K Patel Chemo Pharma Private Limited, Ankleshwar V. The Assistant Commissioner of Income Tax, Circle-2(1)(2), Ahmedabad

ITA 2914/AHD/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3497 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 26-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Services rendered outside India; TDS; Set aside
• Section: 143(3); 5(2); 40(a)(ia); 37(1); 195; 201

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NOS. 2914 & 2915/AHD/2017 ( ASSESSMENT YEARS : 2013-14 & 2014-15) K PATEL CHEMO PHARMA PRIVATE LIMITED 155, G.I.D.C. ESTATE, ANKLESHWAR 393002 / VS. ASSISTANT / DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(1)(2), AHMEDABAD ./ ./ PAN/GIR NO. : AABCK1320M ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SURENDRA MODIANI, A.R. / RESPONDENT BY: SHRI MUDIT NAGPAL, SR. D.R. DATE OF HEARING 11/10/2019 !'# / DATE OF PRONOUNCEMENT 13/11/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF THE COMMISSIONER O F INCOME TAX (APPEALS)-2, AHMEDABAD (CIT(A) IN SHORT), BOTH DA TED 01.12.2017 ARISING IN THE ASSESSMENT ORDERS DATED 18.03.2016 & 21/11/2 016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AYS. 2013-14 & 2014-15. 2. BOTH THE APPEALS INVOLVE COMMON QUESTION TOWARDS DISALLOWANCE OF COMMISSION EXPENSES PAID TO ONE K N MEHTA, SHARJAH UAE. ACCORDINGLY, BOTH THE APPEALS ARE BEING DISPOSED OF BY COMMON OR DER. ITA NOS. 2914 & 2915/AHD/17 [K PATEL CHEMO PHARMA PVT. LTD.] A.YS. 2013-14 & 2014-15 - 2 - 3. WE SHALL FIRST TAKE THE FACTS CONCERNING AY 2013 -14 IN ITA NO. 2914/AHD/2017 FOR ADJUDICATION PURPOSES. ITA NO. 2914/AHD/2017-AY-2013-14 4. BRIEFLY STATED, THE ASSESSEE, A PRIVATE LIMITED COMPANY, DERIVES INCOME FROM MANUFACTURING OF DYES, PIGMENTS AND CHE MICALS ETC. AND DECLARED TOTAL INCOME OF RS.13.50 CRORES FOR THE PU RPOSES OF TAXATION. THE AO INTER ALIA DISALLOWED COMMISSION EXPENSES AMOUNTING TO RS.2,97 ,463/- PAID TO K N MEHTA, SHARJAH UAE BY INVOKING SECTION 40(A)(IA) OF THE ACT FOR NON-DEDUCTION OF TDS. 5. THE CIT(A), IN FIRST APPEAL, HOWEVER SUSTAINED T HE ACTION OF THE AO BY RESORTING TO SECTION 37(1) OF THE ACT INSTEAD OF DISALLOWANCE UNDER S.40(A)(IA) OF THE ACT. 6. AGGRIEVED BY THE ACTION OF THE CIT(A), THE ASSES SEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE ISSUE . ON PERUSAL OF THE ORDER OF THE CIT(A) AND MATERIAL PLACED ON RECORD B EFORE THE TRIBUNAL, WE NOTICE THAT THE COMMISSION PAYMENT OF RS.2.97 LAKHS HAS BEEN PAID TO K N MEHTA, NON-RESIDENT FOREIGN AGENT FOR FACILITATING EXPORT SALES OUTSIDE INDIA. THE COMMISSION SO PAID TO THE NON-RESIDENT IS THUS WITH REFERENCE TO SERVICES RENDERED OUTSIDE INDIA FOR OBTAINING EXPOR T ORDERS. THE FOREIGN AGENT IS STATED TO BE NOT CARRYING ANY BUSINESS OPE RATION IN INDIA AND THEREFORE NO INCOME CAN BE STATED TO ACCRUE OR ARIS E IN INDIA. IT IS TRITE THAT IN THE ABSENCE OF ANY CHARGEABILITY OF INCOME UNDER S.4 R.W.S. 5(2) OF THE ACT, THE PROVISIONS OF SECTION 195 OF THE ACT WILL NOT APPLY. A REFERENCE MAY BE MADE TO THE DECISION OF THE HONBLE SUPREME COURT IN GE INDIA TECHNOLOGY CEN. (P.) LTD. VS. CIT (2010) 193 TAXMAN 234 (SC) IN THIS REGARD. THUS, OBLIGATIONS FOR DEDUCTION WITHHOLDIN G TAX COULD NOT BE FASTENED ON THE ASSESSEE. WE ALSO FIND THAT THE AS SESSEE HAS PRODUCED DOCUMENTARY EVIDENCES IN THE FORM OF SAMPLE COPY OF E-MAIL EXCHANGED BETWEEN THE ASSESSEE AND COMMISSION AGENT, TRANSACT ION ADVICES OF THE ITA NOS. 2914 & 2915/AHD/17 [K PATEL CHEMO PHARMA PVT. LTD.] A.YS. 2013-14 & 2014-15 - 3 - BANK, DEBIT NOTE/COMMISSION INVOICE OF THE PARTIES, FORM NO.15CB AS SUBMITTED TO THE BANK MAKING REMITTANCES ETC. IN T HE BACKGROUND OF THE AFORESAID EVIDENCES TO SUPPORT THE OCCURRENCE OF EX PENDITURE, WE ARE UNABLE TO UNDERSTAND THE ACTION OF THE CIT(A) IN HOLDING T HAT SUCH DOCUMENTS DO NOT ESTABLISH THE IDENTITY AND GENUINENESS OF THE C LAIM. THE ACTION OF THE CIT(A) IN UPHOLDING THE DISALLOWANCE APPEARS TO BE WITHOUT ANY COGENT BASIS. WE ACCORDINGLY SET ASIDE THE IMPUGNED ACTIO N OF THE REVENUE AND DIRECT THE AO TO ALLOW THE COMMISSION EXPENSES IN Q UESTION. 8. IN THE RESULT, APPEAL OF THE ASSESSEE FOR AY 201 3-14 IS ALLOWED. ITA NO. 2915/AHD/2017-AY-2014-15 9. THE FACTS SITUATION IN ITA NO.2915/AHD/2017 BEIN G SIMILAR, THE AO IS DIRECTED TO ALLOW THE COMMISSION OF RS.39,40,158 /- IN QUESTION. 10. IN THE COMBINED RESULT, BOTH APPEALS FILED BY T HE ASSESSEE ARE ALLOWED. SD/- SD/- (RAJPAL YADAV) (PRADIP KU MAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBE AHMEDABAD: DATED 13/11/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 13/11/2019