DCIT, New Delhi V. Shri Vikram Khandelwal, Delhi

ITA 4505/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74282 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 29-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VED PRAKASH BANSAL
• Assessee Lawyers: SAMEER SHARMA

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H : NEW DELHI BEFORE SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 4505 /DEL/ 2013 (ASSESSMENT YEAR: 2010 - 11 ) DCIT CIRCLE - 28(1), NEW DELHI VS. VIKRAM KHANDELWAL, 3940, CHAWRI BAZAR, DELHI 110006 AAAPK2372B (APPELLANT) (RESPONDENT) APPELLANT BY : VED PRA K ASH BAN S AL, CA RESPONDENT BY: SAMEER SHARMA, SR. DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD CIT(A) - XXV, NEW DELHI DATED 07.05.2013 FOR THE ASSESSMENT YEAR 2010 - 11 . 2. THE GROUNDS RAISED BY THE REVENUE IS AS FOLLOWS: - 1. WHETHER THE LD CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS. 23, 81,594/ - MADE BY THE A.O. U/S 40(A)(I) OF THE IT ACT, 1961 BY ACCEPTING THE ASSESSEES CONTENTION THAT THE COMMISSION IS BEING PAID BY THE ASSESSEE TO THE OVERSEAS AGENTS (PAYEE) DO NOT ATTRACT THE PROVISIONS OF TDS U/S 40(1)(I) OF THE IT ACT1961. 2. WHET HER THE LD CIT(A) IS CORRECT IN DELETING THE ADDITION OF RS. 1,00,215/ - BY IGNORING THE FACT THAT THE RATE OF INTEREST ADOPTED BY THE A.O. @ 12% WAS COMMENSURATE WITH THE RATE OF INTEREST OF SBI. 3. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AME ND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. APROPOS DELETION OF ADDITION OF RS. 23,81,594/ - MADE U/S 40(A)(I) OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT) FOR THE COMMISSION PAID BY ASSESSEE TO OVERSEAS AGENTS. 4. BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS THE PROPRIETOR OF M/S SNEH EXPORTS. THE ASSESSEE IS CARRYING ON THE EXPORT BUSINESS OF READY MADE GARMENTS AND THE TOTAL EXPORT DURING THE YEAR WAS TO THE EXTENT OF RS. 3.89 PAGE NO. 2 ITA NO. 4505/DEL/2013 CRORES. THE ASSESSEE HAS PAID A COMMISSION OF RS. 23,81,594/ - TO NON - RESIDENT AGENTS. SINCE THE TDS WAS NOT DEDUCTED ON SUCH PAYMENT THE ASSESSING OFFICER DISALLOWED RS. 23,81,594/ - THE SAID COMMISSION PAID TO FOREIGN AGENTS U/S 40(A)(I) AND ADDED BACK THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE SAID ADDITION THE ASSESSEE PREFERRED AN APPEAL BEFORE LD CIT(A) WHO VIDE THE IMPUGNED ORDER WAS PLEASED TO DELETE THE SAME. AGGRIEVED BY THE SAID DELETION MADE BY TH E LD CIT ( A ) THE REVENUE IS BEFORE US. 6. THE LD DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND CONTENDED THAT THE LD CIT(A) ERRED IN MAKING THE DELETION OF THE ADDITION MADE LAWFULLY BY THE ASSESSING OFFICER ; THEREFORE HE PLEA DED THAT THE SAID IMPUGNED ORDER OF THE LD CIT(A) MAY BE SET ASIDE AND THE ASSESSING OFFICERS ORDER MAY BE RESTORED. ON THE OTHER HAND THE LD AR SUBMITTED THAT THE ISSUE REGARDING DEDUCTION OF TDS ON THE COMMISSION PAID TO THE NON - RESIDENT FOR THE SERVICES R ENDERED OUTSIDE THE COUNTY IS NO LONGER RES - INTEGRA AND THE HONBLE SUPREME COURT IN GE INDIA TECHNOLOGY CENTER VS. CIT, 327 ITR 456 (2010) HAS HELD THAT COMMISSION PAID TO OVERSEAS AGENTS/ NON RESIDENT DO NOT ATTRACT THE PROVISIONS OF TDS U/S 194H AND ALS O THE PROVISIONS OF DISALLOWANCE U/S 40(A)(IA) FOR THE SERVICES RENDERED OUTSIDE THE COUNTRY. THEREFORE HE STATES THAT THE IMPUGNED ORDER MAY NOT BE INTERFERED WITH. 7. WE HAVE H E A R D THE RIVAL SUBMISSIONS AND PERUSED THE RECORDS, AND THE CASE LAWS CITED B Y BOTH THE PARTIES. THERE IS NO DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE IS AN EXPORTER AND IS DOING EXPORT OF READY MADE GARMENTS. THERE IS NO DISPUTE TO THE FACT THAT THE COMMISSION HAS BEEN PAID TO NON - RESIDENT AGENTS FOR THE SERVICES REN DERED OUTSIDE INDIA. THE LD CIT(A) HAS RIGHTLY HELD THAT THE PAYMENT /COMMISSION HAS BEEN MADE TO NON - RESIDENT FOREIGN PARTIES WHO HAS NO PE IN INDIA AND WHOSE INCOME IS ALSO NOT TAXABLE IN INDIA AND THEREFORE RIGHTLY DELETED THE SAID ADDITION . THE ISSUE IN HAND IS NO LONGER RES - INTEGRA AND FOLLOWING THE APEX COURT ORDER IN GE INDIA TECHNOLOGY (SUPRA) WE CONFIRM THE ORDER OF THE LD CIT(A) . THIS GROUND OF THE APPEAL OF THE REVENUE IS DISMISSED. 