M/s Northern Tannery, Kanpur V. Astt. Commissioner of Income Tax, Kanpur

ITA 220/LKW/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4415 (ITAT-LUCKNOW)
• Duration Of Justice: 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 30-05-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india; Non-deduction of tax
• Section: 133(6); 6

Judgement Text

I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI P. K. BANSAL, ACCOUNTANT MEMBER AND SHRI ABY T. VARKEY, JUDICIAL MEMBER ITA NO.220/LKW/2016 ASSESSMENT YEAR:2011-12 M/S NORTHERN TANNERY, 150 FT. ROAD, JAJMAU, KANPUR. PAN:AAAFN6778L VS. A.C.I.R., RANGE-1, KANPUR. (APPELLANT) (RESPONDENT) O R D E R PER P. K. BANSAL, A.M. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-I, KANPUR DATED 03/02/2016. 2. GROUND NO. 1 & 2 RELATE TO THE SUSTENANCE OF EXP ORT SALES COMMISSION AMOUNTING TO RS.25,07,412/- AS THE SAID COMMISSION HAS BEEN PAID BY THE ASSESSEE WITHOUT DEDUCTION OF TAX AT SO URCE. BOTH THE PARTIES AGREED THAT THIS ISSUE IS DULY COVERED BY THE DECIS ION OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-1 1, THE COPY OF WHICH WAS FILED AT PAGE NOS. 75 TO 87 OF THE PAPER BOOK W HICH WE HAVE PERUSED AND AFTER GOING THROUGH THE ORDER OF THIS TRIBUNAL, WE NOTED THAT THE SIMILAR ISSUE HAS ARISEN IN THE ASSESSMENT YEAR 201 0-11 WHERE THE TRIBUNAL UNDER PARA 8,9 & 10 HAS HELD AS UNDER: APPELLANT BY SHRI ASHISH JAISWAL, ADVOCATE RESPONDENT BY SMT. ALKA SINGH, D. R. DATE OF HEARING 30 /0 5 /2016 DATE OF PRONOUNCEMENT 08 / 06 /2016 I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 2 8. HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOW ER AUTHORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS, WE FIND THAT WE HAVE BEEN TAKING A CONSISTENT VIEW IN SERIES OF CAS ES THAT WHEREVER THE PAYMENTS ARE MADE ON ACCOUNT OF COMMIS SION FOR PROCURING ORDERS FOR SALE, TAX WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE. REFERENCE WAS MADE TO THE PROV ISIONS OF SECTION 9(1)(VII) OF THE ACT AND EXPLANATION ADDED TO SECTION 9(1)(VII) OF THE ACT BY THE FINANCE ACT, 2010, BUT THIS ASPECT HAS ALREADY BEEN EXAMINED BY THE JURISDICTIONAL HIG H COURT IN THE CASE OF CIT VS. M/S MODEL EXIMS (SUPRA). FOLLO WING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. M/S MODEL EXIMS (SUPRA), THE TRIBUNAL HAS C ONCLUDED IN THE ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDIN G YEAR THAT TAX WAS NOT REQUIRED TO BE DEDUCTED AT SOURCE ON COMMISSION PAYMENT TO FOREIGN AGENTS WHO HAS RENDER ED SERVICES OUTSIDE INDIA. THE COMMISSION PAID TO FOR EIGN AGENTS FOR PROCURING ORDERS CANNOT BE CALLED EITHER TO REN DERING OF TECHNICAL SERVICES OR MANAGERIAL OR CONSULTANCY SER VICES. THESE DIFFERENT TYPES OF SERVICES WERE EXAMINED BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INCOME-TAX (INTERNATIONAL TAXATION)-II VS. PANALFA AUTOELEKTRI K LTD. (SUPRA) AND THEIR LORDSHIPS HAVE HELD THAT SERVICES RENDERE D FOR PROCUREMENT OF EXPORT ORDERS ETC. CANNOT BE TREATED AS MANAGERIAL SERVICES PROVIDED BY THE NON-RESIDENT TO THE RESPONDENT ASSESSEE. THEIR LORDSHIPS FURTHER DEFIN ED THE CONSULTANCY SERVICES AND TECHNICAL SERVICES. FOR T HE SAKE OF REFERENCE, WE EXTRACT THE RELEVANT OBSERVATION OF T HE HON'BLE HIGH COURT OF DELHI AS UNDER:- THE EXPRESSION 'MANAGERIAL, TECHNICAL AND CONSULTA NCY SERVICES' HAVE NOT BEEN DEFINED EITHER UNDER THE AC T OR UNDER THE GENERAL CLAUSES ACT, 1897. THE SAID TERMS HAVE TO BE READ TOGETHER WITH THE WORD 'SERVICES' T O UNDERSTAND AND APPRECIATE THEIR PURPORT AND MEANING . ONE HAS TO EXAMINE THE GENERAL OR COMMON USAGE OF THESE WORDS OR EXPRESSIONS, HOW THEY ARE INTERPRETE D AND UNDERSTOOD BY THE PERSONS ENGAGED IN BUSINESS A ND BY THE COMMON MAN WHO IS AWARE AND UNDERSTANDS THE SAID TERMS. [PARA 14] THE SERVICES RENDERED, THE PROCUREMENT OF EXPORT ORDERS, ETC. CANNOT BE TREATED AS MANAGEMENT SERVIC ES PROVIDED BY THE NON-RESIDENT TO THE RESPONDENT- ASSESSEE. THE NON-RESIDENT WAS NOT ACTING AS A MANA GER OR DEALING WITH ADMINISTRATION. IT WAS NOT CONTROLL ING THE I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 3 POLICIES OR SCRUTINIZING THE EFFECTIVENESS OF THE P OLICIES. IT DID NOT PERFORM AS A PRIMARY EXECUTOR, ANY SUPERVIS ORY FUNCTION WHATSOEVER. THIS IS CLEAR FROM THE FACTS A S RECORDED BY THE COMMISSIONER (APPEALS), WHICH HAVE BEEN AFFIRMED BY THE TRIBUNAL. [PARA 15] THE NON-RESIDENT, IT IS CLEAR WAS APPOINTED AS A COMMISSION AGENT FOR SALE OF PRODUCTS WITHIN THE TERRITORIES SPECIFIED AND SUBJECT TO AND IN ACCORDA NCE WITH THE TERMS SET OUT, WHICH THE NON-RESIDENT ACCE PTED. THE NON-RESIDENT, THEREFORE, WAS ACTING AS AN AGENT FOR PROCURING ORDERS AND NOT RENDERING MANAGERIAL ADVIC E OR MANAGEMENT SERVICES. FURTHER, THE RESPONDENT-ASSESS EE WAS LEGALLY BOUND WITH THE NON-RESIDENTS' REPRESENTATIONS AND ACTS, ONLY WHEN THERE WAS A WRI TTEN AND SIGNED AUTHORIZATION ISSUED BY THE RESPONDENT- ASSESSEE IN FAVOUR OF THE NON-RESIDENT. THUS, THE RESPONDENT- ASSESSEE DICTATED AND DIRECTED THE NON- RESIDENT. THE COMMISSIONER (APPEALS) HAS ALSO DEALT WITH QUANTIFICATION OF THE COMMISSION AND AS PER AGREEME NT, THE COMMISSION PAYABLE WAS THE DIFFERENCE BETWEEN T HE PRICE STIPULATED IN THE AGREEMENT AND THE CONSIDERA TION THAT THE RESPONDENT-ASSESSEE RECEIVED IN ITEMS OF T HE PURCHASE CONTRACT OR ORDER, IN ADDITION TO A PREDETERMINED GUARANTEE CONSIDERATION. AGAIN, AN INDICATION CONTRA TO THE