M/s. J.J. Patel & Co., Ahmedabad V. The Jt.CIT, Range-12, Ahmedabad

ITA 938/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1773 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 17-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: S N DEVETIA
• Keywords: Principle of natural justice; TDS

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 938/AHD/2017 (ASSESSMENT YEAR: 2010-11) M/S. J.J. PATEL & CO. 3/10, SP TIMBER MARKET B/H GITA MANDIR ROAD BHERAMPURA, AHMEDABAD- 380028 V/S JT. CIT, RANGE-12 NOW, ITO, W ARD-6(1)(2) AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABFJ4720D APPELLANT BY : SHRI S.N. DEVETIA & MEHUL TALERA RESPONDENT BY : SHRI LALIT P. JAIN, SR. D.R. ( )/ ORDER DATE OF HEARING : 10-04-2019 DATE OF PRONOUNCEMENT : 08-07-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-6, AHMEDABAD DATED 23.02.2017 PERTAINING TO A.Y. 2010-11 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 938/ AHD/2017 . A.Y. 2010-1 1 2 1.1 THE ORDER PASSED U/S.250 ON 23.02.2017 FOR A.Y. 2010-11 BY CIT(A)-6, ABAD, UPHOLDING THE DISALLOWANCE OF COMMISSION EXPE NSES OF RS 1.30 CR. U/S.37(L) IS WHOLLY ILLEGAL, UNLAWFUL AND AGAINST T HE PRINCIPLES OF NATURAL JUSTICE. 1.2 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN NOT CONSIDERING FULLY AND PROPERLY THE EXPLANATIONS FUR NISHED AND THE EVIDENCE PRODUCED BY THE APPELLANT. THE LD. CIT(A) HAS COMPLETELY IGNORED THE WRITTEN SUBMISSIONS FILED AND EVIDENCE PRODUCED FROM TIME TO TIME (INCLUDING ON 25.01.2017) WITH REGARD TO IMPUG NED DISALLOWANCE AND MAKING ERRONEOUS OBSERVATIONS CONTRARY TO THE EVIDE NCE ON RECORD. 2.1 THE LD. CIT(A) HAS GRIEVOUSLY ERRED IN LAW AND OR ON FACTS IN CONFIRMING THE DISALLOWANCE OF FOREIGN COMMISSION EXPENSES OF RS. 1.30 CR. U/S. 37(1). 2.2 THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS IN LAW, THE LD. CIT(A) OUGHT NOT TO HAVE CONFIRMED THE DISALLOW ANCE OF FOREIGN COMMISSION EXPENSES OF RS.1.30 CR. U/S.37(L) . 3.1 THE ID. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING THE AFORESAID DISALLOWANCE WITHOUT GIVING ANY NOTICE TO THE EFFEC T THAT THE DISALLOWANCE WAS BEING CONFIRMED U/S.37(L) INSTEAD OF SECTION 40 (A)(IA) MADE BY AO. 2 FACTS OF THE CASE ARE THAT THE APPELLANT IS A PARTN ERSHIP FIRM AND DERIVES INCOME BY WAY OF MANUFACTURE & SALE OF THREE DOBULE ROLLER GI NNING MACHINES. IT HAD FILED ITS E-RETURN OF INCOME FOR A.Y. 2010-11 ON 26.05.20 11. 3 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LD. A. O. NOTICE THAT APPELLANT HAD MADE EXPORT OF MACHINERIES AND ALLIED GOODS TO M/S. UGAPLY INDUSTRIES LTD. OF UGANDA AND HAD PAID COMMISSION OF RS. 1.30 CRORE TO M/S. K R K INVESTMENT LTD. AT KAMPALA, UGANDA. THE A.O. FURTHER NOTICED T HAT APPELLANT HAD NOT MADE ITA NO. 938/ AHD/2017 . A.Y. 2010-1 1 3 TDS ON THE SAID PAYMENT SO THAT IT WAS NOT PERMISSI BLE U/S. 40(A)(I) AND MADE ADDITION OF RS. 1.30 CRORES. 4 THEREAFTER, ASSESSEE PREFERRED FIRST STATUTORY APPE AL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 5 WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. THAT APPELLANT PAID A COMMISSION OF RS. 1.30 CRORES TO M/S. K R K INVESTMENT LTD. AT UGANDA BUT HAD NOT MADE TDS ON THE SAID PAYMENT. LOWER AUT HORITIES WERE OF THE OPINION THAT APPELLANT OUGHT TO HAVE DEDUCTED TAX A T SOURCE FOR WHICH IT FAILED TO DO SO AND SAME IS CONTRAVENTION OF THE ACT. 6 AS WE CAN SEE, THAT PAYEE HAD NO PERMANENT ESTABLIS HMENT OR ANY BUSINESS CONNECTION IN INDIA AND NO INCOME HAS BEEN EARNED I N INDIA. IN CIRCULAR NO. 786 DATED 7.2.2000 CBDT HAS MADE IT CLEAR THAT IF THE F OREIGN AGENTS OPERATES OUTSIDE THE COUNTRY, NO PARTY OF SUCH INCOME ARISES IN INDI A SO THAT WITHHOLDING TAX U/S. 194 ON EXPORT COMMISSION IS NOT REQUIRED TO BE MADE . 7 THE HONBLE DELHI HIGH COURT HAS HELD IN THE MATTER OF CIT VS. EON TECHNOLOGY (P) LTD. 343 ITR 366 IT IS HELD THAT THE SALES COMM ISSION PAID TO THE HOLDING COMPANY ON THE SALES AND AMOUNTS REALIZED ON EXPORT CONTRACT WAS NOT DISALLOWABLE U/S. 40(A)(I) SINCE THE NON-RESIDENT A GENT OPERATED OUTSIDE THE COUNTRY AND NO PART OF HIS INCOME ARISES IN INDIA. IN THIS CASE IN HAND, THAT ASSESSEE/ APPELLANT HAS FILED CERTIFICATE OF INCORPORATION PA ID EFFECT THAT M/S. KRK INVESTMENTS LTD. IS THE REGISTERED AND INCORPORATED IN UGANDA AND PAYMENT HAS BEEN MADE IN FOREIGN CURRENCY. AND APPELLANT HAS AL SO FILED A COPY OF AGREEMENT BETWEEN KRK INVESTMENTS AND THE APPELLANT COMPANY S AME IS PART OF PAPER BOOK ITA NO. 938/ AHD/2017 . A.Y. 2010-1 1 4 AT PAGE NO. 6. SINCE A PAYMENT OF COMMISSION TO W HOM IS MADE IS NOT HAVING ANY P.E. IN INDIA, HENCE IN VIEW OF THE CBDT CIRCULAR A ND JUDGMENT OF DELHI HIGH COURT, APPELLANT IS NOT LIABLE TO DEDUCT TAX. THERE FORE, APPEAL OF THE ASSESSEE IS ALLOWED. 8 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 08- 07- 2019 SD/- SD/- (PRADIP KUMAR KEDIA) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 08/07/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD