1 BY RESPECTFULLY FOLLOWING THE ABOVE JUDGEMENT OF THE HON BLE JURISDICTIONAL H IGH COURT IN THE CASE OF CIT V. FAIZAN SHOES PVT. LTD. (SUPRA), THE DISALLOWANCE MADE BY THE ASSESSING OFFICER TOWARDS EXPORT I.T.A. NO . 2031 /M/ 15 4 COMMISSION PAID TO NON - RESIDENTS UNDER SECTION 40(A)(I) OF THE ACT IS DELETED. 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSES SEE IS ALLOWED . ORDER PRONOUNCED ON THE 23 RD JUNE , 201 7 AT CHENNAI. SD/ - SD/ - (A. MOHAN ALANKAMONY ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 23 . 06 .201 7 VM/ - / COPY TO: 1. / APPELLAN T, 2. / RESPONDENT, 3. ( ) / CIT(A), 4. / CIT, 5. / DR & 6. / GF.