ACIT, CHENNAI V. M/s. Farida Leather Company, CHENNAI

ITA 85/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77208 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-04-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 09-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GURU BHASHYAM
• Assessee Lawyers: G BASKAR
• Keywords: Services rendered outside India; Deemed to accrue or arise in india; Permanent establishment; Non-deduction of tax
• Section: 234B

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , !' # , $ % BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NO S . ASSESS- MENT YEAR / APPELLANT / RESPONDENT 8 4 /MDS/201 4 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-X CHENNAI-600 006. M/S. T.ABDUL WAHID & COMPANY, 55, VEPERY HIGH ROAD, PERIAMET, CHENNAI-600 003. PAN:AAAFT0482B 85 /MDS/201 4 2010-11 ASSISTANT COMMISSIONER OF INCOME TAX, BUSINESS CIRCLE-X CHENNAI-600 006 M/S. FARIDA L EATHER COMPANY, 29A, PERIANNA MAISTRY STREET, PERIAMET, CHENNAI-600 003. PAN:AAAFF1375P / APPELLANT BY : MR. GURU BHASHYAM, JCIT /RESPONDENT BY : MR. G.BASKAR, ADVOCATE / DATE OF HEARING : 25 TH MARCH, 2014 /DATE OF PRONOUNCEMENT : 10 TH APRIL, 2014 & / O R D E R PER CHALLA NAGENDRA PRASAD, JM: BOTH THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS)-IV, CHENNAI DATED 05.09.2013 & 18.10.2013 RESPECTIVELY FOR THE ASSESSMENT YEAR 2010-11. 2. THE COMMON GROUND IN BOTH THESE APPEALS OF THE REVENUE IS THAT COMMISSIONER OF INCOME TAX (APPEALS ) ERRED ITA NOS.84 & 85/MDS/2014 2 IN DELETING DISALLOWANCE MADE UNDER SECTION 40(A)(I A) OF THE ACT ON ACCOUNT OF NON-DEDUCTION OF TAX AT SOURCE ON PAYMENT MADE TO FOREIGN COMMISSION AGENTS. IN BOTH THESE A PPEALS, ASSESSING OFFICER WHILE COMPLETING ASSESSMENTS INVO KED PROVISIONS OF SECTION 40(A)(I) READ WITH SECTION 19 5 OF THE ACT ON THE COMMISSION PAYMENTS MADE TO NON-RESIDENTS HO LDING THAT ASSESSEE HAS NOT DEDUCTED TDS ON THE SAID PAYM ENT AND THEREFORE, COMMISSION IS NOT ALLOWABLE AS DEDUC TION UNDER SECTION 40(A)(I) OF THE ACT. ON APPEAL, COMM ISSIONER OF INCOME TAX (APPEALS) CONSIDERING THE SUBMISSIONS OF THE ASSESSEES AND THE CASE LAW RELIED ON BY THE ASSESSE ES DELETED THE DISALLOWANCE HOLDING THAT SALES COMMISS ION PAID BY THE ASSESSEES TO THE NON-RESIDENTS IS NOT CHARGE ABLE TO TAX IN INDIA AND CONSEQUENTLY, ASSESSEES ARE NOT UNDER ANY OBLIGATION TO DEDUCT TDS UNDER SECTION 195 OF THE A CT ON THE COMMISSION PAYMENTS AND THEREFORE, PROVISIONS OF SE CTION 40(A)(I) HAVE NO APPLICATION. AGAINST THE ORDERS OF COMMISSIONER OF INCOME TAX (APPEALS) REVENUE CAME U P BEFORE US. ITA NOS.84 & 85/MDS/2014 3 3. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDERS OF ASSESSING OFFICER IN DISALLOWING AGENCY/S ALES COMMISSION PAID BY THE ASSESSEE TO THE NON-RESIDENT AGENCIES, AS ASSESSEES DID NOT DEDUCT TDS UNDER SEC TION 195 OF THE ACT. 4. COUNSEL FOR THE ASSESSEES SUBMITS THAT AGENCY/SA LES COMMISSION PAID BY THE ASSESSEES TO NON-RESIDENT AG ENTS FOR THE SERVICES RENDERED BY THEM OUTSIDE INDIA IN PROC URING EXPORT ORDERS FOR THE ASSESSEES. COUNSEL FOR THE A SSESSEES SUBMITS THAT NON-RESIDENT AGENTS HAVE NO BUSINESS CONNECTION IN INDIA NOR THEY HAVE ANY PERMANENT ESTABLISHMENTS IN INDIA AND THEREFORE PROVISIONS OF SECTION 195 HAVE NO APPLICATION FOR THE COMMISSION PAYMENTS MADE BY ASSESSEES TO NON-RESIDENTS FOR THE SERVICES REND ERED BY THEM OUTSIDE INDIA. COUNSEL VEHEMENTLY SUPPORTS TH E ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELE TING THE DISALLOWANCES. HE PLACES RELIANCE ON THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHN OLOGY CENTRE P.LTD. VS. CIT (327 ITR 456), THE DECISION O F THE DELHI ITA NOS.84 & 85/MDS/2014 4 BENCH OF THIS TRIBUNAL IN THE CASE OF DCIT VS. EON TECHNOLOGY P.LTD. (11 TAXMANN.COM 53), THE DECISIO N OF THIS TRIBUNAL IN THE CASE OF PRAKASH IMPEX VS. ACIT IN I TA NO.8/MDS/2012 DATED 30.03.2012 AND THE DECISION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT VS. FARIDA SHOES PVT.LTD. (143 ITD 400). 5. WE FIND THAT ON IDENTICAL FACTS IN ASSESSEES GR OUP CASES I.E. IN THE CASE OF M/S. FARIDA PRIME TANNERY PVT. LTD. IN ITA NO.189/MDS/2014 AND IN THE CASE OF M/S. FARI DA SHOES P.LTD. IN ITA NOS.190 & 191/MDS/2014 DATED 28.03.20 14, THE CO-ORDINATE BENCH OF THIS TRIBUNAL DECIDED THE ISSU E AS UNDER:- 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHORITIES AND THE CASE LAWS RELIED ON. IN ALL TH ESE APPEALS, ASSESSING OFFICER DISALLOWED AGENCY/SALES COMMISSIO N PAID BY THE ASSESSEE TO THE NON-RESIDENT AGENTS ON THE G ROUND THAT ASSESSEE HAS NOT DEDUCTED TDS UNDER SECTION 19 5 OF THE ACT AND THEREFORE SALES COMMISSION PAID BY THE ASSESSEE IS NOT ALLOWABLE EXPENDITURE UNDER SECTION 40(A)(I) OF THE ACT. THE COMMISSIONER OF INCOME TAX (APPEAL S) ELABORATELY CONSIDERED THIS ISSUE AND HELD THAT SAL ES COMMISSION PAID BY ASSESSEES IS NOT CHARGEABLE TO TAX IN INDIA AS THE SERVICES WERE RENDERED OUTSIDE INDIA BY NON- RESIDENTS AND THEREFORE, PROVISIONS OF SECTION 195 HAVE NO APPLICATION SO AS TO DISALLOW COMMISSION PAYMENTS U NDER SECTION 40(A)(I) OF THE ACT. WHILE HOLDING SO, THE ITA NOS.84 & 85/MDS/2014 5 COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED VAR IOUS DECISIONS ON THE ISSUE INCLUDING THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CE NTRE P.LTD. (SUPRA). THE COMMISSIONER OF INCOME TAX (APP EALS) IN ONE OF THE CASES BEFORE US IN K.H.ARIND PVT.LTD. , FOLLOWING THE DECISION OF CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. FARIDA SHOES P.LTD. (SUPRA) DELETED THE DI SALLOWANCE OBSERVING AS UNDER:- BEFORE THE UNDERSIGNED, THE ASSESSEE COMPANY SUBMITTED THAT A SIMILAR ISSUE WAS RECENTLY ADJUDIC ATED BY THE HON'BLE INCOME TAX APPELLATE TRIBUNAL (A-BENCH) OF CHENNAI, VIDE ITS ORDER IN ITA NOS.359 & 360/MDS/20 13 DATED 11 . 