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

ITA 3515/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1593 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: SURENDRA MODIYANI
• Keywords: Deemed to accrue or arise in india; Additional evidence

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI AMARJIT SINGH, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.3515/AHD/2016 (ASSESSMENT YEAR : 2012-13) K. PATEL CHEMO PHARMA PVT.LTD. PLOT NO.155, GIDC, ANKLESHWAR GUJARAT VS. THE DCIT CIRCLE-2(1)(2), AHMEDABAD [PAN NO. AABCK 1320 M] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SURENDRA MODIYANI, AR RESPONDENT BY : SHRI LALIT P. JAIN, SR.DR DATE OF HEARING 06/08/2018 DATE OF PRONOUNCEMENT 31/08/2018 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL HAS BEEN FILED BY THE ASSESSEE BEFORE US AGAINST THE ORDER DATED 23.11.2016 PASSED BY THE COMMISSIONER OF INCO ME TAX(APPEALS)-2, AHMEDABAD [LD.CIT(A) IN SHORT] FOR ASSESSMENT YEAR (AY) 2012 -13 ARISING OUT OF THE ORDER DATED 16.03.2016 PASSED BY THE DCIT, CIRCLE-2(1)(2), AHM EDABAD. 2. THE SOLE GROUND RAISED IN THE INSTANT APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF COMMISSION AMOUNTING TO RS.8,83,193 /- TO K.N. MEHTA AND RS.4,06,954/- TO ARIF WIBOWO ENDRATI. 3. THE FACTS OF THE CASE IS THIS THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAS DEBITED AN EXPENDITURE OF RS.95,35,571/- AGAINS T COMMISSION TO THE FOREIGN AGENTS UNDER THE HEAD OTHER EXPENSES. THE ASSESSEE DUR ING THE ASSESSMENT PROCEEDING WAS - 2 - ITA NO.3515/AHD/2016 K. PATEL CHEMO PHARMA P.LTD. VS. DCIT ASST.YEAR 2012-13 REQUESTED TO FURNISH THE DETAILS AND THE DOCUMENTAR Y EVIDENCE REGARDING SUCH PAYMENTS OF COMMISSION EXPENSES. THE COPY OF THE AGREEMENT OF EVIDENCES WITH REGARD TO THE SERVICES RENDERED BY THE FOREIGN AGENTS WAS ALSO DI RECTED TO BE FILED BY THE ASSESSEE BY THE AO. THE ENTIRE ASPECT OF THE MATTER, AS TO WHE THER THE INCOME OF NON-RESIDENT AGENT CAN BE DEEMED TO ACCRUE OR ARISE IN INDIA AND FURTH ER THAT TAX DEDUCTION WHETHER WOULD BE MANDATORY U/S.195 UNDER EXPORT COMMISSION PAID TO T HE NON-RESIDENTS AGENTS WERE CONSIDERED BY THE AO ON THE BASIS OF THE DOCUMENTS SUPPLIED BY THE ASSESSEE. HOWEVER, THE AO BEING DISSATISFIED WITH THE SUBMISSIONS AND/ OR INSUFFICIENT DOCUMENTS PRODUCED BEFORE HIM DISALLOWED THE ENTIRE EXPENSES OF RS.52, 08,982/- CLAIMED BY THE ASSESSEE UNDER THE HEAD COMMISSION EXPENSES PAID TO NON-RE SIDENTS WITH THE FOLLOWING OBSERVATION:- 3.7 THE ASSESSEE COMPANY HAS ALSO FAILED TO COMPLY WITH THE PROVISIONS OF SECTION 195(2) OF THE INCOME TAX ACT 1961 WHILE DECIDING TH E ISSUE OF APPLICABILITY OR OTHERWISE OF WITHHOLDING TAX U/S. 195 OF THE INCOME TAX ACT 1 961. HAVING FAILED TO MAKE AN APPLICATION BEFORE THE ASSESSING OFFICER AS PRESCRI BED U/S.195(2) OF THE ACT, TO DETERMINE THE CHARGEABILITY AND TDS LIABILITY, THE ASSESSEE A CTED UNILATERALLY BY NOT DEDUCTING TAX AT SOURCE U/S.195 OF THE ACT. THE EXTRACT OF SECTIO N 195(2) IS REPRODUCED BELOW: [ 195(2): WHERE THE PERSON RESPONSIBLE FOR PAYING A NY SUCH SUM CHARGEABLE UNDER THIS ACT (OTHER THAN [***] [***] [***] [***] SALARY) TO NON-RESIDENT CONSIDERS THAT THE WHOLE OF SUCH SUM WOULD NOT BE I NCOME CHARGEABLE IN THE CASE OF THE RECIPIENT, HE MAY MAKE AN APPLICATION TO THE [ASSESSING] OFFICER TO DETERMINE, [ BY GENERAL OR SPECIAL ORDER], THE APPR OPRIATE PROPORTION OF SUCH SUM SO CHARGEABLE, AND UPON SUCH DETERMINATION, TAX SHA LL BE DEDUCTED UNDER SUB- SECTION (1) ONLY ON THAT PROPORTION OF THE SUM WHIC H IS SO CHARGEABLE.] 