Sudha Devi Saraf, Purulia V. ACIT, Circle 3, Asansol

ITA 75/KOL/2009

• Counselvise Citation: 7523514 RSA 2009
• Duration Of Justice: 5 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 01-08-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 19-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KALYAN NATH
• Assessee Lawyers: ARVIND AGARWAL
• Keywords: Services rendered outside India; Question of law
• Section: 194C

Judgement Text

I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) I.T.A. NO.: 75/KOL./ 2009 ASSESSMENT YEAR : 2005-2006 SUDHA DEVI SARAF,................................. .........APPELLANT BALARAMPUR, RANGADIH, DISTRICT PURILIA [PAN :AIXPS 9773 P] -VS.- ASSISTANT COMMISSIONER OF INCOME TAX,.............. ...RESPONDENT CIRCLE-3, ASANSOL SAHANA APARTMENT, LOWER CHELLIDANGA, ASANSOL-713 304 APPEARANCES BY: SHRI ARVIND AGARWAL, ADVOCATE, FOR THE ASSESSEE SHRI KALYAN NATH, JCIT, SR. D.R., FOR THE DEPARTMEN T DATE OF CONCLUDING THE HEARING : JANUARY 29, 2014 DATE OF PRONOUNCING THE ORDER : FEBRUARY 6 TH , 2014 O R D E R PER ABRAHAM P. GEROGE: 1. IN THIS APPEAL FILED BY THE ASSESSEE, DIRECTED A GAINST AN ORDER DATED 31.12.2008 OF COMMISSIONER OF INCOME TAX (APPEALS), ASANSOL, IT HAS RAISED SEVEN GRIEVANCES IN TOTAL OF WHICH GROUND NO S. 6 & 7 ARE GENERAL, NEEDING NO ADJUDICATION. 2. WHEN THE CASE WAS CALLED UP, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AN ADDITIONAL GROUND WAS ALSO BEING RAISED. SU CH ADDITIONAL GROUND, AS PER THE LD. A.R. WAS PURELY LEGAL IN NATURE AND BORNE OUT OF FACTS ON RECORD. FURTHER ACCORDING TO HIM, IF THE ADDITIONAL GROUND WAS ADMITTED AND ALLOWED IN FAVOUR OF THE ASSESSEE, GROUND NO. 3 OF THE ORIGINAL GROUNDS WOULD BECOME REDUNDANT. I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 2 3. ADDITIONAL GROUND RAISED BY THE ASSESSEE IS THAT SECTION 194C DID NOT APPLY SINCE SHE WAS AN INDIVIDUAL AND, THEREFOR E, SHE WAS NOT BOUND TO DEDUCT TAX AT SOURCE UNDER SECTION 194C OF THE A CT. THUS AS PER THE ASSESSEE, SECTION 40(A)(IA) OF THE ACT COULD NOT BE APPLIED ON HER. 4. LD. D.R. DID NOT RAISE ANY SERIOUS OBJECTION AGA INST THE ADDITIONAL GROUND BEING RAISED. 5. WE ARE SATISFIED THAT THE ADDITIONAL GROUND IS O N A QUESTION OF LAW AND A DECISION THEREON CAN BE TAKEN ON THE BASIS ON FACTS ON RECORD. HENCE, ADDITIONAL GROUND IS ADMITTED. 6. ASSESSEE, AN EXPORTER, HAD FILED HER RETURN FOR THE IMPUGNED ASSESSMENT YEAR DECLARING INCOME OF RS.11,19,150/-. IT HAD INCURRED CLEARING & FORWARDING EXPENDITURE OF RS.16,76,430/- . ASSESSING OFFICER RELYING ON CBDT CIRCULAR NO. 715 DATED 08.08.1995 H ELD THAT PAYMENTS TO CLEARING & FORWARDING AGENTS FOR CARRIAGE OF GOODS WERE TO BE SUBJECTED TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 194C OF THE ACT. SINCE ASSESSEE HAD NOT DEDUCTED SUCH TAX AT SOURCE, ASSES SING OFFICER APPLIED SECTION 40(A)(IA) OF THE ACT AND MADE A DISALLOWANC E OF RS.16,76,430/-. ASSESSING OFFICER ALSO HELD THAT IF SECTION 194C WA S NOT APPLICABLE, SECTION 195 HAD TO BE APPLIED SINCE PART OF THE PAY MENTS EFFECTED WERE TO FOREIGN AGENTS. 7. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT RS.8,78,008.19 WAS PAID TO FOREIGN SHIPPING CO MPANIES AND AGENTS OUT OF THE TOTAL SUM OF RS.16,76,430/-. ACCORDING T O ASSESSEE, SECTION 194C WAS NOT APPLICABLE. LD. CIT(APPEALS), HOWEVER, WAS NOT IMPRESSED. ACCORDING TO HIM, TDS PROVISION UNDER SECTION 194C WAS VERY MUCH APPLICABLE TO PAYMENTS FOR CLEARING AND FORWARDING. IN ANY CASE, ACCORDING TO HIM, THE VIEW TAKEN BY ASSESSING OFFIC ER THAT SECTION 195 I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 3 ALSO STOOD ATTRACTED WAS JUSTIFIED. LD. CIT(APPEALS ), THEREFORE, CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 8. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE ORD ER OF LOWER AUTHORITIES SUBMITTED THAT THE PAYMENTS AFFECTED IN INDIA BY ASSESSEE, THOUGH IT WOULD BE COVERED UNDER SECTION 194C OF TH E ACT, ASSESSEE BEING AN INDIVIDUAL, SHE WAS NOT REQUIRED TO DEDUCT TAX A T SOURCE UNDER THE SAID SECTION. ACCORDING TO HIM, SECTION 194C AS IT STOOD PRIOR TO AMENDMENT BY THE FINANCE ACT, 2007 DID NOT FASTEN A LIABILITY ON AN INDIVIDUAL ASSESSEE TO DEDUCT TAX AT SOURCE. IN SO FAR AS APPLICABILITY OF SECTION 195 WAS CONCERNED, LD. AR SUBMITTED THAT THE PAYMENTS EFFEC TED TO FOREIGN AGENTS WERE OUTSIDE INDIA, FOR SERVICES RENDERED OUTSIDE I NDIA AND HENCE, COULD NOT BE SUBJECT TO TAX IN INDIA. THEREFORE, ACCORDIN G TO HIM, SECTION 195 ALSO COULD NOT BE APPLIED ON ASSESSEE AND ASSESSEE COULD NOT BE HELD IN DEFAULT OF DEDUCTING TAX AT SOURCE. 9. PER CONTRA, LD. DR STRONGLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. HE SPECIFICALLY MENTIONED THAT ASSESSING OFF ICER HAD APPLIED SECTION 195 ALSO, SINCE SOME OF THE PAYMENTS WERE E FFECTED TO FOREIGN AGENTS. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. BREAK-UP OF THE AMOUNT OF THE CLEARING AND FORWARDING EXPENDITURE OF RS.16,76,430/- CLAIMED BY THE ASSESSEE IS AS UNDER :- FOR IMPORT.........RS. 2,14,302/- FOR EXPORT.........RS.14,62,128/- ________________________ TOTAL : RS.16,76,430/- __________________________ ASSESSING OFFICER HAS CLEARLY MENTIONED THAT NO BRE AK-UP WAS GIVEN BY THE ASSESSEE FOR THE ABOVE, EXCEPT FOR RS.5,84,120/ - CREDITED TO M/S. J.L. I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 4 GOWARD & CO. IN SO FAR AS CLAIM OF ASSESSEE THAT SE CTION 194C WAS NOT APPLICABLE TO HER, SHE BEING AN INDIVIDUAL, WE ARE IN FULL AGREEMENT, SINCE PRIOR TO 1 ST JUNE, 2007, INDIVIDUALS DID NOT FALL WITHIN