Asstt. Commissioner of Income Tax-1, Kanpur V. M/s Enayat Overseas, Kanpur

ITA 759/LKW/2014

• Counselvise Citation: 75923714 RSA 2014
• Duration Of Justice: 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-08-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 30-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.759/LKW/2014 ASSESSMENT YEAR:2011-2012 ASST. COMMISSIONER OF INCOME TAX-1, KANPUR VS. M/S ENAYAT OVERSEAS, D - 374, DEFENCE COLONY, JAJMAU, KANPUR PAN AADFP 8520 H (APPELLANT) (RESPONDENT) APPELLANT BY SMT. ALKA SINGH, D.R. RESPONDENT BY SHRI RAKESH GARG , ADVOCATE DATE OF HEARING 1 1 /0 8 /201 5 DATE OF PRONOUNCEMENT 2 0 . 0 8 . 2 0 1 5 O R D E R PER SUDHANSHU SRIVASTAVA , J.M. : THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-II, KANPUR DATED 09.06.2014 FOR THE A.Y. 2011 -12. 2. THE GROUNDS RAISED BY THE DEPARTMENT ARE AS UNDER: 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEAL S)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF R S. 74,88,836/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON-DEDUCTIO N OF TDS ON PAYMENT OF COMMISSION TO FOREIGN AGENT WITHOUT APPR ECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPE ALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE F ACT THAT THE PAYMENT BY THE RESIDENT ASSESSEE IN CONNECTION WITH ITS BUS INESS IN INDIA TO A PERSON OUTSIDE COUNTRY IS NOTHING BUT A FEE WHICH H AS BEEN PAID BY THE RESIDENT ASSESSEE TO THE NON-RESIDENT FOR THE TECHN ICAL SERVICES RENDERED BY HIM. 2 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPE ALS)-II. KANPUR HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE F ACT THAT IN THE ASSESSMENT ORDER THE AO HAS POINTED OUT THAT THE SE RVICES RENDERED BY THE AGENTS ARE OF TECHNICAL NATURE IN SENSE THAT TH ESE WERE CONNECTED WITH THE USE OF EXPERTISE, SKILL AND TECHNICAL KNOW LEDGE IN RUNNING OF BUSINESS OF THE ASSESSEE WHICH FALLS UNDER THE NARR OW DEFINITION OF FEE FOR TECHNICAL SERVICES. 4. THAT THE LD. COMMISSIONER OF INCOME TAX (APPE ALS)-II KANPUR HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE F ACT THAT THE AGENTS HAVE THE SKILL AND EXPERTISE ABOUT THE LEATHER PROD UCTS AND LEATHER MARKETS, SO THESE SERVICES COME UNDER FEE FOR TECHN ICAL SERVICES U/S 9 OF THE INCOME TAX ACT. 1961 BECAUSE THESE ADVISORY SERVICES GIVEN BY THE AGENT ARE NOT ORDINARY ADVICE BUT IT IS CONSULT ANCY REGARDING PRODUCTS AND THE MARKET ON WHICH ALMOST THE ENTIRE EXPORTS OF THE ASSESSEE RELIES ATTRACTING THE PROVISION OF SECTION 9(L)(VII) OF THE INCOME TAX ACT, 1961. 5. THAT THE LD. COMMISSIONER OF INCOME TAX (APPE ALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN IGNORING THE FACT THAT THE ASSESSING OFFICER HAS BROUGHT ON RECORD THE INSTANCES WHEN THE SAID A GENTS, PROVIDING THE TECHNICAL SERVICES TO THE ASSESSEE, CAME TO IND IA FOR CONSULTATION AND DISCUSSION ABOUT THE PRODUCTS OF THE ASSESSEE. 6. THAT THE LD. COMMISSIONER OF INCOME TAX (APPE ALS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN DELETING THE ABOVE ADD ITION WITHOUT CONSIDERING THE BOARD'S CIRCULAR NO.7/2009 DATED 22 .10.2009. 7. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-II KANPUR HAS ERRED IN LAW AND ON FACTS IN IGNORING THE EXPLANATI ON INSERTED BY FINANCE ACT. 2010 RETROSPECTIVELY W.E.F. 01.06.1976 IN SUB SECTION (2) OF SECTION 9 OF INCOME TAX ACT, 1961. 8. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITI ON OF RS.23,334/-, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLO WANCE OUT OF TELEPHONE EXPENSES, TO RS.11,667/- WITHOUT APPRECIA TING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 9. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS )-LL, KANPUR HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITI ON OF RS.55,373/-, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF VEHICLE EXPENSES, TO RS.27,687/- WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 10. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-II, KANPUR HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITI ON OF RS. 1,03,106/-, MADE BY THE ASSESSING OFFICER ON ACCOUNT OF VEHICLE EXPENSES, TO 3 RS.51,553/- WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE ASSESSING OFFICER. 11. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-II. KANPUR HAS ERRED IN LAW AND ON FACTS IN ALLOWING DELETING THE ADDITION OF RS.1,80,850/- UNDER THE HEAD FOREIGN TRAVELLING EXP ENSES WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS INCURRE D THE EXPENDITURE ON PERSONAL TOUR OF HIS EMPLOYEE AND NOT FOR ANY BUSIN ESS ACTIVITY. 3. GROUND NOS. 1 TO 7 ARE IN CONNECTION WITH ONE IS SUE I.E. DELETION OF ADDITION OF RS.74,88,836/- MADE BY THE ASSESSING OF FICER ON ACCOUNT OF NON DEDUCTION OF TDS ON PAYMENT OF COMMISSION TO FOREI GN AGENT. 4. REGARDING THIS ISSUE, LD. DR OF THE REVENUE SUPP ORTED THE ASSESSMENT ORDER WHEREAS THE LD. AR OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ITAT, LUCKNOW B BENCH ORDER IN ITA NO. 662/LKW/2014 FOR THE A.Y. 2010-11 IN ASSESSEES OWN CASE. HE ALSO SUBMITTED THAT THERE ARE VARIOUS JUDGMENTS INCLUDIN G THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF DIRECTOR OF INTERNATIONAL TAXATION (INT. TAX)-II VS. PANALFA AUTOELEKTRIK LTD. IN ITA NO.292 /2014 DATED 18.09.2014. APART FROM THIS JUDGMENT OF THE HONBLE DELHI HIGH COURT, LD. AR OF THE ASSESSEE HAS ALSO RELIED UPON TWO MORE JUDGMENTS OF THE TRIBUNAL VIZ. ACIT VS. T. ABDUL WAHID & CO. [2014] 46 TAXMANN.COM 75 ( CHENNAI-TRIB.) AND DCIT VS. I.M. GEARS PVT. LTD. [2014] 49 TAXMANN.COM 175 (CHENNAI TRIB.). IN THESE CASES, THE DISPUTE WAS WHETHER AGENCY/SALE S COMMISSION PAID BY THE ASSESSEE TO NON-RESIDENT AGENTS FOR SERVICES RENDER ED BY THEM OUTSIDE INDIA IN PROCURING EXPORT ORDERS FOR THE ASSESSEE, IS CHA RGEABLE TO TAX IN INDIA OR NOT AND WHETHER AS A CONSEQUENCE, THE ASSESSEE WAS UNDER ANY OBLIGATION TO DEDUCT TDS U/S 195 OF THE ACT ON THE SAID COMMISSIO N PAYMENT. IT WAS HELD BY THE TRIBUNAL THAT SUCH COMMISSION PAYMENT WAS NO T TAXABLE IN THE HANDS OF THE PAYEE IN INDIA AND AS A CONSEQUENCE TDS WAS NOT REQUIRED TO BE DEDUCTED AND AS A FURTHER CONSEQUENCE, NO DISALLOWA NCE CAN BE MADE FROM SUCH COMMISSION PAYMENT U/S 40(A)(IA). 4 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS ISSUE IS SQU ARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT OF THE HONBLE DELHI H IGH COURT CITED BY THE LD. A.R. OF THE ASSESSEE AND ALSO BY THE ORDER OF THIS TRIBUNAL IN ITA NO. 662/LKW/2014 IN ASSESSEES OWN CASE. RESPECTFULLY F OLLOWING THESE JUDGMENTS, WE HOLD THAT NO INTERFERENCE IS CALLED F OR IN THE ORDER PASSED BY THE LD. CIT(A) ON THE ISSUE OF ADDITION OF RS. 74,8 8,836/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON-DEDUCTION OF TD S ON PAYMENT OF COMMISSION TO FOREIGN AGENT. 6. ACCORDINGLY, GROUNDS NO. 1 TO 7 ARE REJECTED. 7. GROUNDS NO. 8 TO 10 PERTAIN TO DISALLOWANCES MAD E BY THE AO ON ACCOUNT OF TELEPHONE EXPENSES, VEHICLE EXPENSES AND DEPRECIATION ON VEHICLE. 8. IT IS SEEN THAT THE AO HAD DISALLOWED A SUM OF R S.23,334/- OUT OF THE TOTAL TELEPHONE EXPENSES OF RS.1,55,562/-. THE CIT( A) HAS HOWEVER, RESTRICTED THE DISALLOWANCE TO RS.11,667/-. SIMILARLY, THE AO HAS DISALLOWED A SUM OF RS.55,373/- OUT OF TOTAL EXPENSES OF VEHICLE MAINTE NANCE AMOUNTING TO RS.3,69,151/-. THE CIT(A) HAS RESTRICTED THIS ADDIT ION TO RS.27,687/-. SIMILARLY, THE AO HAS DISALLOWED DEPRECIATION ON MO TOR CAR TO THE TUNE OF RS.1,03,106/- OUT OF TOTAL DEPRECIATION OF RS.6,87, 372/-. THE CIT(A) HAS RESTRICTED THIS ADDITION TO RS.51,553/-. IN ALL THE SE CASES, THE DISALLOWANCE HAS BEEN MADE BY THE AO ON AN AD HOC BASIS WITHOUT GIVI NG A SPECIFIC FINDING. THE LD. CIT(A) HAS GIVEN A FINDING THAT THERE ARE N O SPECIFIC INSTANCES OF NON VERIFIABILITY OF SUCH EXPENSES. CONSIDERING THE FAC TS OF THE PRESENT CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT( A). ACCORDINGLY, GROUNDS NOS. 8 TO 10 ARE REJECTED. 5 9. GROUNDS NO. 11 PERTAINS TO DISALLOWANCE OF RS.1, 80,850/- BY THE AO ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES OF ONE OF TH E EMPLOYEES OF THE FIRM SHRI MOHD. KAMRAN AFTAB ON THE BASIS THAT MR MOHD. KAMRAN AFTAB IS NOT AN EMPLOYEE OF THE FIRM AND THAT THE VISA SHOWS FOR ISSUE OF VP (SOCIAL) 30 DAYS ONLY. THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT SHRI MOHD. KAMRAN AFTAB IS AN EMPLOYEE OF THE FIRM WHO VISITED FOREIG N COUNTRIES FOR THE BUSINESS OF THE FIRM. HOWEVER, NOTHING HAS BEEN BRO UGHT ON RECORD EITHER DURING THE ASSESSMENT PROCEEDINGS, OR THE FIRST APP ELLATE PROCEEDINGS TO SUBSTANTIATE WHETHER THE FOREIGN TRAVEL EXPENSES OF THE SAID EMPLOYEE WERE IN CONNECTION WITH ANY BUSINESS OF THE FIRM. THE LD. C IT(A) HAS DELETED THE ENTIRE ADDITION WITHOUT GIVING ANY SPECIFIC FINDING OR ANY COGENT REASON IN HIS ORDER. IN THE APPEAL BEFORE US ALSO THE PURPOSE OF FOREIGN TRAVEL EXPENSES HAS NOT BEEN SUBSTANTIATED. IN THE CIRCUMSTANCES WE UPHOLD THE ADDITION OF RS. 1,80,850/- MADE BY THE AO ON THIS ISSUE. ACCORD INGLY, GROUND NO.11 IS ALLOWED. 10. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/- SD/- ( A. K. GARODIA ) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIA L MEMBER AKS DATED:20./08/2015 COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. R EGISTRAR