3.8 FROM THE ABOVE DISCUSSION IT IS DEDUCTED THAT, THE ASSESSEE WAS UNDER OBLIGATION TO DEDUCT TAX AT SOURCE AS ENVISAGED U/S.195 OF THE ACT FROM THE PAYMENTS MADE TO NON- RESIDENT AGENTS TOWARDS THE SERVICES RENDERED BY TH EM. THE ASSESSEE HOWEVER HAD FAILED TO DISCHARGE THE OBLIGATION. THEREFORE THE EXPENDIT URE OF RS.52,08,982/- CLAIMED UNDER THE HEAD COMMISSION EXPENSES PAID TO NON-RESIDENTS IS DISALLOWED IN ACCORDANCE WITH THE SECTION 40(A)(I) OF INCOME TAX ACT AND ADDED BA CK TO THE TOTAL INCOME OF THE ASSESSEE BEING EXPENSES INCURRED WITHOUT DEDUCTING TAX AT SO URCE. PENAL PROCEEDINGS UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 ARE I NITIATED SEPARATELY AS THE ASSESSEE FURNISHED INACCURATE PARTICULARS OF ITS INCOME. - 3 - ITA NO.3515/AHD/2016 K. PATEL CHEMO PHARMA P.LTD. VS. DCIT ASST.YEAR 2012-13 4. IN APPEAL, THE LD. CIT(A) PARTLY ALLOWED THE APP EAL. AMONGST THE NON-RESIDENTS COMMISSION HIS AGENTS QUESTION OF GENUINENESS, IDE NTITY AS ALSO EXPORT DETAILS IN REGARD TO THE COMMISSION PAYMENTS MADE TO SHRI K.N. MEHTA AND ARIF WIBOWO ENDRATI. AROSE IN THE ABSENCE OF DETAILS EVIDENCES ON THAT A SPECT. THE COPIES OF EMAILS EXCHANGED BETWEEN THE PARTIES WERE NOT SUFFICIENT TO PROVE TH E SERVICES RENDERED BY THOSE TWO PARTIES, NEITHER THE SAME COULD ESTABLISH THE IDENT ITY AND GENUINENESS OF THE CLAIM AS OBSERVED BY THE LD. CIT(A). THE LD. CIT(A) UPHELD THE INVOCATION OF SUCH PROVISION OF SECTION 40(A)(IA) AS MADE BY THE AO IN RESPECT OF T HESE TWO AGENTS NAMELY K.N. MEHTA AND ARIF WIBOWO ENDRATI AND THUS DISALLOWANCE MAD E ON THAT BASIS BY THE AO FOUND TO BE CORRECT AND JUSTIFIED AND CONFIRMED BY THE LD. C IT(A). 5. AT THE TIME OF HEARING OF THE INSTANT APPEAL BEF ORE US, THE LD. REPRESENTATIVE OF THE ASSESSEE TOOK US TO THE APPLICATION FOR ADDITIO NAL EVIDENCE SUBMITTED BY HIM ON 22.04.2018 WHICH ACCORDING TO HIM COULD PROVE THE E XPORT DETAILS, SERVICES RENDERED BY THE FOREIGN AGENTS. THE IDENTITY AND GENUINENESS C OULD ALSO BE ESTABLISHED THROUGH THOSE DOCUMENTS AS SUBMITTED BEFORE US WHICH WERE UNABLE TO BE PLACED BEFORE THE AUTHORITIES BELOW AS CONTENDED BY THE LD. REPRESENTATIVE OF THE ASSESSEE. HE, THEREFORE, PRAYED BEFORE US TO REMIT THE MATTER TO THE FILE OF THE AO TO VERIFY THE SAME. 6. THE LD.DR FAIRLY AGREED TO THE SAID PROPOSAL MAD E BY THE ASSESSEES REPRESENTATIVE. 7. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE RES PECTIVE PARTIES. WE HAVE PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. TAKING INTO CONSIDERATION OF THE ENTIRE ASPECTS OF THE MATTER, WE CONSIDER IT FAIR AND PROPER AND I N THE INTEREST OF JUSTICE, SET ASIDE THE ORDERS PASSED BY THE AUTHORITIES BELOW ON THIS ISSU E IN DISPUTE AND REST OF THE MATTER TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH ON THE BASIS OF THE ADDITIONAL EVIDENCE ALREADY AVAILABLE ON RECORD BEFORE US AS WELL AS OT HER DOCUMENTARY EVIDENCE WHICH THE - 4 - ITA NO.3515/AHD/2016 K. PATEL CHEMO PHARMA P.LTD. VS. DCIT ASST.YEAR 2012-13 ASSESSEE MAY CHOOSE TO FILE. WHILE DOING SO, THE A SSESSEE SHOULD BE GIVEN AN OPPORTUNITY OF HEARING TO MEET THE ENDS OF JUSTICE AND SHALL CO -OPERATE THE AO AS AND WHEN CALLED FOR. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER PRONOUNCED IN OPEN COURT ON 31/08/2018 SD/- SD/- (AMARJIT SINGH) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 31/ 08 /2018 .., . ../ T.C. NAIR, SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A)-2, AHMEDABAD 5. !'# , $ , / DR, ITAT, AHMEDABAD 6. #() *+ / GUARD FILE. / BY ORDER, ! //TRUE COPY// / ( DY./ASSTT.REGISTRAR) !, / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 6.8.2018 (DICTATION-PAD 9 -PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 7.8.18 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.31.8.18 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 31.8.18 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER