D.C.I.T Cir - 1,kolkata., Kolkata V. M/s T I L Limited., Kolkata

ITA 477/KOL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3249 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 08-03-2013
• Court: TRIBUNAL
• Department Lawyers: R P NAG JCITLD
• Assessee Lawyers: SAURABH KEDIA LD
• Keywords: Transfer pricing; Business expenditure; International transaction; Services rendered outside India; Permanent establishment
• Section: 143(3); 5(2)

Judgement Text

ITA NO. 477/KOL/2013-B-AM M/S. T I L LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, K OLKATA BEFORE : SHRI N.V. VASUDEVAN, JUDICIAL MEMBER, AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER I.T.A NO. 477/KOL/2013 A.Y : 2005-06 DCIT, CIRCLE-1, KOLKATA VS. M/S. T I L L IMITED PAN: AABCT 0704G (APPELLANT) (RE SPONDENT) FOR THE APPELLANT: SHRI R.P NAG, JCIT, LD. SR.DR FOR THE RESPONDENT: SHRI SAUR ABH KEDIA, LD.AR DATE OF HEARING: 27-01-2016 DATE OF PRONOUNCEMENT: 29 -01-20 16 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE REVENUE ARISES OUT OF THE OR DER OF THE LEARNED CIT(A), I, KOLKATA IN APPEAL NO. 646/CIT(A)-I/C-1/07-08 DATED 18/12/2012 FOR THE ASSESSMENT YEAR 2005-06 AGAINST THE ORDER OF ASSESSMENT FRAME D BY THE LEARNED AO U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT). 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE ADDITION OF RS. 34,99,272/- COULD BE MADE TOWARDS AGENCY DEALERSHI P COMMISSION IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASS ESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF MOBILE CRANES , FORK LIFT TRUCKS AND GENERATORS. IN THE ASSESSMENT PROCEEDINGS, THE LD. AO DISALLOWED A GENCY DEALERSHIP COMMISSION OF RS. 34,99,272/- PAID TO M/S MD.AL SAMARAIE OF ISAM BURE AU GROUP, BAGHDAD, IRAQ DURING THE FINANCIAL YEAR 2004-05 RELEVANT TO ASST YEAR UNDER APPEAL. ON FIRST APPEAL, THE LD. CITA DELETED THE ADDITION BY PLACING RELIANCE ON THE DEC ISION OF THIS TRIBUNAL IN ASSESSEES OWN ITA NO. 477/KOL/2013-B-AM M/S. T I L LIMITED 2 CASE FOR THE EARLIER YEAR. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 1. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDIT ION OF RS.34,99,272/- ON ACCOUNT OF AGENCY DEALERSHIP COMM ISSION. 4. THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE LD. AO. IN RESPONSE TO THIS, THE LD. AR VEHEMENTLY RELIED ON THE ORDER OF THE LD. CITA . 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LD.AO HAD RECORDED THAT THE PAYMEN T WAS NOT APPROVED BY THE UNITED NATIONS SECURITY COUNCIL BUT HAD NOT DISCLOSED UND ER WHICH PROVISION OF LAW AND TRANSACTION BETWEEN TWO INDEPENDENT PARTIES IS REQU IRED TO BE APPROVED BY THE UNITED NATIONS SECURITY COUNCIL. THE ASSESSEE HAD REMITTED THE DEALERSHIP/AGENCY COMMISSION AS PER AGREEMENT THROUGH NATIONALIZED BANKS AFTER COMP LYING WITH ALL THE REQUISITE FORMALITIES FOR SENDING REMITTANCE THROUGH NATIONAL IZED BANKS. THE QUESTION OF APPROVAL BY THE UNITED NATIONS SECURITY COUNCIL THEREFORE DOES NOT AND CANNOT ARISE AT ALL. WE ALSO FIND THAT THE ISSUE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE ORDER OF CO- ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN C ASE FOR ASST YEAR 2004-05 IN ITA NO. 338/KOL/2013 DATED 10.12.2015, WHEREIN IT WAS HELD THAT :- 7. .. IN THE PRESENT CASE, THE ASSESSEE PRODUCED ALL THE EVIDENCES RELATING TO THE TRANSACTIONS IT HAD WITH THE PARTY WHO PROCURED THE ABOVE SAID GOODS FOR FOOD FOR OIL PROGRAMME AND ALL THE PAYMENTS WERE ROUTED THOUGH VALID CHANNELS BY WAY OF BANKS WHERE IT IS SHOWN THAT THE EXPENDITURE BY WAY OF COMMISSION INCURRED IN RELATI ON TO BUSINESS, HAVING RELEVANT MATERIAL ON RECORD AND ACCEPTING THE SAME AS GENUINE TRANSACTIONS, BUT, HOWEVER, BASING ON A REPORT WHICH IS NOT PART OF THE ASSESSMENT, DISALLOWING THE CLAIM IS UNJUSTIFIED. WITH REFERENC E TO THE CIRCULAR NO:786 DT07-02-2000 ISSUED BY THE CBDT IT IS VERY CLEAR TH AT NO TAX IS DEDUCTIBLE U/S 195 OF ACT ON EXPORT COMMISSION AND RELATED CHARGES PAYABLE TO A NON- RESIDENT FOR SERVICES RENDERED OUTSIDE INDIA IS AN ALLOWABLE EXPENDITURE. A COORDINATE BENCH OF ITAT AT KOLKATA 'B' BENCH, KOLK ATA IN THE ASSESSEE'S OWN CASE FOR A.Y 2003-04 BY AN ORDER DT30-03-2007 I N ITA 2811KO1L2007 DECIDED THE SAME IDENTICAL ISSUE IN FAVOUR OF THE A SSESSEE. THE RELEVANT PORTION OF SUCH ORDER IS AT PARA 6.21 IS REPRODUCED AS UNDER: ITA NO. 477/KOL/2013-B-AM M/S. T I L LIMITED 3 'AS DISCUSSED EARLIER THE STAND TAKEN BY THE LEARNE D CIT(A) THAT IN THE ABSENCE OF DEDUCTION OF TAX AT SOURCE FROM T HE PAYMENT IT IS HIT BY THE PROVISIONS OF SECTION 40(A)(IA) OF THE A CT, ALSO IS NOT TENABLE. THERE IS NOTHING ON RECORD TO SHOW THAT AN Y PART OF THE ACTIVITIES OF THE IRAQI AGENT HAS PERFORMED IN INDI A. THE PAYMENT WAS ALSO RECEIVED BY THEM IN JORDAN. ABSENCE OF ANY PERMANENT ESTABLISHMENT OR BUSINESS CONNECTION OF AGENT IN IN DIA, ALSO TAKES THE CASE OUT OF THE PURVIEW OF THE DEEMING PROVISIO NS REGARDING ACCRUAL OF INCOME IN INDIA AS ENVISAGED IN SECTION 5(2) OF THE ACT. HENCE, BY TAKING INTO CONSIDERATION ALL THE AS PECTS OF THE CASE, IT IS FOUND THAT IN THIS CASE, NEITHER WAS TH E COMMISSION PAYMENT RECEIVED BY THE NON-RESIDENT AGENT IN INDIA NOR ANY INCOME ACCRUE OR ARISE NOR DEEMED TO ACCRUE OR ARIS E TO IT IN INDIA. HENCE, THERE WAS NO LIABILITY ON THE PART OF THE APPELLANT COMPANY TO DEDUCT TAX ANY TAX FROM THE AMOUNT OF CO MMISSION PAYMENT MADE BY IT TO THE IRAQI AGENT IN TERMS OF P ROVISIONS OF SECTION 195 OF THE ACT. IT HAS ALSO GOT TO BE HELD THAT LOOKING TO THE COMPLEXITIES OF INTERNATIONAL TRANSACTIONS, THE RATE OF COMMISSION PAYMENT IN THIS CASE CAN NOT BE CONSIDER ED TO BE TOO HIGH, EXCESSIVE OR UNREASONABLE. IN ANY CASE, THERE IS NOTHING ON RECORD TO SHOW THAT THE FULL AMOUNT AS CLAIMED BY T HE APPELLANT COMPANY WAS NOT ACTUALLY PAID OR THAT SOME PART OF IT WAS ROUTED BACK TO THE APPELLANT COMPANY OR ITS DIRECTORS IN A N INDIRECT OR UNDERHAND WAY. THEREFORE THERE IS NO CASE FOR DISAL LOWING THE COMMISSION PAYMENT IN THIS CASE FROM ANY ANGLE WHAT SOEVER. TAKING INTO CONSIDERATION ALL THESE ASPECTS, WE HOL D THE COMMISSION PAYMENT UNDER CONSIDERATION IS FULLY ALL OWABLE. WE, THEREFORE, REVERSE THE ORDERS OF THE LOWER AUTHORIT IES AND DELETE THE ENTIRE DISALLOWANCE IN THIS REGARD. 7.1 THEREFORE, IN THE LIGHT OF OBSERVATIONS OF ABOV E, WE DEEM IT PROPER TO HOLD THAT THE PAYMENT OF COMMISSION TO A AGENT OUTS IDE INDIA IS A BUSINESS EXPENDITURE IS ALLOWABLE AND WE CONFIRM THE ORDER P ASSED BY THE LD. CIT(A). RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CITA. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. ITA NO. 477/KOL/2013-B-AM M/S. T I L LIMITED 4 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DI SMISSED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 29 -0 1-2016 1.. THE APPELLANT: THE DCIT, CIRCLE-1, KOLKATA, AA YKAR BHAVAN, 7 TH FL., P-7 CHOWRINGHEE SQ., KOL-69. 2 THE RESPONDENT-M/S. T I L LIMITED 1 TARATALA ROA D, KOL-700024. 3 /THE CIT, 4.THE CIT(A ) 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS SD/- ( N.V. VASUDEVAN, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE: DATE 29 -01-2016 COPY OF THE ORDER FORWARDED TO:-