THE PU RVIEW OF SECTION 194C OF THE ACT. NEVERTHELESS A LOOK AT SEC TION 195 OF THE ACT CLEARLY SHOW THAT NO SUCH DIFFERENTIATION BETWEEN A N INDIVIDUAL OR ANY OTHER PERSON IS MADE. SECTION 195 REQUIRES ANY PERS ON RESPONSIBLE FOR EFFECTING PAYMENT TO A NON-RESIDENT, ANY SUM WAS CH ARGEABLE UNDER THE ACT, TO DEDUCT TAX AT SOURCE. CLAIM OF THE ASSESSEE IS THAT PART OF THE CLEARING AND FORWARDING EXPENDITURE, THOUGH PAID TO FOREIGN AGENTS, INCOME OF SUCH FOREIGN AGENTS WERE NOT CHARGEABLE U NDER THE PROVISIONS OF THE ACT. NONE OF THE AUTHORITIES HAVE VERIFIED T HIS ASPECT. ASSESSEE DID NOT FURNISH BEFORE THE ASSESSING OFFICER BREAK-UP O F THE PAYMENTS EFFECTED TO CLEARING AND FORWARDING AGENTS RESIDENT ABROAD AND ASSESSING OFFICER ALSO DID NOT MAKE ANY VERIFICATION AS TO TH E PLACE WHERE SERVICES WERE RENDERED BY SUCH NON-RESIDENT AGENTS TO THE AS SESSEE. IN THE FITNESS OF THINGS, WE ARE OF THE OPINION THAT MATTER REQUIR ES A FRESH LOOK BY THE ASSESSING OFFICER. WE SET ASIDE THE ORDERS OF AUTHO RITIES BELOW IN SO FAR AS IT RELATES TO THE DISALLOWANCE OF EXPENDITURE OF RS .16,76,430/- FOR CLEARING AND FORWARDING CHARGES IS CONCERNED AND RE MIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR CONSIDERATION AFR ESH IN ACCORDANCE WITH LAW. ADDITIONAL GROUND RAISED BY ASSESSEE AS WELL A S GROUND NO. 3 OF THE ORIGINAL GROUNDS IS ALLOWED FOR STATISTICAL PURPOSE S. 11. VIDE ITS GROUND NO. 1, GRIEVANCE RAISED BY ASSE SESE IS THAT A SUM OF RS.2,85,127/- OUT OF TOTAL PURCHASES WAS DISALLOWED WITHOUT ANY REASON. 12. FACTS APROPOS ARE THAT ASSESSEE HAD LOCAL PURCH ASES OF RS.2,85,12,750/-. AS PER ASSESSING OFFICER, ONLY SE LF-MADE BILLS AND VOUCHERS WERE PRODUCED. PAYMENTS FOR SUCH PURCHASES WERE AFFECTED AFTER FEW DAYS FROM THE DATE OF PURCHASES. ASSESSIN G OFFICER NOTED THAT EVEN ORIGINAL SELF-MADE VOUCHERS WERE NOT PRODUCED FOR VERIFICATION. HE, THEREFORE, MADE DISALLOWANCE OF 1% OF TOTAL PURCHAS E VALUE OF I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 5 RS.2,85,12,750/- AND MADE AN ADDITION OF RS.2,85,12 7/-. ASSESSEES APPEAL BEFORE LD. CIT(APPEALS) IN THIS REGARD WAS N OT SUCCESSFUL. ACCORDING TO HIM, ASSESSEE COULD NOT SUBSTANTIATE T HE LOCAL PURCHASES OF GOODS WITH A SUFFICIENT SUPPORTING MATERIAL. 13. NOW BEFORE US, LD. AR SUBMITTED THAT SIMILAR IS SUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES APPEAL FOR ASSES SMENT YEAR 2008-09 IN ITA NO. 686/KOL/2011. AS PER LD. A.R., SIMILAR DISA LLOWANCES WERE MADE FOR THAT YEAR AND SUCH DISALLOWANCES WERE DELETED B Y THE LD. CIT(APPEALS) ON ASSESSEES APPEAL. AS PER THE LD. A.R. ORDER OF LD. CIT(APPEALS) WAS CONFIRMED BY THE TRIBUNAL ON REVENUES APPEAL. PER CONTRA, LD. D.R. SUBMITTED THAT EVERY YEAR SHOULD BE CONSIDERED SEPA RATELY AND EVERY APPEAL HAD TO BE ADJUDICATED BASED ON THE FACTS AVA ILABLE FOR THAT YEAR. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT FOR ASSESSMENT YE AR 2008-09 ALSO A DISALLOWANCE OF RS.1,31,375/- FOR LOCAL PURCHASE WA S MADE. SUCH A DISALLOWANCE WAS MADE BY TAKING 1% OF THE TOTAL LOC AL PURCHASES. IN ASSESSEES APPEAL FOR THE SAID YEAR, SUCH DISALLOWA NCE WAS DELETED BY LD. CIT(APPEALS). 15. ON REVENUES APPEAL, THIS TRIBUNAL VIDE ITS ORD ER DATED 14.02.2013 IN ITA NO. 686/KOL/2011 HELD AS UNDER:- 8. IN REGARD TO GROUND NO. 2, WHICH WAS AGAINST T HE ACTION OF THE LEARNED CIT(A) IN ALLOWING THERELIEF OF DISALLOWANCE OF RS.1,31,375/- MADE BY THE AO UNDER THE HEAD PURCHASE OF LAC AND SHELLAC, IT WAS SUBMITTED BY T HE LEARNED SR.DR THAT THESE WERE LOCAL PURCHASES AND THE AO HAS DISALLOWED 1% OF THE PURCHASES BY HOLDING THAT INFLATION OF THE LOCAL PURCHASES COULD NOT BE RULED OUT. IT W AS THE FURTHER SUBMISSION THAT THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE BY HOLD ING THAT THE AO HAS NOT DONE ANY ENQUIRY ON THE SELLERS IN RESPECT OF THE ESTIMATED DISALLOWANCE. IT WAS THE SUBMISSION THAT THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 9. IN REPLY, THE LEARNED AR FOR THE ASSESSEE SUBMIT TED THAT IN THE ABSENCE OF ANY SPECIFIC DEFECTS NO ESTIMATED DISALLOWANCE WAS LIABLE TO BE MADE. HE HAS VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A) IN DELETING THE SAM E. I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 6 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ORDERS OF THE AO AND THE LEARNED CIT(A) SHOW THAT EVEN THOUGH THE DETAILS WE RE FILED BEFORE THE AO, NO DEFECTS HAVE BEEN POINTED OUT BY THE AO TO SHOW THAT THERE WAS ANY INFLATION IN THE PURCHASES. IN THE ABSENCE OF ANY SPECIFIC DEFECT OR ANY SPECIF IC INFLATION OF THE LOCAL PURCHASES POINTED OUT BY THE AO, NO ESTIMATED DISALLOWANCE CA N BE MADE. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(APPEALS) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. THE SAME IS HEREBY UPHELD. THISGROUND OF REVENUES APPEAL STANDS DISMISSED. 16. FACT FOR THIS YEAR IS NOT ANY DIFFERENT. WE ARE THEREFORE OF THE OPINION THAT THE DISALLOWANCE WAS NOT CALLED FOR, I N THE CIRCUMSTANCES OF THE CASE. SUCH DISALLOWANCE STANDS DELETED. GROUND NO. 1 OF THE ASSESSEE IS ALLOWED. 17. VIDE ITS GROUND NO. 2, GRIEVANCE RAISED BY THE ASSESSEE IS THAT DISALLOWANCE ON FOREIGN TRAVELLING EXPENDITURE OF R S.7,45,479/- WAS SUSTAINED BY THE LD. CIT(APPEALS). 18. FACTS APROPOS ARE THAT ASSESSEE HAD CLAIMED FOR EIGN TRAVELLING EXPENDITURE OF RS.11,63,557/-. OUT OF THIS, ASSESSI NG OFFICER HAD DISALLOWED A CLAIM OF RS.3,25,601/- RELATING TO ASS ESSEE AND RS.4,19,878/- RELATING TO ASSESSEES HUSBAND SHRI SUSHIL KUMAR SA RAF. ASSESSING OFFICER NOTED THAT ASSESSEE HAD GIVEN A GENERAL POWER OF AT TORNEY TO HER HUSBAND AND, THEREFORE, ACCORDING TO THE ASSESSING OFFICER, EXPENDITURE INCURRED BY HER WAS NOT FOR THE PURPOSE OF BUSINESS . FOR THE CLAIM OF SHRI SUSHIL KUMAR SARAF, ASSESSING OFFICER WAS OF THE OP INION THAT THERE COULD HAVE BEEN PERSONAL ELEMENTS THEREIN AND HENCE, HE D ISALLOWED 50% OF THE TOTAL CLAIM OF RS.8,39,756/-. TOTAL DISALLOWANCE CA ME TO RS.7,45,479/-. 19. ASSESSEES APPEAL BEFORE LD. CIT(APPEALS) DID N OT MEET WITH ANY SUCCESS. LD. CIT(APPEALS) ALSO NOTED THAT ASSESSEE S HUSBAND WAS A PARTNER OF ANOTHER FIRM M/S. SARAF INDUSTRIES AND, THEREFORE, PART OF THE EXPENDITURE INCURRED BY HIM ON FOREIGN TRAVEL COULD BE RELATED TO SUCH BUSINESS ALSO. FURTHER AS PER LD. CIT(APPEALS), ASS ESSEE COULD NOT PRODUCE ANY MATERIAL TO SHOW EXPORTS. THERE WAS NO CORRESPO NDENCE WITH ANY OF I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 7 THE PERSONS VISITED BY THEM ABROAD. HE, THEREFORE, CONFIRMED THE DISALLOWANCE. 20. LD. COUNSEL FOR THE ASSESSEE FAIRLY ADMITTED TH AT SIMILAR DISALLOWANCE MADE IN ASSESSMENT YEAR 2008-09 WAS CO NFIRMED BY LD. CIT(APPEALS) ON ASSESSEES APPEAL AND SUCH CONFIRMA TION UPHELD BY TRIBUNAL. NEVERTHELESS ACCORDING TO HIM, FOR THAT Y EAR, ASSESSEE WAS NOT ABLE TO PRODUCE BREAK-UP DETAILS WHEREAS FOR THE IM PUGNED ASSESSMENT YEAR ASSESSEE WAS ABLE TO SHOW THE BUSINESS PURPOSE . PER CONTRA, LD. DR SUPPORTED THE ORDER OF AUTHORITIES BELOW. 21. WE HAVE HEARD THE PARTIES. WE FIND THAT A SIMIL AR DISALLOWANCE FOR FOREIGN TRAVELLING EXPENDITURE RELATING TO ASSESSEE AND HER HUSBAND WAS MADE BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 20 08-09 ALSO. LD. CIT(APPEALS) HAD CONFIRMED SUCH DISALLOWANCE ON ASS ESSEES APPEAL. THE MATTER WAS BROUGHT BEFORE THIS TRIBUNAL BY ASSESSEE THROUGH A CROSS OBJECTION NO. 30/KOL/2011, WHEREIN THIS TRIBUNAL HE LD AS UNDER :- 18. IN THIS CROSS OBJECTION, THE ASSESSEE HAS RAIS ED THE FOLLOWING EFFECTIVE GROUND:- FOR THAT, IN VIEW OF FACTS AND CIRCUMSTANCES OF TH E CASE, LD. CIT(A) ERRED ON FACTS AS WELL AS IN LAW IN CONFIRMING DISALLOWANCE OF RS. 2,85,825/- MADE BY LD. AO OUT OF CLAIM EXPENDITURE UNDER THE HEAD FOREIGN TRAVELL ING. 19. IN REGARD TO THIS GROUND, WHICH WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.2,85,825/- MADE B Y THE AO OUT OF CLAIM OF EXPENDITURE UNDER THE HEAD FOREIGN TRAVELLING, IT WAS THE SUBMISSION BY THE LEARNED AR FOR THE ASSESSEE THAT THE ASSESSEES HUS BAND, SHRI SUSHIL KUMAR SARAF HAD TRAVELLED TO VARIOUS PLACES IN JAKARTA, L ONDON, HUMBARG & AMSTERDAM FOR THE BUSINESS PURPOSES OF THE ASSESSEE. IT WAS T HE SUBMISSION THAT ASSESSEES HUSBAND HOLDS GENERAL POWER OF ATTORNEY EXECUTED IN HIS FAVOUR BY THE ASSESSEE, SMT. SUDHA DEVI SARAF FOR LOOKING AFTER HER BUSINES S. IT WAS THE SUBMISSION THAT ASSESSEES BUSINESS CONSISTS SOLELY OF EXPORT. IT W AS THE SUBMISSION THAT FOREIGN TRAVEL WAS NECESSARY FOR MAINTAINING AND INCREASING OF BUSINESS. IT WAS THE SUBMISSION THAT THE AO HAS DISALLOWED 50% OF THE FO REIGN TRAVEL EXPENSES BY HOLDING THAT THE ASSESSEES HUSBAND ALSO HAD BUSINE SS IN HIS OWN INDIVIDUAL CAPACITY NAMELY M/S. SARAF INDUSTRIES AND M/S. SARA F INTERNATIONAL LTD. IT WAS THE SUBMISSION THAT THE AO HAS DISALLOWED @50% OF THE F OREIGN TRAVEL EXPENSES HOLDING THAT THE ASSESSEES HUSBAND TRAVELLED WOULD ALSO HAVING BEEN PARTLY FOR THE BENEFIT OF THE PROMOTING BUSINESS INTEREST IN W HICH HE WAS ALSO INVOLVED. THE LEARNED AR FOR THE ASSESSEE ALSO SUBMITTED THAT THE LEARNED CIT(APPEALS) HAS I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 8 NOT GRANTED ANY RELIEF TO THE ASSESSEE. IT WAS THE SUBMISSION THAT DISALLOWANCE OF 50% WAS EXCESSIVE. 20. IN REPLY, THE LEARNED SR.DR HAS VEHEMENTLY SUPP ORTED THE ORDERS OF THE AO AND THE LEARNED CIT(A). IT WAS THE SUBMISSION THAT ASSESSEES HUSBAND WAS ALSO PROMOTING HIS OWN BUSINESS AND CONSEQUENTLY, 50% DI SALLOWANCE WAS RIGHTLY MADE BY THE AO. 21. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS THE ASSESSEE HAS NOT BEEN ABLE TO PLACE ANY EVIDENCE BEFORE US TO SHOW THAT F OREIGN TRAVEL BY SHRI SUSHIL KUMAR SARAF (HUSBAND OF THE ASSESSEE) WAS EXCLUSIVE LY FOR THE BUSINESS PURPOSE OF THE ASSESSEE, WE ARE OF THE VIEW THAT THE DISALL OWANCE OF 50% AS MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(A) IS ON A RIGH T FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. THE SAME IS HEREBY UPHELD. 22. THE ABOVE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED . THOUGH LD. AR HAS ARGUED THAT FOR THE IMPUGNED ASSE SSMENT YEAR, ASSESSEE WAS ABLE TO GIVE BUSINESS PURPOSE OF THE E XPENDITURE, WE DO NOT FIND ANY SUCH BUSINESS PURPOSE TO BE SUBSTANTIATED. FACTS REMAINED THE SAME AS FOR ASSESSMENT YEAR 2008-09. IMPUGNED ASSES SMENT YEAR IS 2005- 06 AND EVEN UP TO ASSESSMENT YEAR 2008-09 ASSESSEE WAS UNABLE TO SHOW ANY EXPORTS OR COMMUNICATION WITH EXPORTERS. THIS B EING THE SITUATION, WE ARE OF THE OPINION THAT DISALLOWANCES WERE RIGHT LY MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPE ALS). GROUND NO. 2 OF THE ASSESSEE STANDS DISMISSED. 22. VIDE ITS GROUND NO. 4, GRIEVANCE RAISED BY ASSE SSEE IS THAT SALES COMMISSION OF RS.1,52,903/- PAID TO A NON-RESIDENT AGENT CALLED MD. HAROON ISLAM IN EGYPT WAS DISALLOWED FOR NON-DEDUCT ION OF TAX AT SOURCE. 23. LD. AR SUBMITTED THAT SIMILAR COMMISSION WAS PA ID IN ASSESSMENT YEAR 2008-09 ALSO, TO ONE SHRI AMAR SIBADI. LD. CIT (APPEALS) HAD DELETED SUCH DISALLOWANCE RELYING ON A CIRCULAR NO. 786 DAT ED 07.07.2000 OF CBDT. ACCORDING TO HIM, PAYMENT MADE TO MD. HAROON ISLAM IN EGYPT WAS ALSO FOR SALES AFFECTED BY HIM IN EGYPT. MD. HAROON ISLAM WAS ALSO A NON- RESIDENT OPERATING OUTSIDE INDIA. HENCE, ACCORDING TO HIM THE ISSUE STOOD I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 9 COVERED BY THE ORDER OF TRIBUNAL FOR ASSESSMENT YEA R 2008-09. PER CONTRA, LD. DR SUPPORTED THE ORDER OF AUTHORITIES B ELOW. 24. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. ASSESSING OFFICER HAD DISALLOW ED RS.1,52,903/- RELYING ON SECTION 195 OF THE ACT. ACCORDING TO HIM , PAYMENTS MADE TO FOREIGN AGENTS WERE TO BE SUBJECTED TO DEDUCTION OF TAX AT SOURCE UNDER SECTION 195 OF THE ACT. ASSESSEE HAVING FAILED TO M AKE SUCH DEDUCTION AND APPLIED SECTION 40(A)(I) AND MADE THE DISALLOWANCE. THOUGH FOR DIFFERENT PERSONS, WE FIND THAT THERE WERE SIMILAR DISALLOWAN CES MADE BY ASSESSING OFFICER IN ASSESSMENT YEAR 2008-09 ALSO. SUCH DISAL LOWANCES WERE DELETED BY LD. CIT(APPEALS) ON ASSESSEES APPEAL. THIS TRIB UNAL ON FURTHER APPEAL FILED BY THE REVENUE IN ITA NO. 686/KOL/2011 VIDE I TS ORDER DATED 14.02.2013 HELD AS UNDER :- 11. IN REGARD TO GROUND NO.3, WHICH WAS AGAINST TH E ACTION OF THE LEARNED CIT(A) IN DELETING THE DISALLOWANCE OF RS.94,776/- MADE BY TH E AO UNDER THE HEAD COMMISSION, IT WAS THE SUBMISSION BYTHE LEARNED SR. DR THAT IN THE COURSE OF ASSESSMENT, THE AO HAS DISALLOWED THE AMOUNT OF RS.94,776/- REPRESENTI NG THE COMMISSION PAYMENT TO THE NON-RESIDENT, SHRI OMAR CHIRABI., IT WAS THE SUBMIS SION THAT THE SAID NON RESIDENT, SHRI OMAR CHIRABI HAS BEEN PAID COMMISSION OF $200 PER M .TON. IT WAS FURTHER SUBMITTED BY HIM THAT SAID NON-RESIDENT HAS EARNED COMMISSION FR OM INDIA. THE INCOME OF SHRI OMAR CHIRABI ACCRUES IN INDIA. IT WAS THE SUBMISSION THA T THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE ON THE GROUND THAT THE SAID AMOUNT HAS BEEN PAID OUTSIDE INDIA FOR SERVICES RENDERED OUTSIDE INDIA. IT WAS THE SUBMISS ION THAT THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 12. IN REPLY, THE LEARNED AR FOR THE ASSESSEE HAS S UBMITTED THAT THE ISSUE WAS SQUARELY COVERED BY THE CBDT CIRCULAR NO. 786 DATED 07-07-20 00 AS ALSO CIRCULAR NO. 23 DATED 23-7- 1969, WHEREIN IT HAS BEEN CLARIFIED THAT WHER E THE NON-RESIDENT AGENT OPERATES OUTSIDE INDIA, NO PART OF HIS INCOME ARISES IN INDI A. THE PAYMENTS MADE TO SAID NON- RESIDENT, SHRI OMAR CHIRABI ARE NOT LIABLE TO BE TA X IN INDIA. HE FURTHER PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF G.E INDIA TECHNOLOGY CENTRE PVT. LTD VS. CIT REPORTED IN 234 CTR 153 (SC). HE H AS VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE AO HAS ACCEPTED THAT SHRI OM AR CHIRABI IS A NON RESIDENT, WHO HAS RENDERED HIS SERVICES OUT SIDE INDIA. A PERUSAL OF THE ORDER OF THE LEARNED CIT(A) AS ALSO THE REPLY OF THE ASSESSEE BEFORE THE AO CLEARL Y SHOW THAT THE PAYMENT TO SHRI OMAR CHIRABI HAS BEEN MADE OUTSIDE INDIA. IN THE CIRCUMS TANCES, WE ARE OF THE VIEW THAT THE INCOME OF SHRI OMAR CHIRABI IS NOT TAXABLE IN INDIA IN VIEW OF THE SAID CBDT CIRCULARS (REFER TO SUPRA) AS ALSO THE SAID DECISION OF THE H ONBLE SUPREME COURT IN THE CASE OF I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 10 G.E INDIA TECHNOLOGY CENTRE PVT. LTD (REFER TO SUPR A). IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. WE UPHOLD THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMISSED. WE ARE OF THE OPINION THAT THE CHANGE OF THE PERSON WILL NOT HAVE ANY EFFECT SINCE SERVICES RENDERED WERE STILL OUTSIDE I NDIA AND COULD NOT BE TERMED AS TECHNICAL SERVICES. HENCE, WE ARE OF THE OPINION THAT DISALLOWANCE WAS NOT CALLED FOR. SUCH DISALLOWANCE STANDS DELETED. GROUND NO. 4 OF ASSESSEE IS ALLOWED. 25. VIDE ITS GROUND NO. 5, GRIEVANCE OF THE ASSESSE E IS THAT LD. CIT(APPEALS) UPHELD THE DISALLOWANCE OF 15% ON EXPE NDITURE CLAIMED UNDER THE HEAD TELEPHONE AND MOTOR CAR. 26. FACTS APROPOS ARE THAT ASSESEE HAD CLAIMED MOTO R CAR AND TELEPHONE EXPENDITURE TOTALLING RS.5,36,050/-. ON AN APPREHEN SION, THAT A PART OF EXPENDITURE MIGHT HAVE BEEN INCURRED FOR PERSONAL P URPOSE, ONE-FOURTH OF THE AMOUNT WAS DISALLOWED. DISALLOWANCE CAME TO RS.1,34,012/-. ON ASSESSEES APPEAL LD. CIT(APPEALS) SCALED DOWN THE DISALLOWANCE TO 15% AGAINST 25% MADE BY THE ASSESSING OFFICER. 27. NOW BEFORE US, LD. AR SUBMITTED THAT DISALLOWAN CE WAS NOT BASED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. PER CONTRA , LD. DR SUPPORTED THE ORDER OF AUTHORITIES BELOW. 28. WE HAVE HEARD THE RIVAL CONTENTIONS. ASSESSING OFFICER HAD MADE DISALLOWANCE ON TOTAL CLAIM OF RS.5,36,050/- BASED ON AN APPREHENSION THAT A PART OF THE EXPENDITURE WOULD HAVE BEEN FOR PERSONAL USE. ACCORDING TO HIM, THERE WAS NO LOG BOOK MAINTAINED BY ASSESSEE, WHICH COULD HAVE HELPED BIFURCATING THE USE OF ASSETS. WE ARE OF THE OPINION THAT THE DISALLOWANCE WAS MADE PURELY ON SURMISES. THOUG H ASSESSEES TURNOVER IS NOT CLEAR FROM THE ASSESSMENT ORDER, IT S LOCAL PURCHASES ITSELF I.T.A. NO.: 75/KOL./2009 AS SESSMENT YEAR : 2005-06 PAGE 1 TO 11 11 CAME TO RS.2,85,12,750/-. IF THAT BE SO, ASSESSEE H AD SUBSTANTIAL BUSINESS TRANSACTIONS. HENCE, EXPENDITURE OF RS.5,36,050/- I NCURRED ON MOTOR CAR AND TELEPHONE CANNOT BY ANY STRETCH OF IMAGINATION BE TERMED AS EXCESSIVE. THE DISALLOWANCE WAS MERELY MADE ON SURM ISES AND ASSUMPTIONS. SUCH DISALLOWANCE STANDS DELETED. GROU ND NO. 5 OF THE ASSESSEE IS ALLOWED. 29. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 6 TH DAY OF FEBRUARY, 2014. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 6 TH DAY OF FEBRUARY, 2014 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.