CONTENTION THAT THE NON-RE SIDENT WAS PROVIDING MANAGEMENT SERVICE TO THE RESPONDENT- ASSESSEE. [PARA 16] THE REVENUE HAS NOT PLACED COPY OF THE AGREEMENT TO CONTEND THAT THE AFORESAID CLAUSES DO NOT REPRESENT THE TRUE NATURE OF THE TRANSACTION. THE ASSESSING OFFIC ER IN HIS ORDER HAD NOT BOTHERED TO REFER AND TO EXAMINE THE RELEVANT CLAUSES, WHICH CERTAINLY WAS NOT THE RIGHT WAY TO DEAL WITH THE ISSUE AND QUESTION. [PARA 17] FURTHER, WOULD BE INCONGRUOUS TO HOLD THAT THE NON- RESIDENT WAS PROVIDING TECHNICAL SERVICES. THE NON- RESIDENT HAD NOT UNDERTAKEN OR PERFORMED 'TECHNICAL SERVICES', WHERE SPECIAL SKILLS OR KNOWLEDGE RELATI NG TO A TECHNICAL FIELD WERE REQUIRED. TECHNICAL FIELD WOUL D MEAN APPLIED SCIENCES OR CRAFTSMANSHIP INVOLVING SPECIAL SKILLS OR KNOWLEDGE BUT NOT FIELDS SUCH AS ARTS OR HUMAN SCIENCES. [PARA 19] I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 4 THE MOOT QUESTION AND ISSUE IS WHETHER THE NON-RESI DENT WAS PROVIDING CONSULTANCY SERVICES. [PARA 20] THE WORD 'CONSULTANT' REFERS TO A PERSON, WHO IS CONSULTED AND WHO ADVISES OR FROM WHOM INFORMATION IS SOUGHT. IN BLACK'S LAW DICTIONARY, EIGHTH EDITION, THE WORD 'CONSULTATION' HAS BEEN DEFINED AS AN ACT OF A SKING THE ADVICE OR OPINION OF SOMEONE (SUCH AS A LAWYER) . IT MAY MEAN A MEETING IN WHICH PARTIES CONSULT OR CONF ER. FOR CONSULTATION SERVICE UNDER EXPLANATION 2, THERE SHOULD BE A PROVISION OF SERVICE BY THE NON-RESIDEN T, WHO UNDERTAKES TO PERFORM IT, WHICH THE ACQUIRER MA Y USE. THE SERVICE MUST BE RENDERED IN THE FORM OF AN ADVICE OR CONSULTATION GIVEN BY THE NON-RESIDENT TO THE RESIDENT INDIAN PAYER. [PARA 21] IN THE PRESENT CASE COMMISSION PAID FOR ARRANGING O F EXPORT SALES AND RECOVERY OF PAYMENTS CANNOT BE REGARDED AS CONSULTANCY SERVICE RENDERED BY THE NON - RESIDENT. THE NON-RESIDENT HAD NOT RENDERED ANY CONSULTATION OR ADVICE TO THE RESPONDENT-ASSESSEE. THE NON-RESIDENT NO DOUBT HAD ACQUIRED SKILL AND EXPERT ISE IN THE FIELD OF MARKETING AND SALE OF AUTOMOBILE PRODU CTS, BUT IN THE FACTS, AS NOTICED BY THE TRIBUNAL AND TH E COMMISSIONER (APPEALS), THE NON-RESIDENT DID NOT AC T AS A CONSULTANT, WHO ADVISED OR RENDERED ANY COUNSELLI NG SERVICES. THE SKILL, BUSINESS ACUMEN AND KNOWLEDGE ACQUIRED B Y THE NON-RESIDENT WERE FOR HIS OWN BENEFIT AND USE. THE NON-RESIDENT PROCURED ORDERS ON THE BASIS OF THE SA ID KNOWLEDGE, INFORMATION AND EXPERTISE TO SECURE 'THE IR' COMMISSION. IT IS A CASE OF SELF-USE AND BENEFIT, A ND NOT GIVING ADVICE OR CONSULTATION TO THE ASSESSEE ON AN Y FIELD, INCLUDING HOW TO PROCURE EXPORT ORDERS, HOW TO MARKET THEIR PRODUCTS, PROCURE PAYMENTS ETC. THE ASSESSEE UPON RECEIPT OF EXPORT ORDERS, MANUFACTURE D THE REQUIRED ARTICLES/GOODS AND THEN THE GOODS PROD UCED WERE EXPORTED. THERE WAS NO ELEMENT OF CONSULTATION OR ADVICE RENDERED BY THE NON-RESIDENT TO THE RESPONDE NT- ASSESSEE. [PARA 22] THE TECHNICAL SERVICES CONSISTS OF SERVICES OF TECH NICAL NATURE, WHEN SPECIAL SKILLS OR KNOWLEDGE RELATING T O TECHNICAL FIELD ARE REQUIRED FOR THEIR PROVISION, MANAGERIAL SERVICES ARE RENDERED FOR PERFORMING I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 5 MANAGEMENT FUNCTIONS AND CONSULTANCY SERVICES RELAT E TO PROVISION OF ADVICE BY SOMEONE HAVING SPECIAL QUALIFICATION THAT ALLOWS HIM TO DO SO. IN THE PRES ENT CASE, THE AFORESAID REQUISITES AND REQUIRED NECESSI TIES ARE NOT SATISFIED. INDEED, TECHNICAL, MANAGERIAL AN D CONSULTANCY SERVICES MAY OVERLAP AND IT WOULD NOT B E PROPER TO VIEW THEM IN WATERTIGHT COMPARTMENTS, BUT IN THE PRESENT CASE THIS ISSUE OR DIFFERENTIATION IS A GAIN NOT RELEVANT. [PARA 25] 10. THE SCOPE OF EXPLANATION 2 TO SECTION 9(1)(VII) OF THE ACT BY THE FINANCE ACT, 2010 WAS ALSO EXAMINED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MO DEL EXIMS (SUPRA) WHICH WAS FOLLOWED BY THE TRIBUNAL IN THE A SSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR. THE R ELEVANT OBSERVATIONS OF THE TRIBUNAL ARE EXTRACTED HEREUNDE R FOR THE SAKE OF REFERENCE:- 5. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED THAT THIS ISSUE IS COVERED BY THE ORDER OF THE JURI SDICTIONAL HIGH COURT AND VARIOUS ORDERS OF THE TRIBUNAL, PARTICULARLY IN THE CASE OF ACIT VS. M/S MODEL EXIM S, KANPUR IN I.T.A. NO. 697/LKW/2013 IN THE LIGHT OF C BDT CIRCULAR AND AMENDMENTS. WE FIND THAT THE VIEW TAK EN BY THE TRIBUNAL HAS BEEN APPROVED BY THE HON'BLE HI GH COURT OF ALLAHABAD IN THE CASE OF CIT VS. M/S MODEL EXIMS, 358 ITR 2 (ALLD). THE RELEVANT OBSERVATIONS OF THE HON'BLE HIGH COURT ARE EXTRACTED HEREUNDER:- WE FIND THAT ALL THE QUESTIONS AS FRAMED BY THE DEPARTMENT ARE COVERED BY OUR JUDGMENT IN CIT V. M/ S MODEL EXIMS, KANPUR, INCOME TAX APPEAL (DEF.) NO.16 4 OF 2011, DECIDED IN FAVOUR OF THE ASSESSEE AND AGAI NST THE REVENUE ON 10.09.2013 AND DIE JUDGMENT IN CIT, KANPUR V. M/S ALLIED EXIMS, INCOME TAX APPEAL NO.31 3 OF 2013 DECIDED ON 13.11.2013. IN BOTH THESE JUDGMENTS WE HAVE HELD, THAT A.O. DID NOT BRING ANYTHING ON R ECORD, WHICH COULD DEMONSTRATE THAT NON-RESIDENT AGENTS WE RE APPOINTED AS SELLING AGENTS, DESIGNERS OR TECHNICAL ADVISERS. THE PAYMENT OF COMMISSION TO FOREIGN AGEN TS DID NOT ENTITLE SUCH FOREIGN AGENTS TO PAY TAX IN I NDIA AND THUS THE TDS WAS NOT LIABLE TO BE DEDUCTED UNDER SECTION 195 OF THE ACT. THE DISALLOWANCE MADE BY A. O. I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 6 UNDER SECTION 40 (A) (I) FOR NON-DEDUCTION OF TAX A T SOURCE UNDER SECTION 195 WERE NOT JUSTIFIED. SHRI BHARAT JI AGRAWAL HAS TRIED TO DISTINGUISH THE JUDGMENTS ON THE GROUND THAT IN THE PRESENT CASE TH ERE WAS SUFFICIENT MATERIAL BY WAY OF WRITTEN SUBMISSIO NS OF THE ASSESSEE, WHO HAD STATED IN HIS REPLY ON 20.12. 2010 THAT THE ASSESSEE IS ENGAGED IN BUSINESS OF MANUFAC TURE AND EXPORT OF FINISHED LEATHER, SHOE UPPER AND LEAT HER PRODUCTS. THE ASSESSEE'S MAIN BUSINESS BEING EXPORT BUSINESS IT HAS TO TAKE THE SERVICE OF FOREIGN AGEN TS, WHO SECURE EXPORT ORDERS AND HELP IN EXECUTION OF SUCH BUSINESS. FOR THE SERVICES RENDERED BY THE FOREIGN AGENTS, THEY ARE PAID COMMISSION IN FOREIGN EXCHANG E BY REMITTING THE AMOUNT THROUGH BANK. WE FIND THAT THE CIT (A) HAS CONSIDERED THE ALLEGED ADMISSION IN THE REPLY OF THE ASSESSEE AND HAS ALSO PERUSED THE AGREEMENT FROM WHICH HE FOUND THAT THER E WAS NOTHING, WHICH COULD DEMONSTRATE THAT THESE AGE NTS WERE APPOINTED AS SELLING AGENTS, DESIGNERS OR TECH NICAL ADVISERS FOR INVOKING THE PROVISIONS OF SECTION 9 ( 1) (VII) OF THE ACT. THE FINDINGS RECORDED BY THE CIT (A), W HICH HAVE BEEN CONFIRMED BY THE ITAT IS QUOTED AS BELOW: - '5.3.2 THE A. O. HAS ALSO INVOKED THE PROVISIONS OF SECTION 9 (1) (VII) ON THE PREMISE THAT SUCH PAYMENTS ALSO FULL UNDER FTS. IN THIS REGARD SHE HAS OBSERVED THAT NORMALLY THE EXPORTER APPOINTS THE AGENTS AS HIS SELLING AGENT, DESIGNER & TECHNICAL ADVISER FOR HIS PRODUCTS. HE HAS FURTHER OBSERVED THAT BEING COMMISSION AGENT REQUIRED MANAGERIAL ACUMEN & EXPERTISE AND THEREFORE, WOULD BE COVERED UNDER SECTION 9 (1) (VII) OF THE ACT AS MANAGERIAL SERVICES. ON PERUSAL OF THE ASSESSMENT ORDER AND ASSESSMENT FOLDER, I FIND THAT THE A.O. HAS NOT BROUGHT ANYTHING ON RECORD WHICH COULD DEMONSTRATE THAT THESE AGENTS HAD BEEN APPOINTED AS SELLING AGENTS, DESIGNERS & TECHNICAL ADVISERS. RATHER ON ME CONTRARY I FIND THAT THE AGREEMENT IS OF FOR PROCURING ORDERS AND NOTHING ELSE. IN ABSENCE OF ANY SUCH EVIDENCE, THIS OBSERVATION OF THE A.O. IS MERE CONJECTURE AND THEREFORE, NO COGNIZANCE OF THE SAME CAN BE I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 7 TAKEN. IT IS A TRITE LAW THAT SUSPICION, NO MATTER HOW GRAVE, CANNOT TAKE PLACE OF EVIDENCE. IN THIS CASE, THERE IS EVEN NO CASE OF SUSPICION, LEAVE ASIDE ANY EVIDENCE TO THE EFFECT THAT THE AGENTS WERE NOT ONLY SELLING AGENTS BUT ALSO DESIGNERS AND TECHNICAL ADVISERS. THE CONFIRMATION FROM THE RESPECTIVE FOREIGN AGENTS THAT THE FOREIGN AGENTS DID NOT HAVE ANY BRANCH OR PE IN INDIA FURTHER SUPPORTS THE CASE OF THE APPELLANT. 5.3.3 THE A.O.'S OBSERVATION THAT AS A SELLING AGENT, THE AGENT HAS TO HAVE MANAGERIAL ACUMEN AND, THEREFORE, HIT BY THE PROVISIONS OF SECTION 9 (1) (VII), IS BASELESS. THE PROVISIONS OF SECTION 9 (1) (VII) DEALS WITH FEES FOR TECHNICAL SERVICES AN D IT HAS TO BE READ IN THAT CONTEXT. PAR THAT MATTER, EVERYTHING IN LIFE REQUIRES MANAGERIAL SKILLS, LIKE RUNNING THE HOUSEHOLD, BEING AN ASSESSING OFFICER, RUNNING A SHOP ETC. WILL THAT TANTAMOUNT TO PROVIDING MANAGERIAL SERVICES IN THE CONTEXT OF SECTION 9 (1) (VII)? THE ANSWER IS CLEAR NO. THUS, THE AFORESAID PAYMENTS DO NOT FALL WITHIN THE MEANING OF 'FTS' AS DESCRIBED IN SECTION 9 (1) (VII ) OF THE ACT. 5.3.4 THE INCOME OF THE NON-RESIDENT WAS NOT CHARGEABLE TO TAX IN INDIA SINCE THE SAME WAS NEITHER RECEIVED IN INDIA NOR HAD IT ACCRUED OR DEEMED TO ACCRUE IN INDIA. ACCORDINGLY, THE APPELLANT WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE U/S 195 IN RESPECT OF COMMISSION PAID TO THE FOREIGN AGENTS. DISALLOWANCE U/S 40 (A) (I) IS, THEREFORE, DELETED.' SHRI BHARAT JI AGRAWAL SUBMITS THAT THE CIT (A) AND ITAT HAVE NOT CONSIDERED THE EXPLANATION ADDED TO SECTIO N 9 (1) (VII) BY THE FINANCE ACT, 2010 W.E.F. 1.6.1976 AND WHICH PROVIDES THAT FOR THE PURPOSE OF SECOND PROVI SO THE INCOME OF SUCH NON-RESIDENT SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V) OR CLAUSE (VI) OR CLAUSE (VII) [OF SUB-SECTION (1)] AND SHALL BE INCL UDED IN TOTAL INCOME OF NON-RESIDENT WHETHER OR NOT, NON- RESIDENT HAS RESIDENCE OR PLACE OF BUSINESS OR BUSI NESS I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 8 COMMISSION IN INDIA; OR NON-RESIDENT HAS RENDERED SERVICES IN INDIA. WE DO NOT FIND THAT THE FACT SITUATION CONTEMPLATED OR CLARIFIED IN THE EXPLANATION ADDED BY FINANCE ACT, 2010 IS APPLICABLE TO THE PRESENT CASE AS IN THE PRESENT CA SE THE AGENTS APPOINTED BY THE ASSESSEE HAD THEIR OFFICES SITUATE IN A FOREIGN COUNTRY AND THAT THEY DID NOT PROVIDE ANY MANAGERIAL SERVICES TO THE ASSESSEE. SECTION 9 (1) (VII) DEALS WITH TECHNICAL SERVICES AND HAS TO BE R EAD IN MAT CONTEXT. THE AGREEMENT OF PROCURING ORDERS WOUL D NOT INVOLVE ANY MANAGERIAL SERVICES. THE AGREEMENT DID NOT SHOW THE APPLICABILITY OR REQUIREMENT OF ANY TECHNICAL EXPERTISE AS FUNCTIONING AS SELLING AGENT , DESIGNER OR ANY OTHER TECHNICAL SERVICES. THERE ARE NO DISTINGUISHING FEATURE IN THIS CASE, N OR DO WE FIND THAT THE RATIO OF THE CONSTITUTION BENCH DE CISION IN COMMISSIONER OF C. EX., BOLPUR V. RATAN MELTING & WIRE INDUSTRIES, (2008) (231) E.L.T. 22 (SC) (PARA 6) IS APPLICABLE IN AS MUCH AS IN THE PRESENT CASE THERE WAS NO DECISION OF THE SUPREME COURT OR HIGH COURT OR A NY STATUTORY PROVISION, WHICH WAS CONTRARY TO THE CIRC ULAR, WHICH WAS WITHDRAWN ON 22.10.2009. THE QUESTIONS OF LAW ARE COVERED BY THE JUDGMENTS O F THIS COURT CITED AS ABOVE, AND ARE DECIDED IN FAVOU R OF THE ASSESSEE AND A AGAINST THE DEPARTMENT. WE, THEREFORE, FOLLOWING THE AFORESAID JUDGMENT OF THE JURISDICTIONAL HIGH COURT, DECIDE THE ISSUE IN FAVO UR OF THE ASSESSEE AND CONFIRM THE ORDER OF THE LD. CIT(A) IN THIS REGARD. 10. SIMILAR VIEW WAS ALSO TAKEN IN OTHER CASES OF T HE TRIBUNAL. NOTHING HAS BEEN BROUGHT ON RECORD BY TH E REVENUE IN ORDER TO DEMOLISH THE STAND TAKEN BY THE ASSESSE E AND TO ESTABLISH THAT NON-RESIDENT HAS EVER RENDERED ANY T ECHNICAL SERVICES OR CONSULTANCY OR MANAGERIAL SERVICES. TH EREFORE, WE ARE OF THE VIEW THAT SINCE THE ASSESSEE HAS SIMPLY PROCURED EXPORT ORDERS THROUGH COMMISSION AGENT FOR WHICH CO MMISSION WAS PAID, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT T AX AT SOURCE ON THE COMMISSION PAID TO THE FOREIGN AGENT. ACCORDINGLY WE CONFIRM THE ORDER OF THE LD. CIT(A). I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 9 3. RESPECTFULLY FOLLOWING THE SAID DECISION, WE DEL ETE THE DISALLOWANCE. THUS GROUND NOS. 1 & 2 STAND ALLOWED. 4. GROUND NO. 3 RELATES TO THE DISALLOWANCE ON ACCO UNT OF TELEPHONE EXPENSES AND VEHICLE MAINTENANCE AMOUNTING TO RS.1, 32,122/-. 5. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING TH ROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW, WE NOTED THAT THE ASSESS EE HAS INCURRED A SUM OF RS.3,85,537/- ON TELEPHONE, RS.1,37,690/- ON TRU CK VEHICLE & MAINTENANCE AND RS.7,98,007/- ON VEHICLE MAINTENANC E. THE ASSESSING OFFICER DISALLOWED 10% OF THESE EXPENSES AS IN HIS OPINION THESE EXPENSES HAVE BEEN INCURRED FOR PERSONAL PURPOSES ALSO. THE ASSESSEE IS A PARTNERSHIP FORM AND USER OF THE VEHICLE FOR PERSON AL PURPOSES HAS NOT BEEN DENIED THEREFORE, WE RESTRICT THE DISALLOWANCE TO 10% OF THE VEHICLE MAINTENANCE I.E. RS.79,800/-. THUS DISALLOWANCE OF RS.1,32,122/- IS REDUCED TO RS.79,800/-. ACCORDINGLY, GROUND NO. 3 IS PARTLY ALLOWED. 6. GROUND NO. 4 & 5 RELATE TO THE SUSTENANCE OF ADD ITION OUT OF MISC. EXPENSES AMOUNTING TO RS.2,00,000/-. 7. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING TH ROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW, WE NOTED THAT THE ASSESS ING OFFICER NOTED THAT THE ASSESSEE HAS INCURRED A SUM OF RS.13,93,200/- U NDER THE HEAD MISC. EXPENSES WHILE IN THE EARLIER YEAR, SUCH EXPENSES W ERE TO THE TUNE OF RS.10,18,260/-. THE ASSESSEE WAS ASKED TO SUBMIT T HE COMPLETE DETAILS OF THE EXPENSES. THE ASSESSING OFFICER NOTED THAT ALL THE EXPENSES ARE NOT FULLY VERIFIABLE. THE ASSESSING OFFICER THEREFORE, DISALLOWED RS.2,00,000/-. WE NOTED FROM THE DETAILS OF THESE EXPENSES AVAILAB LE ON PAGE NO. 71 TO 74 OF THE PAPER BOOK THAT THE ASSESSEE HAS NOT GIVE N THE NATURE OF EXPENSES INCURRED BY THE ASSESSEE. WHAT THE ASSESS EE HAS MENTIONED IS I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 10 JUST THE BILL NUMBER AND DATE. IN VIEW OF THIS FAC T, THE NATURE OF THE EXPENSES WHETHER THE EXPENSES HAVE BEEN WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF THE BUSINESS OR NOT CANNOT BE VE RIFIED. KEEPING IN VIEW THIS FACT, IN OUR OPINION, IT WILL MEET THE ENDS OF JUSTICE IF THE DISALLOWANCE IS RESTRICTED TO RS.1,00,000/-. WE ACCORDINGLY, RE DUCE THE DISALLOWANCE TO RS.1 LAC. ACCORDINGLY, GROUND NO. 4 & 5 ARE PARTLY ALLOWED. 8. GROUND NOS. 6 & 7 RELATE TO THE SUSTENANCE OF DI SALLOWANCE OF RS.1,09,174/- U/S 41(1) OF THE I.T. ACT. 9. AFTER HEARING THE RIVAL SUBMISSIONS AND GOING TH ROUGH THE ORDERS OF THE TAX AUTHORITIES BELOW, WE NOTED THAT THE FACTS RELATING TO THIS ADDITION ARE THAT THE ASSESSING OFFICER NOTED THAT THERE WAS CREDIT BALANCE IN THE NAME OF M/S OMEGA INTERNATIONAL, JAJMAU, KANPUR. T HE ASSESSING OFFICER THEREFORE, ISSUED NOTICE U/S 133(6) TO THE SAID PAR TY AND THE PARTY STATED THAT THERE WAS NO TRANSACTION BETWEEN ASSESSEE AND M/S OMEGA INTERNATIONAL DURING ASSESSMENT YEAR 2010-11 AND TH ERE EXISTED NO OUTSTANDING BALANCE AS ON 31/03/2011. THE ASSESSIN G OFFICER COUNTERED THE ASSESSEE BUT THE ASSESSEE STATED THAT THIS PART Y WAS THEIR SUPPLIER IN THE PAST YEAR BUT IN THE FINANCIAL YEAR 2010-11 THE RE WAS NO TRANSACTION AND A SUM OF RS.1,09,174/- IS STILL OUTSTANDING. T HE ASSESSING OFFICER THEREFORE, ADDED THE SUM OF RS.1,09,174/- IN THE IN COME OF THE ASSESSEE. WHEN THE MATTER TRAVELLED TO CIT(A), THE ASSESSEE S UBMITTED THAT THE SAID PARTY MIGHT HAVE WRITTEN OFF THE AMOUNT AND THEREFO RE, MIGHT HAVE STATED THAT THE SAID AMOUNT CANNOT BE ADDED IN THE INCOME OF THE ASSESSEE. WE NOTED THAT IT IS A CASE WHERE THE LIABILITY HAS ALR EADY BEEN REMITTED AND CEASED IN VIEW OF THE FACT THAT THE ASSESSEE HIMSEL F HAS STATED BEFORE THE AUTHORITIES BELOW THAT THE OTHER PARTY MIGHT HAVE R EVERSED THE LIABILITY. IN OUR OPINION, THE IMPUGNED CASE IS DULY COVERED BY T HE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. KARAM CHAND TH APAR AND OTHERS I.T.A. NO.220/LKW/16 ASSESSMENT YEAR:2011-12 11 [1996] 222 ITR 112 (SC) IN WHICH HON'BLE SUPREME CO URT STATED THAT SINCE THE AMOUNT HAS BEEN RECEIVED IN THE COURSE OF THE B USINESS, THERE IS NO EXISTING LIABILITY TO REPAY THE AMOUNT, THE AMOUNT WILL BECOME AS TRADING RECEIPT. IN VIEW OF THE SAID DECISION, WE CONFIRM THE ORDER OF CIT(A). ACCORDINGLY, GROUND NO. 6 & 7 STAND DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 08/06/2016) SD/. SD/. ( ABY T. VARKEY ) ( P. K . BANSAL ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:08/06 /2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. RE GISTRAR