04 ' .2013, IN THE CASES . OF M/S. FARIDA , SHOES P LTD AND M / S. FARIDA PRIME TANNERY P LTD. IN THE S A ID CASES THE PAYMENTS MADE TO THE NON-RESIDENTS, WIT HOUT MAKING TDS , WERE SIMILAR TO THOSE MADE BY THE ASSESSEE COMPANY . THE ASSES S ING OFFICER DIS A LLOWED THE S A ID PAYMENTS U/S . 40(A)(I) FOR NON - DEDUCTION OF TDS U/S . 195 OF THE ACT. THE CIT(A) ALLOWED THE APPEALS OF THE SAID COMPANIES. THE REVENUE PREFERRED AN APPEALS TO THE ITAT AGAINST THE ORDERS OF THE CIT(A). THE HON 'BLE TRIBUNAL, VIDE ITS ORDERS MEN T IONED ABOVE, HAS HELD THAT THE SERVICES PROVIDED BY THE CONCERNED NON-RESIDENTS NEITHER AMOUNTS TO MANAGERIAL/TECHNICAL SERVICES NOR THE PAYMENTS ARE ASSESSABLE TO TAX IN INDIA AND HEN CE THE PROVISIONS OF SEC.195 OF THE ACT ARE NOT APPLIC ABLE TO THE FACTS OF THE SAID COMPANIES. THE RELEVANT PORTION OF THE ORDER OF THE ITAT (IN ITA NO.159/MDS/2013 DATED 11 . 04.2013 FOR A.Y. 2008-09 IN THE CASE OF M / S. FARIDA SHOES P LTD) IS REPRODUCED AS UNDER: 10. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIAL S AVAILABLE ON RECORD AND CASE LAW CITED. IN THIS CASE THE ASSE SSEE HAS MADE CERTAIN PAYMENTS TO OVERSEAS AGENTS AS COMMIS SION AND NO TDS DEDUCTED. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEES BUSINESS IS SITUATED IN INDIA AND THE PA YMENTS WERE ALSO MADE FROM INDIA AND ACCORDING TO SECTION 195, THE ASSESSEE IS UNDER OBLIGATION TO DEDUCT TDS. THERE FORE, BY INVOKING SECTION 40(A)(I) HE HAS DISALLOWED AN AMO UNT OF ` 5,62,13,826/-. ON APPEAL, THE COMMISSIONER OF INCOM E TAX (APPEALS) DELETED THE DISALLOWANCE ON THE GROUND TH AT THE COMMISSION WAS PAID TO NON-RESIDENT AGENT AND IT C ANNOT BE SAID TO HAVE BEEN ACCRUED IN INDIA AND SECTION 195 HAVE NO APPLICATION. THE ONLY ISSUE FOR OUR CONSIDERATION IS AS ' TO WHETHER THE ASSESSEE ! IS UNDER OBLIGATION TO DEDUCT THE TDS ,- UNDER SECTION 195 OR NOT . THE CIT(APPEALS), BY CONSIDERING THE ITA NOS.84 & 85/MDS/2014 6 ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE ! PASSED A DETAILED ORDER BY OBSERVING THAT SECTION 195 HAVE NO APPLICATION TO ASSESSEE'S CASE. IN THE CASE OF M/S. PRAKASH IMPEX VS AC!T , (SUPRA), THE COORDINATE BENCH OF !TAT CHENNAI HAS CONSIDERED THE VERY SAME ISSUE AND OBSERVED THAT THE COMMISSION PAID TO NON - RESIDENT AGENTS FOR THE SERVICES RENDERED OUTSIDE INDIA AND SUCH PAYMENTS ARE NOT CH ARQEABLE TO TAX INDIA AND THEREFORE, THE PROVISIONS OF SECTION 195 ARE NOT ! APPLICABLE VIEW OF THE DECISION OF THE HON 'BLE SUP REME COURT IN THE CASE OF G E INDIA TECHNOLOGY CENTRE P. LTD. V. CIT (SUPRA). 11. IN THE CASE OF CIT V. EON TECHNOLOGY (P) LTD . , THE HON'BLE DELHI HIGH COURT HAS ALSO HELD THAT THE COMMISSION PAYMENT TO ITS BRITISH PARENT/ HOLDING COMPANY ETUK COULD NOT SAID TO HAVE BEEN ACCRUED TO ! ETUK IN INDIA AND THEREFORE, THE ASSESSEE WAS NOT LIABLE TO DEDUCT TAX AT SOURCE FRO M PAYMENT OF COMMISSION TO ETUK. THE HEAD NOTE OF ADDER IS REPRODUCED HEREUNDER: 'SECTION 9 OF THE INCOME-TAX ACT, 1961 - INCOME - DEEMED TO ACCRUE OR ARISE IN INDIA ASSESSMENT YEAR 2007 - 08 - ASS E SSEE- COMPANY WAS ENGAGED IN BUSINESS OF DEVELOPMENT AND EXPORT OF SOFTWARE - DURING . RELEVANT ASSESSMENT YEAR, IT HAD PAID COMMISSION TO ITS BRITISH PARENT/HOLDING COMPANY ET UK ON SALES AND AMOUNTS REALIZED ON EXPORT CONTRACTS PROC URED BY ETUK FOR ASSESSEE - ASSESSING OFFICER HELD THAT COMMISSION INCOME EARNED BY ETUK HAD ACCRUED IN INDIA OR WAS DEEMED TO ACCRUE IN INDIA AND, THEREFORE, ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE THERE FROM AND AS THERE WAS FAILURE, SAID EXPENDITURE SHOULD BE DISALLOWED UNDER SECTION 40(A)(IA) - WHETHER WHEN ETUK WAS NOT RENDERING ANY SERVICE OR PERFORMING ANY ACTIVITY IN INDIA ITSELF COMMISSION INCOME COULD BE SAID TO HAVE ACCRUED, ARISEN TO OR RECEIVED BY ETUK IN INDIA MERELY BECAUSE IT WAS RECORDED IN BOOKS OF ASSESSEE IN INDIA O R WAS PAID BY ASSESSEE SITUATED IN INDIA - HELD, NO - WHETHER FOR APPLYING SECTION 9 . ASSESSING OFFICER WAS REQUIRED TO EXAMINE WHETHER S AID COMMISSION INCOME WAS ACCRUING OR ARISING DIRECTLY OR INDIRECTLY FROM ANY BUSINESS CONNECTION IN INDIA - HELD, YES - WHETHER SINCE FA C TS FOUND BY ASSESSING OFFICER DID NOT MAKE OUR A CASE OF BUSINESS CONNECTION AS STIPULATED IN SECTION 9(1)(I), COMMISSION INCOME COULD NOT BE SAID TO HAV E ACCRUED TO ETUK IN INDIA AND, THEREFORE, ASSESSEE W AS NOT LIABLE TO DEDUCT TAX AT SOURCE FROM PAYMENT OF COM MISSION TO ETUK - HELD, YES [IN FAVOUR OF ASSESSEE] . ' 12. THE HON'BLE DELHI HIGH COURT HAS CONSIDERED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/ S. TRANSMISSION CORPORATION OF ANDHRA PRADESH REPORTED IN 239 ITR 587 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. ITA NOS.84 & 85/MDS/2014 7 13. IN THE CASE OF ARMAYESH GLOBAL V . ACIT (SUPRA), THE MUMBAI BENCH OF ITAT HAS OBSERVED THAT THE COMMISSION PAYM ENT WAS MADE TO THE OVERSEAS AGENT FOR PROCURING EXPORT ORDERS. THE AGENTS HAVE NOT BEEN PROVIDED ANY MANAGERIAL/TECHNICAL SER VICES. THE RELATIONSHIP BETWEEN THE ASSESSEE AND THE NON-RESID ENT (AGENT) WAS ONLY FOR RENDERING NON - TECHNICAL SERVICES. MOREOVER, THERE WAS NO PERMANEN T ESTABLISHMENT OF THE SAID NON-RESIDENT IN INDIA. THEREFORE, THE COMMISSION PAID TO THE NON- RESIDENT AGENT DID NOT ACCRUE OR ARISE IN INDIA AND THUS , THERE WAS NO NEED FOR DEDUCTING TDS UNDER SECTION 195 OF THE ACT . 14. IN THE PRESENT CASE, THE ASSESSEE PAID CERTAIN AMOUNTS TO OVERSEAS AGENTS FOR PROCUREMENT OF EXPORT ORDERS . THE AGENTS HAVE NOT PROVIDED ANY MANAGERIAL/ TECHNICAL SERVICES. THE PAYMENTS RECEIVED BY THE NON-RESIDENT INDIAN ARE NOT TAXABLE IN INDIA . TAKING INTO CONSIDERATION OF ENTIRE : FACTS AND CIRCUMSTANCES AND BY FOLLOWING AFORESAID DECISIONS, W E ARE OF THE OPINION THAT THE ISSUE INVOLVED IN THIS APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE AND SECTION 195 HAVE NO APPLICATION TO ASSESSEE'S CASE. ACCORDINGLY , THE APPEAL OF THE REVENUE IS DISMISSED.' I HAVE CONSIDERED THE ASSESSEE'S SUBMISSIONS AS WEL L AS THE ORDERS OF THE HON'BLE ITAT IN THE CASE OF M/S . FARIDA SHOES P LTD (ITA NO.159/MDS/2013 DATED 11.0 4 .2013 FOR A.Y. 2008-09). THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANU F ACTURING AN EXPORT OF LEATHER GOODS. AS EXPLAINED BY THE ASSESSEE, IT IS AVAILING THE SERVICES OF CERTAIN NON - RESIDENT AGENTS FOR PROCURING EXPORT ORDERS FOR THE ASSESSEE FOR WHICH IT IS PAYING COMMISSION. PERUSAL OF THE ASSESSEE'S SUBMISSIONS SHOWS THAT THE SAID NON-RESIDENT AGENTS HAVE NO BUSINESS CONNECTION IN INDIA NOR THEY HAVE ANY PERMANENT ES T ABLISHMENTS IN INDIA. THEY ARE PROCURING EXPORT ORDERS FOR THE ASSESSEE. THUS, THE SAID NON-RESIDENT AGENTS ARE OPERATING OUTSIDE THE COUNTRY AND ALL THE SERVICES ARE RENDERED ABROAD ON LY. IN OTHER WORDS, THOUGH THE SAID NON-RESIDENTS ARE RENDERING SERVICES TO THE ASSESSEE (INDIAN COMPANY) , THESE SERVICES ARE RENDERED TOTALLY OUTSIDE THE COUNTRY. IN SUCH A SITUATION THE PAYMENTS (COMMISSIONS) MADE TO SUCH AGENTS ARE NOT LIABLE TO BE TAXED IN INDIA. TDS IS REQUIRED TO BE DEDUCTED ON ALL PA Y MENTS TO NON-RESIDENTS IF THE SAID PAYMENTS ARE . LIABLE FOR TAX IN INDIA. IN THE INSTANT CASE, THE COMMISSION PAYMEN TS ITA NOS.84 & 85/MDS/2014 8 TO THE NON-RESIDENT AGENTS ARE NOT TAXABLE IN INDIA AS THE SERVICES ARE RENDERED ABROAD AND THE AGENTS HAV E NO PE IN INDIA. THEREFORE, THERE IS NO REQUIREMENT TO DEDUCT TDS ON THESE PAYMENTS. FOR THIS PURPOSE RELIANCE IS ALSO PLACED ON THE DECISION OF APEX COURT IN THE CASE OF GE INDIA TECHNOLOGY CEN. P LTD . V . CIT [2010] (327 ITR 456) (SC) W HEREIN IT WAS HELD AS UNDER: , I SECTION 195 OF THE INCOME-TAX ACT , 1961- D EDUCTION OF TAX AT SOURCE - PAYMENT TO NON - RESIDENT - , . WHETHER THE MOMENT A REMITTANCE IS MADE TO A NON- RESIDENT, OBLIGATION TO DEDUCT TAX AT SOURCE DOES NOT ARISE; IT ARISES ONLY WHEN SUCH REMITTANCE IS A SUM CHARGEABLE UNDER ACT, I. E., CHARGEABLE UNDER SECTIONS 4, 5 AND 9 - HELD, YES. WHETHER SECTION 195(2) IS NOT A MERE PROVISION TO PROVIDE INFORMATION TO ITO(TDS) SO THAT DEPARTME N T CAN KEEP TRACK OF REMITTANCES BEING MADE TO NON - RESIDENTS OUTSIDE IND I A; RATHER IT GETS ATTRACTED TO CASES WHERE PAYMENT MADE IS A COMPOSITE PAYMENT IN WHICH CER T AIN PROPORTION OF PAYMENT HAS AN ELEMENT OF 'INCOME' CHARGEABLE TO TAX IN INDIA AND PAYER SEEKS A DETERMINATION OF APPROPRIATE PROPORTION OF SUM CHARGEABLE - HELD, YES . FURTHER, UNDER SIMILAR FACTS AND CIRCUMSTANCES, THE HONBLE ITAT OF CHENNAI, IN ONE OF THE ASSESSEE'S RELATED CONCERNS (M/S. F A RIDA SHOES P LTD, IN ITA NO.159/MDS/ 2013 DATED 11 . 04.2013 FOR A.Y. 2008-09), HAS EXAMINED THE ISSUE OF COMMISSION PAYMENTS TO NON-RESIDENTS FOR PROCURING EXPORT ORDERS IN DE T AIL CONCLUDED THAT THE COMMISSION PAYMENTS TO THE SAID NON-RESIDENT AGENTS ARE NOT ASSESSABLE TO TAX IN INDIA AND CONSEQUENTLY THE RESIDENT PAYEE COMPANY (M/S. FARIDA SHOES P LTD) WAS NOT U NDER THE OBLIGATION OF DEDUCTION TDS ON THE COMMISSION PAYMENTS 1 U/S.195 OF THE A CT . \ IN THE PRESENT APPEALS OF THE ASSESSEE (I . E. IN THE A . YS. 2008-09, 2009-10 AND 2010-11) ALSO THE FACTS AND CIRCUMSTANCES ARE EXACTLY IDENTICAL TO THOSE \ INVOLVED IN THE CASE OF M/S. FARIDA SHOES P LTD FOR A. Y . 2008-09. THEREFORE, SINCE THE ' ISSUE ITA NOS.84 & 85/MDS/2014 9 INVOLVED IN THE PRESENT APPEALS IS THE SAME AND THE FACTS ARE EXACT L Y IDENTICAL, THE ABOVE DECISION OF THE ITAT, (M/S. FARIDA SHOES P LTD, IN ITA NO . 159/MDS/2013 DATED 11.04.0 1 3), IS EQUALLY APPLICABLE TO THE FACTS OF THE PRESENT APPEALS OF T HE INSTANT ASSESSEE FOR A.YS. 2008-09, 2009-10 AND 2010-11 UNDER CONSIDERATION. THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF ITAT IN THE CASE OF M/S. FARIDA SHOES P.LTD. (IN ITA NO.159/MDS/2013) DATED 11.04.2013), I HOLD THAT THE ABOVE TRANSACTIONS OF COMMISSION PAYMENTS TO THE NON-RESIDENTS FOR PROCURING EXPORT ORDERS, ARE NOT ASSESSABLE TO TAX IN INDIA AND CONSEQUENTLY THE ASSESSEE COMPANY IS NOT UNDER ANY OBLIGATION TO DEDUCT THE TDS ON THE ABOVE COMMISSION PAYMENTS U/S.195 OF THE ACT. THEREFORE, THE PROVISIONS OF SEC.40(A)(I) HAVE NO APPLICATION IN T HE PRESENT CASE. ACCORDINGLY, THE ADDITIONS MADE BY THE ASSESSING OFFICER IN ALL THE THREE ASSESSMENT YEARS UNDER CONSIDERATION ON ACCOUNT OF DISALLOWANCE OF COMMISSION PAYMENTS FOR NON- DEDUCTION OF TDS U/S.40(A)(I) R.W.S. 195 OF THE ACT ARE NOT JUSTIFIED AND DELETED. 6. SIMILAR ISSUE HAS BEEN CONSIDERED BY THIS TRIBUN AL IN THE CASE OF ITO VS. FAIZAN SHOES (P.) LTD (58 SOT 2 45), WHEREIN CO-ORDINATE BENCH OF THIS TRIBUNAL, TO WHIC H ONE OF US IS A PARTY, AFTER CONSIDERING THE DECISION OF TH E HONBLE SUPREME COURT IN THE CASE OF GE INDIA TECHNOLOGY CE NTRE P.LTD. (SUPRA) HELD THAT SALES COMMISSION PAID BY T HE ASSESSEES TO NON-RESIDENTS ARE NOT CHARGEABLE TO TA X IN INDIA, THEREFORE PROVISIONS OF SECTION 195 ARE NOT APPLICABLE. ON GOING THROUGH THE ABOVE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS), WE FIND THAT IN ALL THESE CASES ASSESSEES PAID SALES COMMISSION TO ITS NON- RESIDENT AGENTS FOR THE SERVICES RENDERED BY THEM O UTSIDE INDIA AND THE SALES COMMISSION IS NOT CHARGEABLE TO TAX IN INDIA SO AS TO DEDUCT TDS ON SUCH PAYMENTS UNDER SE CTION 195 OF THE ACT. THEREFORE, RESPECTFULLY FOLLOWING T HE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GE INDI A TECHNOLOGY CENTRE P.LTD. (SUPRA) AND THE ABOVE CITE D DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, WE SUSTAIN THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN DELETING THE DISALLOWANCE MADE UNDER S ECTION 40(A)(I) OF THE ACT. ITA NOS.84 & 85/MDS/2014 10 6. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPH OLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I N DELETING DISALLOWANCE MADE UNDER SECTION 40(A)(IA) OF THE ACT . FACTS AND CIRCUMSTANCES BEING SIMILAR, WE ALS O UPHOLD THE VIEW OF THE COMMISSIONER OF INCOME TAX (APPEALS ) IN ITA NO.84/MDS/2014 IN THE CASE OF M/S. T.ABDUL WAHID & CO. AND DELETE THE DISALLOWANCE MADE UNDER SECTION 40(A)(IA ) OF THE ACT ON THE SALES COMMISSION PAID BY THE ASSESSEE TO NON- RESIDENT AGENTS. 7. THE NEXT ISSUE IN THE CASE OF M/S. FARIDA LEATHE R COMPANY (ITA NO.85/MDS/2014) IS THAT COMMISSIONER O F INCOME TAX (APPEALS) ERRED IN RESTRICTING DISALLOWA NCE TO 50% ON THE 15% DISALLOWANCE MADE BY ASSESSING OFFIC ER ON EXPENDITURE OF SALARY, WAGES, ASSORTMENT EXPENSES A ND STAFF WELFARE. 8. THE ASSESSING OFFICER WHILE COMPLETING ASSESSMEN T DISALLOWED 15% OF THE EXPENSES DEBITED UNDER THE HE ADS SALARY & WAGES TANNERY , WET BLUE ASSORTMENT COA LY AND ITA NOS.84 & 85/MDS/2014 11 STAFF WELFARE STATING THAT ASSESSEE HAS NOT PRODU CED PROPER EVIDENCE / VOUCHERS FOR CLAIM OF THESE EXPENSES. TH E COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTED THE DISALLOWANCE TO 50% OF 15% DISALLOWED BY THE ASSESS ING OFFICER OBSERVING AS UNDER:- COMING TO THE FIRST ADDITIONAL GROUND OF APPEAL R ELATING TO 15% DISALLOWANCE OF SALARY, WAGES, WET BLUE ASSORTMENT COALY AND STAFF WELFARE, WHICH THE ASSES SING OFFICER HAS STATED IS DUE TO NON-PRODUCTION OF PROP ER VOUCHERS. DURING THE APPELLATE PROCEEDINGS, THE AR HAS STATED THAT SUFFICIENT OPPORTUNITY WAS NOT PROVIDED TO PRODUCE THE SAME. THE LEDGERS, VOUCHERS, ETC. HAVE ALSO BEEN PRODUCED DURING THE APPEAL HEARINGS AND ON A RANDOM TEST CHECK ON THE SAME WAS LARGELY FOUND TO BE IN ORDER. AS SUCH, THE AD-HOC ADDITION MADE BY THE ASSESSING OFFICER OF 15% OF SUCH EXPENSES APPEARS TO BE ON THE HIGHER SIDE. HOWEVER, CONSIDERING THE NATUR E OF BUSINESS AS ALSO THE EXPENSES CLAIMED SOME OF WHICH IS SEEN TO BE ONLY EVIDENCED BY SELF-VOUCHERS ETC. I R ESTRICT THE ADDITIONS TO FIFTY PERCENT OF THAT MADE BY THE ASSESSING OFFICER. 9. ON GOING THROUGH THE ABOVE ORDER, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN RESTRICTING DISALLOWANCE TO 50% OF 15%. THEREFORE, THE GROUNDS OF APPEAL RAISED BY THE REVENUE ON THIS ISSUE ARE REJE CTED. ITA NOS.84 & 85/MDS/2014 12 10. THERE IS ONE MORE ISSUE IN THE APPEAL OF THE RE VENUE IN ITA NO. 85/MDS/2014, WHEREIN THE REVENUE IS CHALLE NGING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) IN DELETING INTEREST CHARGED UNDER SECTION 234B & 234C OF THE ACT. ON A PERUSAL OF THE IMPUGNED ORDER, WE FIND T HAT COMMISSIONER OF INCOME TAX (APPEALS) HAD IN FACT HE LD THAT CHARGING OF INTEREST UNDER SECTION 234A, 234B, 234C & 234D ARE MANDATORY AND HE HAS DIRECTED THE ASSESSING OFF ICER TO RECOMPUTE CORRECT INTEREST UNDER SECTION 234B & 234 C OF THE ACT WHILE GIVING EFFECT TO THE IMPUGNED ORDER. WE FIND THAT COMMISSIONER OF INCOME TAX (APPEALS) HAS NOT DIRECT ED THE ASSESSING OFFICER TO DELETE THE INTEREST CHARGEABLE UNDER SECTION 234B & 234C OF THE ACT. THEREFORE, GROUNDS OF APPEAL RAISED BY THE REVENUE ON THIS ISSUE ARE REJECTED. 11. THE REVENUE RAISED A SIMILAR GROUND IN ITA NO. 84/MDS/2014 (M/S. T.ABDUL WAHID & CO.) CHALLENGING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I N DELETING INTEREST CHARGED UNDER SECTION 234B & 234C OF THE ACT. HERE ALSO WE FIND THAT COMMISSIONER OF INCOME TAX ITA NOS.84 & 85/MDS/2014 13 (APPEALS) HAD IN FACT HELD THAT CHARGING OF INTERES T UNDER SECTION 234A, 234B, 234C & 234D ARE MANDATORY AND HE HAS DIRECTED THE ASSESSING OFFICER TO RECOMPUTE AND CHARGE CORRECT INTEREST UNDER SECTION 234B & 234C OF THE A CT. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE DIRE CTION GIVEN BY THE COMMISSIONER OF INCOME TAX (APPEALS). THEREFORE , THE GROUNDS OF APPEAL RAISED BY THE REVENUE ON THIS ISS UE ARE REJECTED. 12. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THURSDAY, TH E 10 TH DAY OF APRIL, 2014 AT CHENNAI. SD/- SD/- ( A.MOHAN ALANKAMONY ) ( CHALLA NAGEN DRA PRASAD ) . ( !' #$% & ) ACCOUNTANT MEMBER / &' JUDICIAL MEMBER/ $ ( &' !$ /CHENNAI, )& /DATED,10 TH APRIL, 2014 SOMU *&+ (,-.- /COPY TO: 1. APPELLANT 2. /RESPONDENT 3. * * /01 /CIT(A) 4. * * / /CIT 5. -2# ((34 /DR 6. #567 /GF.