DCIT, CIR-8(2), KOLKATA, Kolkata V. M/s U. M Cables Ltd., Kolkata

ITA 835/KOL/2015

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 3658 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 09-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOUDHUR Y
• Assessee Lawyers: J P KHAITAN
• Keywords: Capital asset; Business income; Deemed to accrue or arise in india; Permanent establishment; Bad and doubtful debts; Revised return
• Section: 195

Judgement Text

ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI A.T. VARKEY, JUDICIAL MEMBER I.T.A. NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2010-2011 & 2011-2012 DEPUTY COMMISSIONER OF INCOME TAX,................. .....................APPELLANT CIRCLE-8(2), KOLKATA, AAYAKAR BHAWAN, 4 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. U.M. CABLES LIMITED,.......................... ..............................RESPONDENT 2A, SHAKESPEARE SARANI, KOLKATA-700 071 [PAN: AAACU5578N] APPEARANCES BY: SHRI ROBIN CHOUDHURY, ADDL. CIT(D.R) , FOR THE DEPARTMENT SHRI J.P. KHAITAN, SR. ADVOCATE, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JULY 15, 2019 DATE OF PRONOUNCING THE ORDER : AUGUST 28, 2019 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ):- THESE TWO APPEALS ARE PREFERRED BY THE REVENUE AGA INST TWO SEPARATE ORDERS PASSED BY THE LD. COMMISSIONER OF I NCOME TAX (APPEALS)- 3, KOLKATA, BOTH DATED 27.03.2015 FOR ASSESSMENT YE ARS 2010-11 AND 2011-12 AND SINCE ONE OF THE ISSUES INVOLVED THEREI N IS COMMON, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER. 2. GROUND NO. 1 RAISED BY THE REVENUE IN ITS APPEAL FOR A.Y. 2010-11 BEING ITA NO. 835/KOL/2015 RELATES TO THE DELETION BY THE LD. CIT(APPEALS) OF THE ADDITION OF RS.1,45,90,552/- MA DE BY THE ASSESSING ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 2 OFFICER ON ACCOUNT OF DISALLOWANCE OF COMMISSION PA ID BY THE ASSESSEE TO THE NON-RESIDENT AGENTS. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF TELECO MMUNICATION CABLES, OPTICAL FIBRES, ETC. THE RETURN OF INCOME FOR THE Y EAR UNDER CONSIDERATION WAS ORIGINALLY FILED BY THE ASSESSEE ON 22.09.2010 DECLARING TOTAL INCOME OF RS.8,09,08,890/-. THEREAFTER A REVISED RETURN WA S FILED BY THE ASSESSEE ON 04.01.2012 DECLARING TOTAL INCOME OF RS.7,62,72, 079/-. AS NOTICED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE COMMISSION OF RS.1,45,90,552/- WAS PAID BY THE ASSE SSEE DURING THE YEAR UNDER CONSIDERATION TO THE NON-RESIDENT AGENTS. HE ALSO NOTICED THAT NO TAX AT SOURCE WAS DEDUCTED BY THE ASSESSEE FROM THE PAYMENT OF THE SAID COMMISSION AS REQUIRED BY THE PROVISIONS OF SECTION 195 OF THE ACT. THE ASSESSING OFFICER ALSO WAS OF THE VIEW THAT THE SUB MISSION MADE BY THE ASSESSEE ON THIS ISSUE DID NOT MAKE IT VERY CLEAR A S TO WHAT SPECIFIC SERVICES WERE RENDERED BY THE COMMISSION AGENTS. AC CORDING TO HIM, THERE WAS ALSO A FAILURE ON THE PART OF THE ASSESSE E TO PROVE THAT ALL THE SERVICES WERE RENDERED BY THE COMMISSION AGENTS EXC LUSIVELY IN THE TERRITORY OUTSIDE INDIA. HE HELD THAT IF THE ASSESS EE HAD NOT AVAILED THE SERVICES OF THE SAID AGENTS, IT WOULD HAVE ENGAGED MANAGERIAL PERSONNEL TO CARRY OUT THE RELEVANT ACTIVITIES. HE HELD THAT THE SERVICES RENDERED BY THE NON-RESIDENT AGENTS THUS WERE IN THE NATURE OF MANAGERIAL SERVICES AND THE ASSEESSEE WAS REQUIRED TO DEDUCT TAX AT SOU RCE FROM THE PAYMENT MADE TO THE NON-RESIDENT COMMISSION AGENTS UNDER SE CTION 195 OF THE ACT. SINCE THERE WAS A FAILURE ON THE PART OF THE ASSESS EE TO COMPLY WITH THE SAID REQUIREMENT, THE ASSESSING OFFICER DISALLOWED THE COMMISSION PAID TO NON-RESIDENT AGENTS AMOUNTING TO RS.1,45,90,552/ - BY INVOKING THE PROVISIONS OF SECTION 40(A)(I). 4. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF COMMISSION PAID TO THE NON-RESIDENT AGENTS WAS CHAL LENGED BY THE ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 3 ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APP EALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(APPEALS) DELETED T HE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER FOR THE FOLLOWING REA SONS GIVEN IN HIS IMPUGNED ORDER:- THE APPELLANT WAS ENGAGED IN MANUFACTURE AND SALE OF CABLES. IT HAD APPOINTED A NUMBER OF AGENTS ON COMM ISSION BASIS TO RENDER SERVICES IN PROCURING ORDERS AND EF FECTING SALE OUTSIDE INDIA. SINCE THE EXPORT ORDERS WERE PR OCURED OUTSIDE INDIA, THE VERY NATURE OF THE WORK DONE BY THE EXPORT AGENT, INVOLVING MARKETING AND PROCUREMENT OF ORDER S, INDICATES THAT IT WAS CARRIED OUT OUTSIDE INDIA. IT HAS BEEN INFORMED, THAT THE DETAILS REGARDING NATURE OF SERV ICE AND THE COUNTRIES IN WHICH SUCH SERVICES WERE RENDERED HAD BEEN PLACED BEFORE THE ASSESSING OFFICER DURING THE ASSE SSMENT PROCEEDINGS. COPY OF SUBMISSION MADE BEFORE THE ASS ESSING OFFICER IN THIS REGARD WAS ALSO FURNISHED. IT WOULD NOT BE OUT OF PLACE TO MENTION HERE, THAT IN THE ASSESSMENT FO R THE IMMEDIATELY SUCCEEDING YEAR, I.E. A.Y. 2011-12 ALSO , SIMILAR DISALLOWANCE OF EXPORT COMMISSION HAS BEEN MADE BY INVOKING PROVISIONS OF SECTION 40(A)(I). HOWEVER, I N THE ASSESSMENT ORDER FOR THAT YEAR, THERE IS NO ALLEGAT ION THAT DETAILS OF SERVICES RENDERED WERE NOT PRODUCED. IT HAS BEEN SUBMITTED BY THE APPELLANT THAT THE ROLE OF AGENTS AND NATURE OF SERVICES RENDERED ETC. WERE PRACTICALLY I DENTICAL IN BOTH THE SAID YEARS. IN ORDER TO, UNDERSTAND THE NA TURE OF SERVICES RENDERED BY THE AGENTS, THE 'COMMERCIAL AG ENCY AND DISTRIBUTION AGREEMENTS' SIGNED BY THE APPELLANT WI TH THEM HAVE BEEN GONE THROUGH. IT IS SEEN, THAT THE AGENTS HAD BEEN APPOINTED FOR SPECIFIC TERRITORY OUTSIDE INDIA AND THE AGENT WAS REQUIRED TO MAKE EFFORTS TO PROMOTE, ADVERTISE, DEVELOP AND INCREASE TRADE IN THE PRODUCTS MANUFACTURED BY THE APPELLANT. BASED ON THE SALE CARRIED OUT, THE AGENT GOT COMMISSION. THUS, THERE APPEARS TO BE FORCE IN THE CONTENTION OF THE APPELLANT THAT THE SERVICES RENDE RED BY THE APPELLANT WERE WHOLLY OUTSIDE INDIA. 3.3. THE LEGAL POSITION IN THIS REGARD HAS BEEN CAR EFULLY EXAMINED. AS PER CLAUSE (I) OF SECTION 9(1), FOLLOW ING INCOME IS DEEMED TO HAVE ACCRUED OR ARISEN IN INDIA:- 'ALL INCOME ACCRUING/ARISEN WHETHER DIRECTLY OR INDIRECTLY THROUGH OR FROM ANY BUSINESS CONNECTION IN INDIA OR THROUGH OR FROM ABROAD IN INDIA OR THROUGH OR FROM ANY ASSET SOURCE OF INCOME IN INDIA OR THROUGH A TRANSFER OF CAPITAL ASSET SITUATED IN INDIA' EXPLANATION-1 TO THE SAID SECTION PROVIDES THAT:- ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 4 '(A) IN THE CASE OF A BUSINESS OF WHICH ALL THE OPERATIONS ARE NOT CARRIED OUT IN INDIA, THE INCOME OF THE BUSINESS DEEMED UNDER THIS CLAUSE ACCRUED OR ARISEN IN INDIA SHALL BE ONLY SUCH PART OF THE INCOME AS REASONABLY ATTRIBUTED TO THE OPERATIONS CARRIED OUT IN INDIA. (B) IN THE CASE OF A NON-RESIDENT, NO INCOME SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA TO HIM THROUGH OR FROM OPERATIONS WHICH ARE CONFINED TO PURCHASE OF GOODS IN INDIA FOR THE PURPOSE OF EXPORT. ' 3.4. THUS, IT FOLLOWS FROM EXPLANATION 1 TO SECTION 9(1)(I) THAT IN A BUSINESS WHERE NONE OF THE OPERATIONS IS CARRIED OUT IN INDIA, NO PART OF ITS INCOME IS DEEMED TO AC CRUE OR ARISE IN INDIA. AS PER UNDISPUTED FACTS IN THE APPE LLANT'S CASE, NO OPERATION WAS CARRIED OUT BY THE NON-RESID ENT COMMISSION AGENT IN INDIA. THEREFORE, IT WOULD BE E RRONEOUS TO HOLD THAT THEIR ENTIRE COMMISSION INCOME HAD ACC RUED OR ARISEN IN INDIA. IN THE APPELLANT'S CASE, ENTIRE RE NDERING OF SERVICES OF AGENT HAD TAKEN PLACE OUTSIDE INDIA AS SUCH CUSTOMERS WERE BASED ABROAD. THE COMMISSION WAS ALS O PAID TO THE ACCOUNT HELD ABROAD. THEREFORE, THERE IS NO OPERATION WHICH IS CARRIED OUT IN INDIA FOR WHICH ANY INCOME CAN BE REASONABLY ATTRIBUTED. THIS PRINCIPLE HAS BEEN UPHE LD BY THE APEX COURT IN THE CASES OF M/S. ISHIKAWAJMA-HARIMA HEAVY INDUSTRIES LTD VS DIT (288 ITR 408) AND CIT VS M/S. HYUNDAL HEAVY INDUSTRIES CO LTD (291 ITR 482). ON THE ISSUE OF COMMISSION TO FOREIGN BASED AGENT, SIMILAR VIEW HAS BEEN TAKEN BY THE APEX COURT IN THE CASE OF CIT VS M/S.T OSHOKU LTD (125 ITR 525) (SC). SIMILAR VIEW HAS BEEN TAKEN BY DELHI HIGH COURT IN THE CASE OF CIT VS M/S. EON TECHNOLOG Y (P) LTD (15 TAXMANN.COM 391). ANOTHER NOTABLE DECISION IN T HIS REGARD IS THAT OF HON'BLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE (P) LTD. 327 ITR 456. SO FA R AS THE COMMISSION PAYMENT UP TO 22.10.2009 ARE CONCERNED, THEY WERE ALSO COVERED BY CIRCULAR NO.786 DATED 07.02.20 00, WHICH MADE IT CLEAR THAT WHEN NO ACTIVITY IS CARRIE D OUT BY NON-RESIDENT COMMISSION AGENT IN INDIA, NO INCOME I S ARISEN IN INDIA. THOUGH THE SAID CIRCULAR WAS WITHDRAWN VI DE CIRCULAR NO. 7 DATED 22.10.2009, THE LEGAL POSITION WITH RESPECT OF TAXABILITY OF EXPORT COMMISSION REMAINED UN- CHANGED, WHICH HAS TO BE DETERMINED IN LIGHT OF THE PROVISIONS OF ACT AND THE RELEVANT JUDICIAL PRONOUN CEMENTS. HENCE, EVEN AFTER WITHDRAWL OF CIRCULAR NO.786 DATE D 07.02.2000, THE EXPORT COMMISSION ATTRIBUTABLE TO S ERVICES RENDERED OUTSIDE INDIA CANNOT BE CONSIDERED TO BE T AXABLE U/S. 9(1)(I), AS DISCUSSED EARLIER. THE APPELLANT H AS RIGHTLY PLACED RELIANCE UPON THE DECISION OF ITAT, MUMBAI I N THE CASE OF GUJARAT RECLAIM & RUBBER PRODUCTS LTD. VS. ADDL. CIT 60 SOT 22 IN THE MATTER. IT MAY ALSO BE MENTIONED T HAT ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 5 COMMISSION PAID TO AGENT DOES NOT FALL IN PURVIEW O F FEES FOR TECHNICAL SERVICES ETC. WHERE EXPLANATION TO SECTIO N 9 HAS PROVIDED THAT SUCH INCOME OF NON-RESIDENT SHALL BE DEEMED TO ACCRUE OR ARISE IN INDIA UNDER CLAUSE (V), (VI) AND (VII) OF SUB SECTION (1) WHETHER OR NOT THE NON-RESIDENT HAS RENDERED SERVICES IN INDIA. IN THIS REGARD, THE APPELLANT HA S CITED DECISION OF ITAT, JAIPUR IN THE CASE OF ACIT VS. MO DERN INSULATORS 140 TTJ 715 WHERE IT HAS BEEN HELD, THAT THE SERVICES OF SALES AGENTS DO NOT QUALIFY AS TECHNICA L SERVICES. BOMBAY HIGH COURT HAS ALSO HELD IN THE CASE OF CEAT INTERNATIONAL S.A. VS. CIT 237 ITR 859 THAT EXPORT COMMISSION ATTRIBUTABLE TO SERVICES RENDERED OUTSID E INDIA CANNOT BE TAXABLE U/S. 9(1)(VII). THE APPELLANT HAS ALSO REFERRED TO THE DECISION OF ITAT, MUMBAI IN THE CAS E OF UPS SCS (ASIA) LTD. 50 SOT 268 IN THE MATTER. THEREFORE , PAYMENT OR COMMISSION IS NOT GOVERNED BY THE EXPLANATION TO SECTION 9 AND HENCE CAN BE DEEMED TO ACCRUE OR ARISE ONLY I F CERTAIN SERVICES HAVE BEEN RENDERED IN INDIA. IN FACT, EVEN THE SAID EXPLANATION PROVIDES FOR EXCEPTION IN RESPECT OF FE E 'FOR TECHNICAL SERVICES PAID FOR THE PURPOSE OF MAKING O R EARNING ANY INCOME FROM ANY SOURCE OUTSIDE INDIA', WHICH WO ULD COVER FEE FOR EXPORT SALES. 3.5. SINCE THE SALES COMMISSION UNDER CONSIDERATION WAS NOT IN NATURE OF FEE FOR TECHNICAL SERVICES, THE PROVIS IONS OF SECTION 9(1)(VII) WHICH STATE THAT THE AMOUNT WOULD BE TAXABLE IRRESPECTIVE OF PLACE OF RENDERING SERVICES ARE NOT ATTRACTED. HENCE, THE SALES COMMISSION WOULD BE IN NATURE OF 'BUSINESS INCOME' IN THE HANDS OF THE PAYEES. IT IS UNDISPUTED, THAT THE AGENTS ARE NON-RESIDENTS, HAVE NO PERMANENT ESTABLISHMENT IN INDIA AND NO PART OF THE IR ACTIVITY WAS CARRIED OUT IN INDIA. HENCE, IN LIGHT OF THE DISCUSSION MADE EARLIER, NO BUSINESS INCOME ACCRUES OR ARISES TO THEM IN INDIA. PROVISIONS OF SECTION 195 ARE, THEREFORE, NOT APPLICABLE ON SUCH COMMISSION. AS A CONSEQUENCE, PROVISION OF SECTION 40(A)(I) WOULD AL SO NOT BE ATTRACTED. CONSIDERING THIS, THE DISALLOWANCE U/ S 40(A)(I) IS DELETED. 5. THE LD. D.R. SUBMITTED THAT THE NEW FACTS AND FI GURES WERE FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) IN SUPP ORT OF ITS CASE ON THIS ISSUE AND BY RELYING ON THE SAME, THE LD. CIT(APPEA LS) ALLOWED RELIEF TO THE ASSESSEE BY DELETING THE DISALLOWANCE MADE BY T HE ASSESSING OFFICER ON ACCOUNT OF COMMISSION PAID TO NON-RESIDENT AGENT S WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSING OFFICER TO VERIFY THE SAME. HE CONTENDED THAT THERE IS THUS A CLEAR VIOLATION OF RULE 46A OF THE INCOME TAX RULES, 1962 ON THE PART OF THE LD. CIT(APPEALS) AND URGED THAT THE MATTER SHOULD ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 6 BE SENT BACK TO THE ASSESSING OFFICER FOR GIVING HI M AN OPPORTUNITY TO VERIFY THE NEW FACTS AND FIGURES FURNISHED ON BEHAL F OF THE ASSESSEE FOR THE FIRST TIME BEFORE THE LD. CIT(APPEALS). 6. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, INVITED OUR ATTENTION TO THE COPY OF WRITTEN SUBMISSIONS FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS VIDE LETTER DATED 09.03.2013 PLACED AT PAGE NOS. 2 TO 12 OF THE PAPER BOOK TO POINT OUT THAT ALL THE RELEVANT FACTS AND FIGURES AS FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS) WERE ALSO SUBMITTED BEFORE THE ASS ESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE ALSO SUBMI TTED THAT EVEN ALL THE RELEVANT DETAILS OF THE COMMISSION PAID TO THE NON- RESIDENT AGENTS AS REQUIRED BY THE ASSESSING OFFICER WERE SUBMITTED BY THE ASSESSEE VIDE ITS LETTER DATED 15.03.2013 (COPY AT PAGE NOS. 14 TO 17 OF THE PAPER BOOK) FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. HE CONTENDED THAT THERE WAS THUS NOTHING NEW BROUGHT ON RECORD BY THE ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT( APPEALS) AND THE DECISION HAVING BEEN RENDERED BY THE LD. CIT(APPEAL S) GIVING RELIEF TO THE ASSESSEE BY RELYING ON THE SAME FACTS AND FIGURES A S WERE AVAILABLE BEFORE THE ASSESSING OFFICER, THERE WAS NO VIOLATION OF RU LE 46A OF THE INCOME TAX RULES, 1962 AS ALLEGED BY THE LD. D.R. HE ALSO CONTENDED THAT THE ENTIRE COMMISSION AMOUNT WAS PAID BY THE ASSESSEE T O THE NON-RESIDENT AGENTS FOR MARKETING AND SALES PROMOTION OUTSIDE IN DIA AND THE SERVICES RENDERED BY THEM NOT BEING IN THE NATURE OF MANAGER IAL SERVICES, THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE F ROM THE PAYMENT OF THE SAID COMMISSION AS PER THE PROVISIONS OF SECTIO N 9(1)(VII) READ WITH SECTION 195 OF THE ACT. IN SUPPORT OF THIS CONTENTI ON, HE, INTER ALIA, RELIED ON THE DECISION OF THE DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS.- EVER GREEN INTERNATIONAL LIMITED [91 TAXMANN.C OM 111], WHEREIN IT WAS HELD THAT SERVICES RENDERED BY THE NON-RESIDENT AGENTS FOR BOOKING EXPORT ORDER FROM FOREIGN BUYERS CANNOT BE TERMED A S MANAGERIAL SERVICES, WHICH COULD FALL UNDER THE TERM FEES FOR TECHNICAL SERVICES AS ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 7 DEFINED IN EXPLANATION 2 BELOW SECTION 9(1)(VII) OF THE ACT. HE ALSO RELIED ON THE DECISION OF AHMEDABAD BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS.- WELSPUN CORPORATION LIMITED [77 TAXMANN.COM 16 5], WHEREIN IT WAS HELD THAT THE CONSIDERATION PAID TO THE NON-RESIDE NT AGENTS FOR SECURING BUSINESS FROM FOREIGN BUYERS CANNOT BE TAXED IN IND IA UNDER SECTION 9(1)(VII) OF THE ACT. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISS ION PAID BY THE ASSESSEE TO THE NON-RESIDENT AGENTS FOR PROCURING O RDERS FROM THE FOREIGN BUYERS, INTER ALIA, BY INVOKING SECTION 40(A)(I) WA S DELETED BY THE LD. CIT(APPEALS) VIDE HIS IMPUGNED ORDER AND THE RELIEF ALLOWED BY THE LD. CIT(APPEALS) TO THE ASSESSEE ON THIS ISSUE IS MAINL Y CHALLENGED BY THE LD. D.R. AT THE TIME OF HEARING BEFORE THE TRIBUNAL ON THE GROUND THAT THE SAID RELIEF WAS ALLOWED BY THE LD. CIT(APPEALS) BY RELYI NG ON THE NEW FACTS AND FIGURES FURNISHED BY THE ASSESESE FOR THE FIRST TIM E BEFORE HIM WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSING OFFICER TO VERIFY THE SAME, WHICH ACCORDING TO HIM, IS IN VIOLATION OF THE PROVISION OF RULE 46A OF THE INCOME TAX RULES, 1962. IN THIS REGARD, THE LD. CO UNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE COPY OF LETTER DAT ED 09.03.2013 SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PRO CEEDINGS (COPY AT PAGE NOS. 2 TO 12 OF THE PAPER BOOK), WHICH CLEARLY SHOWS THAT A DETAILED SUBMISSION WAS MADE ON BEHALF OF THE ASSESSEE BEFOR E THE ASSESSING OFFICER EXPLAINING THE NATURE OF SERVICES RENDERED BY THE NON-RESIDENT AGENTS AND HOW THE COMMISSION PAID FOR THE SAID SER VICES WAS NOT CHARGEABLE TO TAX IN THE HANDS OF THE SAID NON-RESI DENT AGENTS. THE SAID SUBMISSION WAS MADE BY THE ASSESSEE IN THE LIGHT OF THE RELEVANT PROVISIONS OF THE INCOME TAX ACT, 1961 AS WELL AS T HE RELEVANT CASE LAWS RELATING TO THE ISSUE. RELIANCE WAS ALSO PLACED BY THE ASSESSEE ON THE CBDT CIRCULAR NO. 23 DATED 23.07.1969 AND A CASE WA S ALSO MADE OUT TO SHOW THAT THE PROVISIONS OF SECTION 9(1)(VII) WERE NOT ATTRACTED IN ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 8 RESPECT OF COMMISSION PAID TO THE NON-RESIDENT AGEN TS. ON THE BASIS OF THIS SUBMISSION, IT WAS CONTENDED ON BEHALF OF THE ASSESSEE-COMPANY THAT IT WAS NOT UNDER ANY OBLIGATION TO DEDUCT TAX AT SO URCE UNDER SECTION 195 FROM THE COMMISSION PAID TO THE NON-RESIDENT AGENTS AND THERE WAS NO QUESTION OF MAKING ANY DISALLOWANCE UNDER SECTION 4 0(A)(I). THEREAFTER A LETTER DATED 15.03.2013 (COPY AT PAGE NOS. 14 TO 17 OF THE PAPER BOOK) WAS ALSO FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER GIVING ALL THE RELEVANT DETAILS OF THE EXPORT COMMISSION PAID TO T HE NON-RESIDENT AGENTS AS REQUIRED BY THE ASSESSING OFFICER TO SHOW THAT T HE ENTIRE COMMISSION WAS PAID TO THE NON-RESIDENT AGENTS FOR SERVICES PE RFORMED IN CONNECTION WITH THE PROCUREMENT OF ORDERS FROM THE FOREIGN CUS TOMERS. IT IS THUS CLEAR THAT ALL THE RELEVANT DETAILS WERE DULY FURNI SHED BY THE ASSESSEE EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN SUPPORT OF ITS CASE ON THE ISSUE UNDER CONSIDERATION AND AS RIGHTLY SUB MITTED BY THE LD. COUNSEL FOR THE ASSESSEE, THE LD. CIT(APPEALS) HAVI NG GIVEN RELIEF ON THE BASIS OF THE SAME FACTS AND FIGURES, WHICH WERE FUR NISHED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND NOT ON THE BASIS OF ANY NEW FACTS AND FIGURES, THERE WAS NO VIOLATION OF RU LE 46A OF INCOME TAX RULES, 1962 AS ALLEGED BY THE LD. D.R. IN OUR OPINI ON, ALL THESE DETAILS FURNISHED BY THE ASSESSEE DURING THE COURSE OF ASSE SSMENT PROCEEDINGS BEFORE THE ASSESSING OFFICER AS WELL AS DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(APPEALS) WERE SUFFIC IENT TO ESTABLISH THAT THE COMMISSION AMOUNT IN QUESTION WAS PAID BY THE ASSESSEE-COMPANY TO THE NON-RESIDENT AGENTS FOR THE SERVICES RENDERED I N CONNECTION WITH PROCUREMENT OF ORDERS FROM THE FOREIGN CLIENTS AND THE ASSESSEE WAS NOT REQUIRED TO DEDUCT TAX AT SOURCE FROM THE SAID COMM ISSION AS PER THE PROVISIONS OF SECTION 195 READ WITH SECTION 9(1)(VI I) OF THE ACT AS RIGHTLY HELD BY THE LD. CIT(APPEALS). THE DECISION OF DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF EVER GREEN INTERNATIONAL LIMITED (SU PRA) AND AHMEDABAD BENCH IN THE CASE OF WELSPUN CORPORATION LIMITED (S UPRA) CLEARLY SUPPORTS THE ASSESSEES CASE ON THIS ISSUE. WE, THE REFORE, FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELET ING THE DISALLOWANCE ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 9 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISS ION PAID BY THE ASSESSEE-COMPANY TO NON-RESIDENT AGENTS BY INVOKING , INTER ALIA, SECTION 40(A)(I) AND UPHOLDING THE SAME, WE DISMISS GROUND NO. 1 OF THE REVENUES APPEAL FOR A.Y. 2010-11. 8. THE ISSUE RAISED IN GROUND NO. 2 OF THE REVENUE S APPEAL FOR A.Y. 2010-11 RELATES TO THE DELETION BY THE LD. CIT(APPE ALS) OF THE ADDITION OF RS.3,17,265/- MADE BY THE ASSESSING OFFICER ON ACCO UNT OF BAD DEBTS WRITTEN OFF. 9. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH TH E RETURN OF INCOME, A SUM OF RS.22,88,344/- WAS DEBITED BY THE ASSESSEE O N ACCOUNT OF BAD DEBTS WRITTEN OFF. FROM THE PERUSAL OF THE RELEVANT DETAILS FILED BY THE ASSESSEE IN THIS REGARD, THE ASSESSING OFFICER NOTE D THAT THE AMOUNT OF RS.3,17,265/- WRITTEN OFF BY THE ASSESSEE AS IRRECO VERABLE FROM BSNL ACTUALLY REPRESENTED PENALTY LEVIED ON THE ASSESSEE FOR NON-SUBMISSION OF C FORM BY THE SALES TAX DEPARTMENT. HE HELD THAT THE AMOUNT OF RS.3,17,265/- THUS WAS ON ACCOUNT OF PENALTY IMPOSE D BY THE ASSESSING OFFICER FOR VIOLATING STATUTORY NORM AND ACCORDINGL Y THE SAME WAS DISALLOWED BY HIM. 10. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER OF RS.3,17,265/- WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AS WELL AS THE MATERIAL AVAILABLE ON RECORD, THE LD .CIT(APPEALS) DELETED THE SAID DISALLOWANCE FOR THE FOLLOWING REASONS GIV EN IN PARAGRAPH NO. 4.2 OF HIS IMPUGNED ORDER:- 4.2. I HAVE CONSIDERED THE FACTS OF THE CASE. AS E XPLAINED BY THE APPELLANT, BSNL IS A MAJOR CUSTOMER OF THE APPE LLANT TO WHOM IT SUPPLIES CABLES. IN RESPECT OF SALE MADE BY IT, THE APPELLANT IS REQUIRED TO PAY SALES TAX. AS PER THE SALES TAX RULES, IF C-FORM IS PROVIDED BY THE CUSTOMER IS SUB MITTED TO THE SALE TAX DEPARTMENT, THE SALES TAX ON SUCH SALE SHALL BE CHARGED ON A REDUCED RATE. HOWEVER, BSNL FAILED TO PROVIDE C-FORM FOR WHICH THE APPELLANT HAD TO PAY ADDITIONA L SALES ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 10 TAX. IT TRIED TO RECOVER SUCH ADDITIONAL LIABILITY FROM THE BSNL. HOWEVER, SINCE BSNL DID NOT MAKE GOOD THE SAI D AMOUNT AND THE APPELLANT DID NOT CONSIDER IT PRUDEN T TO INSIST UPON THE SAME FROM ONE OF ITS LARGEST CUSTOM ERS, IT CHOSE TO WRITE OFF THE AMOUNT. THUS, IT IS CLEAR TH AT THE AMOUNT UNDER CONSIDERATION DID NOT REPRESENT A PENA LTY FOR VIOLATION OF ANY STATUTE. IT WAS SIMPLY AN ADDITION AL TAX CHARGED BY SALES TAX DEPARTMENT DUE TO NON SUBMISSI ON OF C-FORM. IN FACT, THE RESPONSIBILITY OF PROVIDING C FORM LIED WITH THE BSNL AND THERE WAS NO VIOLATION OF ANY LAW BY THE APPELLANT. HENCE, I DO NOT AGREE WITH THE ASSESSING OFFICER THAT THE AMOUNT REPRESENTED PENALTY FOR STATUTORY VIOLATION. SINCE SALES TAX IS NORMALLY RECOVERED FR OM THE CUSTOMER, THE APPELLANT CLAIMED THE ADDITIONAL OUTG O FROM THE CUSTOMER BSNL AND ON FAILURE TO RECOVER, WROTE THE SAME OFF AS BAD DEBT. IT IS CLEAR FROM THE AFORESAI D FACTS, THAT THE AMOUNT REPRESENTED AN EXPENDITURE INCURRED IN NORMAL COURSE OF BUSINESS AND WAS REVENUE IN NATURE . CONSIDERING THIS, THE SAME IS ALLOWABLE AS DEDUCTIO N. THE DISALLOWANCE OF RS.3,17,265/- IS ACCORDINGLY, DELET ED. 11. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES A ND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY H ELD BY THE LD. CIT(APPEALS), THE AMOUNT IN QUESTION DID NOT REPRES ENT ANY PENALTY IMPOSED ON THE ASSESSEE BY THE SALES TAX DEPARTMENT FOR VIOLATION OF ANY STATUTORY PROVISION, BUT THE SAME WAS SIMPLY IN THE NATURE OF ADDITIONAL TAX CHARGED BY THE SALES TAX DEPARTMENT DUE TO NON- SUBMISSION OF C FORM BY BSNL. THERE WAS THUS NO VIOLATION OF ANY LA W ON THE PART OF THE ASSESSEE AND THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE, IN OUR OPINION, WAS RIGHTLY DELETED BY THE L D. CIT(APPEALS). WE, THEREFORE, FIND NO MERIT IN GROUND NO. 2 OF THE REV ENUES APPEAL AND DISMISS THE SAME. 12. AS REGARDS THE APPEAL OF THE REVENUE FOR A.Y. 2 011-12 BEING ITA NO.836/KOL/2015, IT IS OBSERVED THAT THE SOLITARY I SSUE RAISED THEREIN RELATING TO THE DELETION BY THE LD. CIT(APPEALS) OF THE DISALLOWANCE OF RS.78,00,717/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF COMMISSION PAID TO NON-RESIDENT AGENTS IS SIMILAR TO THE ONE I NVOLVED IN GROUND NO. 1 OF THE REVENUES APPEAL FOR A.Y. 2010-11, WHICH HAS ALREADY BEEN DECIDED BY US. AS ALL THE MATERIAL FACTS RELEVANT TO THIS I SSUE AS INVOLVED IN A.Y. ITA NOS. 835 & 836/KOL/2015 ASSESSMENT YEARS: 2 010-2011 & 2011-2012 M/S. U.M. CABLES LIMITED 11 2011-12 AS WELL AS THE ARGUMENTS RAISED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES ARE SIMILAR TO THAT OF A.Y. 2010-11, WE FOLLOW OUR CONCLUSION DRAWN IN A.Y. 2010-11 AND UPHOLD THE IMP UGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF COMMISSION PAID TO NON-RESIDENT AGENT S. THIS APPEAL OF THE REVENUE FOR A.Y. 2011-12 IS ACCORDINGLY DISMISSED. 13. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON AUGUST 28, 20 19. SD/- SD/- (A.T. VARKEY) (P.M. JAGTAP) JUDICIAL MEMBER V ICE-PRESIDENT (KZ) KOLKATA, THE 28 TH DAY OF AUGUST, 2019 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-8(2), KOLKATA, AAYAKAR BHAWAN, 4 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. U.M. CABLES LIMITED, 2A, SHAKESPEARE SARANI, KOLKATA-700 071 (3) COMMISSIONER OF INCOME TAX (APPEALS)-3, KOLKAT A, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.