8. APROPOS DELETION OF ADDITION OF RS. 1,00,215/ - . PAGE NO. 3 ITA NO. 4505/DEL/2013 9. BRIEF FACTS O F THE CASE IS THAT THE ASSESSEE IS A PROPRIETOR OF M/S SNEH EXPORTS. THE ASSESSEE IS CARRYING ON THE EXPORT BUSINESS OF READY MADE GARMENTS AND THE TOTAL EXPORTS DURING THE YEAR WAS TO THE EXTENT OF RS. 3.89 CRORES. THE ASSESSEE HAS DEBITED A SUM OF RS. 3, 00,645/ - AS INTEREST ON UNSECURED LOAN @ 18% TAKEN FROM RELATED PARTIES. THE ASSESSING OFFICER RESTRICTED THE INTEREST PAYMENT AT SBI RATE OF 12% AND THE DIFFERENCE OF RS. 1,00,215/ - WAS ADDED BACK TO HIS TOTAL INCOME. 10. AGGRIEVED BY THE SAID ORDER OF T HE ASSESSING OFFICER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD CIT(A) WHO WAS PLEASED TO DELETE THE SAME. AGGRIEVED BY THE SAID ORDER OF THE LD CIT(A) THE REVENUE IS BEFORE US. 11. THE LD DR CONTENDED THAT THE ASSESSEE HAD DEBITED A SUM OF RS. 3,00,6 45/ - AS INTEREST ON UNSECURED LOAN @ 18% TAKEN FROM RELATED PARTIES AND ASSESSEE COULD NOT JUSTIF Y THE HIGH INTEREST RATE WHICH HE WAS PAYING TO THE RELATED PARTIES. THEREFORE THE ASSESSING OFFICER WAS RIGHT IN INVOKING SECTION 40A(2)(B) OF THE ACT AND RIGHTLY RESTRICTED THE PERCENTAGE OF INTEREST TO SBI RATE AT 12%. THEREFORE ACCORDING TO THE DR , THE ORDER OF THE ASSESSING OFFICER SUFFERS FROM NO INFIRMITY AND THE LD CIT(A) ERRED IN DELETING THE SAID ADDITION. ON THE OTHER HAND THE LD AR CONTENDED T HAT THE LOANS WERE TAKEN FOR THE PURPOSE OF BUSINESS AND THE INTEREST WAS ALSO PAID IN ACCORDANCE TO THE BUSINESS EXIGENCIES. IT WAS ALSO SUBMITTED BY THE AR THAT THE INTEREST PAYMENT MADE @ 18% CANNOT BE SAID TO BE EXCESSIVE WHICH WAS AS PER THE PREVAILIN G MARKET RATE. THE LD AR ALSO CONTENDED THE INTEREST PAID BY THE ASSESSEE HAS BEEN OFFERED FOR TAXATION BY THE RECIPIENTS AND ACCORDINGLY , THE ADDITION SHOULD BE DELETED. 12. WE HAVE HEARD THE RIVAL SUBMISSION S AND PERUSED THE RECORDS, WE FIND THAT THE AS SESSEE HAS CLAIMED TO HAVE PAID 18% INTEREST TO THE RELATED PARTIES ON LOAN SECURED FROM THEM AND DEBITED IT AS EXPENDITURE . ACCORDING TO THE ASSESSING OFFICER 18% OF INTEREST ON LOAN FROM RELATED PARTIES WAS FOUND TO BE AN EXCESSIVE EXPENDITURE AND SO HE RESTRICTED IT BY @12% AND DISALLOWED THE 6% INTEREST WHICH AMOUNTS TO RS. 1,00,215/ - . THE LD CIT(A) ORDERED DELETION OF IT HOLDING THAT SECTION 40A(2)(A) AND 40A(2)(B) APPLIE S ONLY WHEN THE PAYMENTS ARE MADE WHICH ARE EXCESSIVE AND UNREASONABLE AND WITHOUT LEGITIMATE BUSINESS NEEDS AND ACCORDING TO HIM IN THIS CASE DISALLOWANCE U/S PAGE NO. 4 ITA NO. 4505/DEL/2013 40A(2)(B) IS NOT ATTRACTED . PER - SE , WE FIND THAT THIS REASONING ARE BASED ON THE SUBMISSION S MADE BY THE AR, BEFORE THE LD CIT(A) AND NOT BORNE OUT OF ANY EVIDENCE ON THE RECORD. WE FIND FORCE IN THE LD DRS CONTENTION THAT THE ISSUE REGARDING HIGH INTEREST PAID TO THE RELATED PARTIES HAVE NOT BEEN PROPERLY LOOKED INTO AND ADJUDICATED BY THE LD CIT(A) . THEREFORE, WE SET ASIDE THE ORDER OF THE LD CIT(A) ON THIS ISSUE AND REMAND BACK THE CASE TO THE FILE OF CIT(A) AND DIRECT HIM TO GIVE ADEQUATE OPPORTUNITY TO THE ASSESSEE AND IF IT IS FOUND NECESSARY A REMAND REPORT MAY BE CALLED FOR FROM THE ASSESSING OFFICER BEFORE ADJUDICATING THIS ISSUE. 13 . IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 14 . IN THE RESULT THE REVENUES APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 0 7 . 0 3 . 2014 . - S D / - - S D / - ( SHAMIM YAHYA) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 0 7 / 0 3 / 2014 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI