DCIT, CIR-4(1), KOLKATA, Kolkata V. M/s Goodricke Group Ltd, Kolkata

ITA 971/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1738 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 03-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SALLONG YADAV
• Assessee Lawyers: P N RAJENDRAM
• Keywords: Services rendered outside India; Retrospective amendment; Non-deduction of tax; Assessment record
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : KOLKATA [BEFORE HONBLE SHRI N.V. VASUDEVAN, JM & SHRI M. BALAGANESH, AM ] I.T.A NO. 971/KOL/201 5 ASSESSMENT YEAR : 2007-0 8 DCIT, CIRCLE-4(1), KOLKATA -VS- M/S GOODRICKE GRO UP LTD., KOLKATA [PAN: AABCG1614Q] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI SALLONG YADAV , ADDL. CIT DR FOR THE RESPONDENT : SHRI P.N. RAJENDRAM, FC A DATE OF HEARING : 01.08.2017 DATE OF PRONOUNCEMENT : 04.08.2017 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORD ER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -2, KOLKATA [ IN SHORT THE LD CITA] IN APPEAL NO. 582/CIT(A)- 2/(07-08)/14-15 DATED 27.02.2015 AGAINST THE ORDER S PASSED BY THE DCIT, CIRCLE-4(1), KOLKATA [ IN SHORT THE LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 31.12.2009 FOR THE ASSESSME NT YEAR 2007-08. 2. AT THE OUTSET, WE FIND THAT THERE IS A DELAY OF 10 DAYS IN FILING THE APPEAL BEFORE US BY THE REVENUE, FOR WHICH AN AFFIDAVIT HAD BEEN FILED BY THE REVENUE DULY EXPLAINING THE REASONS FOR THE DELAY. WE HAVE GONE THROUGH THE SA ME AND WE ARE CONVINCED WITH THE REASONS ADDUCED THEREON. THE LD AR ALSO FAIRLY AGR EED FOR CONDONATION OF THE DELAY. ACCORDINGLY THE DELAY IN FILING THE APPEAL BY THE R EVENUE IS HEREBY CONDONED AND APPEAL IS ADMITTED FOR ADJUDICATION. 2 ITA NO.971KOL/2015 M/S GOODRICKE GROUP LTD A.YR.2007-08 2 3. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF CESS ON GREEN LEAF AMOUNTING TO RS 30,58,779/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF CULTIVATION AND MANUFACTURE OF TEA, INSTANT TEA AND PROCESSED BLENDED TEA AND MAKING SALES THEREOF IN AND OUTSIDE INDIA. THE LD AO OBSER VED THAT THE ASSESSEE HAD PAID CESS ON GREEN LEAF AMOUNTING TO RS 30,58,779/- UNDER THE ASSAM (SPECIFIED LAND) ACT, 1990 (THE ASSAM ACT), WHICH WAS CLAIMED AS DEDUCTIBLE EX PENDITURE. IT WAS PLEADED BY THE ASSESSEE THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS A.F.T.INDUSTRIES LTD REPORTED IN (2004) 270 ITR 167 (CAL) HAD DECIDED THAT THE SAME WAS TO BE FULLY ALLOWED FROM THE COMPOSITE INCOME U NDER RULE 8(1) OF THE IT RULES AND THE SAME IS TO BE FOLLOWED IN THE CASE OF THE ASSES SEE. THE LD AO OBSERVED THAT THE HONBLE GUWAHATI HIGH COURT IN THE CASE OF JORHAT G ROUP LTD VS AGRICULTURAL ITO REPORTED IN 226 ITR 622 HAD DECIDED THAT THE CESS ON GREEN LEAF IS DEDUCTI BLE FROM THE AGRICULTURAL INCOME ONLY AND NOT FROM THE COMPOSITE INCOME. SINCE THE DEPARTMENT HAD PREFERRED FURTHER APPEAL BEFORE THE HONBLE SUPREME COURT AGAINST THE HONBLE CALCUTTA HIGH COURTS ORDER, IN ORDER TO MAINTAIN JUDICIAL CONSISTENCY, THE LD AO DISALLOWED THE SAME AND ADDED BACK A SUM OF RS 30,58,779/- TO THE TOTAL INCOME OF THE ASSESSEE. 3.2. THE LD CITA OBSERVED THAT THE ISSUE OF CESS ON GREEN LEAF IS COVERED BY THE DECISIONS OF HONBLE JURISDICTIONAL HIGH COURT IN T HE CASE OF A.F.T.INDUSTRIES LTD IN 270 ITR 167 AND HINDUSTAN LEVER LTD IN 335 ITR 108 IN FAVOUR OF THE ASSESSEE AND HENCE BY RESPECTFULLY FOLLOWING THE SAME, HE DELETE D THE DISALLOWANCE MADE BY THE LD AO. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED ON FACTS AS WELL AS IN LAW IN HOLDING THAT THE DISALLOWANCE OF CESS ON GREEN LEAVES OF RS. 30,58,779/- WAS NOT WARRANTED, IGNORING THE FACT THAT CESS ON G REEN LEAVES IS ATTRIBUTABLE TO AGRICULTURE ACTIVITIES OF THE ASSESSEE BEYOND THE P URVIEW OF CENTRAL INCOME TAX AND ON THE SAME ISSUE SLP IS PENDING IN THE CASE OF AFT IN DUSTRIES. 3 ITA NO.971KOL/2015 M/S GOODRICKE GROUP LTD A.YR.2007-08 3 3.3. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND T HAT THE LD CITA HAD DULY FOLLOWED THE HONBLE JURISDICTIONAL HIGH COURT DECISIONS SUP RA AND GRANTED RELIEF TO THE ASSESSEE. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD CITA IN THIS REGARD. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE REVENUE IS DISMISSED. 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF LEASE RENT IN THE S UM OF RS 36,48,000/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 4.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSS ESSE MADE PAYMENT OF LEASE RENT TO KOOMBER PROPERTIES & LEASING CO LTD (KPLCL IN SHORT ) TO THE TUNE OF RS 36,48,000/- DURING THE YEAR UNDER APPEAL. THE LD AO NOTED THA T FROM THE ASSESSMENT RECORDS OF EARLIER YEARS, IT WAS OBSERVED THAT THE ASSESSEE WA S THE OWNER OF THE SAID PROPERTY IN RESPEC TOF WHICH THE RENT WAS PAID. THE ASSESSEE C LAIMED THAT THE CLAIM OF THE ASSESSEE HAD BEEN ACCEPTED BY THIS TRIBUNAL IN THE EARLIER Y EAR. HOWEVER THE DEPARTMENT HAD CHALLENGED THE SAME BEFORE THE HONBLE CALCUTTA HIG H COURT AND IN ORDER TO PROTECT THE INTEREST OF THE REVENUE, THE PAYMENT WAS DISALLOWED BY THE LD AO. THE ASSESSEE SUBMITTED THAT THE RENT WAS PAID TO KPLCL FOR CARR YING ON ITS BUSINESS FROM THE PREMISES TAKEN FROM THEM ON LEASE. IT WAS SUBMITT ED THAT THIS TRIBUNAL ON CONSIDERATION OF MATERIALS ON RECORD HELD THAT THE ASSESSEE COMPA NY IS NOT THE OWNER OF THE PREMISES TAKEN ON LEASE FROM KPLCL AND ALLOWED THE DEDUCTION OF LEASE RENT SO PAID IN EARLIER YEARS. THE LD CITA FOLLOWING THE SAID TRIBUNAL ORD ER IN ITA NOS. 497 & 498 /KOL/2004 DATED 13.8.2004 FOR THE ASST YEARS 1999-2000 & 200 0-01 DELETED THE DISALLOWANCE OF LEASE RENT MADE BY THE LD AO. AGGRIEVED, THE REVEN UE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED ON FACTS AS WELL AS IN LAW IN HOLDING THAT ADDITION OF LEASE RENT OF RS. 36,48,000/- WAS NOT WARRANTED, IGNORING THE FACT THAT ON THIS ISSUE IN EARLIER YEA R APPEAL IS PENDING BEFORE HIGH COURT. 4 ITA NO.971KOL/2015 M/S GOODRICKE GROUP LTD A.YR.2007-08 4 4.2. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ISSUE UNDER DISPUTE IS COVERED BY THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASST YEARS 1999- 2000 & 2000-01 IN ITA NOS. 497 & 498/KOL/2004 DATE D 13.8.2004 WHEREIN IT WAS HELD THAT :- 4. IN THE A.Y. 2000-01, THE REVENUE HAS TAKEN A GR OUND THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ALLOWING THE ASSESSEES CLAI M ON ACCOUNT OF LEASE RENT PAID TO KOOMBER PROPERTIES & LEASING CO. LTD. 4.1. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE T HROUGH THE ORDERS OF THE AUTHORITIES BELOW AND IT HAS BEEN POINTED OUT BY THE LD. DR THA T THIS ISSUE WAS DECIDED AGAINST THE DEPARTMENT. BUT THE DEPARTMENT HAS PREFERRED AN APP EAL BEFORE THE HONBLE KOLKATA HIGH COURT , WHICH IS PENDING FOR ADJUDICATION. BE THAT AS IT MAY, IT IS NOT IN DISPUTE THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE A SSESSEE BY THIS TRIBUNAL IN EARLIER YEARS. TO MAINTAIN THE CONSISTENCY AND RESPECTFULLY FOLLOWING THE TRIBUNALS DECISION IN EARLIER YEARS, WE FIND NO MERIT IN THIS GROUND RAIS ED BY THE REVENUE. THEREFORE, THIS GROUND IS REJECTED. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE L D CITA HAD RIGHTLY DELETED THE DISALLOWANCE AND ACCORDINGLY GROUND NO. 2 RAISED BY THE REVENUE IS DISMISSED. 5. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF COMMISSION PAID OUT SIDE INDIA TO THE TUNE OF RS 1,18,85,513/- IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSE SSEE HAS PAID RS. 1,18,85,513/- IN FOREIGN CURRENCY ON ACCOUNT OF COMMISSION TO NON-RESIDENT E XPORT AGENT NAMELY M/S LAWRIE PLANTATION SERVICES LTD. (LPS), UK FOR CERTAIN SERV ICES RENDERED. THE ASSESSEE CLAIMED THAT THE SERVICES WERE RENDERED OUTSIDE INDIA AND T HE INCOME TO THE NON-RESIDENT ENTITY DID NOT ACCRUE IN INDIA AND, THEREFORE, THERE WAS N O LIABILITY TO DEDUCT TDS ON THESE PAYMENTS. THE CONTENTION OF THE ASSESSEE WAS EXAMIN ED BY THE LD AO. HE OBSERVED THAT THE HON'BLE SUPREME COURT IN CASE OF M/S. TRANSMISS ION CORPORATION OF INDIA REPORTED IN 239 ITR 587 HELD THAT THE MOMENT THERE IS A PAY MENT TO A NON-RESIDENT, THERE IS AN OBLIGATION ON THE PAYER TO DEDUCT TAX AT SOURCE U/S 195(1). THE ONLY WAY TO ESCAPE THE 5 ITA NO.971KOL/2015 M/S GOODRICKE GROUP LTD A.YR.2007-08 5 LIABILITY IS FOR THE PAYER TO MAKE AN APPLICATION T O THE ASSESSING OFFICER U/S 195(2) FOR NON-DEDUCTION OF FOR DEDUCTION AT A LOWER RATE. IF THE PAYER DOES NOT MAKE AN APPLICATION AND OBTAIN AN ORDER U/S 195(2), , IT IS NOT OPEN TO HIM TO ARGUE THAT THE PAYMENT HAS NOT RESULTED IN TAXABLE INCOME IN THE HANDS OF THE NON- RESIDENT RECIPIENT. HE FURTHER OBSERVED THAT THIS VIEW HAS ALSO BEEN TAKEN IN CASE OF M/S SAMSUNG ELECTRONICS BY HONBLE KARNATAKA HIGH COURT. IN VIEW OF THIS LEGAL POSITION, THE ASSESSEE WAS REQUIRED TO DEDUCT TAX AT SOURCE AT THE APPLICABLE RATES AT THE TIME OF MAKING PAYMENTS FOR OBTAINING SERVICES FROM THE NON-RESIDENTS. THEY PAY MENTS OF RS. 1,18,85,513/- WAS THEREFORE DISALLOWED AND ADDED BACK TO THE INCOME O F THE ASSESSEE. 5.2. THE LD CITA DELETED THE DISALLOWANCE BY OBSERV ING THAT THE DECISIONS OF THE HONBLE SUPREME COURT IN TRANSMISSION CORPORATIONS CASE AND HONBLE KARNATAKA HIGH COURT IN SAMSUNG ELECTRONICS CASE RELIED UPON BY THE LD AO HAVE NO APPLICATION TO THE FACTS OF THE INSTANT CASE. IN THE CASE OF T HE ASSESSEE, SERVICES HAD BEEN RENDERED OUTSIDE INDIA AND REMITTANCE FOR SUCH SERVICES WAS ALSO MADE OUTSIDE INDIA. FROM THE PERUSAL OF THE AGREEMENT , IT EMANATES THAT THE NON -RESIDENT EXPORT AGENT IS NOT REQUIRED TO RENDER ANY SERVICES IN INDIA NOR THEY HAVE ANY P ERMANENT ESTABLISHMENT IN INDIA. THEREFORE, THE REMITTANCES MADE FOR THE SERVICES RE NDERED OUTSIDE INDIA DO NOT PARTAKE THE INCOME PAYMENTS AND ACCORDINGLY IT IS NOT TAXAB LE IN INDIA. HE FINALLY PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COU RT IN THE CASE OF GE TECHNOLOGY CENTRE PVT LTD AND ANOTHER REPORTED IN 327 ITR 456 (SC) AND DELETED THE DISALLOWANCE OF OVERSEAS COMMISSION IN THE SUM OF RS 1,18,85,513 /-. AGGRIEVED , THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUND:- 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED ON FACTS AS WELL AS IN LAW IN HOLDING THAT TDS IS NOT APPLICABLE ON THE COMMISSION PAID OUTSIDE INDIA THROUGH FOREIGN REMITTANCE, IGNORING THE FACT THAT NO CERTIFICATE WAS OBTAINED U/S 195(2) BEFORE THE FOREIGN REMITTANCE AND AS SUCH, INCOME T HROUGH THAT FOREIGN REMITTANCE DEEMED TO ACCRUE AND ARISES IN INDIA. 6 ITA NO.971KOL/2015 M/S GOODRICKE GROUP LTD A.YR.2007-08 6 5.3. THE LD DR VEHEMENTLY RELIED ON THE ORDER OF TH E LD AO. IN RESPONSE TO THIS, THE LD AR VEHEMENTLY RELIED ON THE ORDER OF THE LD CITA. 5.4. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THAT THE ASSESSEE COMPANY ENGAGED NON-RESIDENT EXPORT AGENTS AFTER ENTERING INTO AN A GREEMENT FOR RENDERING THEIR SERVICES OUTSIDE INDIA TO MARKET ASSESSEE COMPANYS TEA OUTS IDE INDIA IN VARIOUS TERRITORIES SPECIFIED IN THE AGREEMENT. THE ENTIRE DETAILS OF COMMISSION PAID TO FOREIGN AGENTS WERE DULY FILED BEFORE THE LD AO. AS PER THE TERMS OF THE AGREEMENT AND BASED ON THE EXPORT OF TEA AGAINST ORDERS OBTAINED BY THEM OUTSI DE INDIA, THESE EXPORT AGENTS WERE PAID COMMISSION IN FOREIGN CURRENCY OUTSIDE INDIA. THE FACT THAT THE SERVICES OF SUCH AGENTS WERE RENDERED OUTSIDE INDIA AND THE PAYMENTS WERE MADE AGAINST SUCH SERVICES OUTSIDE INDIA WERE NOT IN DISPUTE, BUT THE REJECTIO N OF THE SAID DEDUCTION WAS FOR THE REASON OF NON-DEDUCTION OF TAX AT SOURCE U/S 195 OF THE ACT. THE LD AO IN SUPPORT OF IT RELIED THE DECISIONS OF THE HON'BLE SUPREME COURT I N TRANSMISSION CORPORATION OF AP LIMITED VS. CIT (239 ITR 587) AND THE HONBLE KARNA TAKA HIGH COURT IN THE CASE OF CIT VS. SAMSUNG ELECTRONICS CO. LTD. (320 ITR 209), WHICH ACCORDING TO THE LD AR WAS DUE TO AN ERRONEOUS APPRECIATION OF THE RATIO OF TH E SAID DECISIONS OF THE RESPECTIVE HONBLE COURTS. THE LD AR POINTED OUT THAT THE KARN ATAKA HIGH COURT DECISION IN 320 ITR 209 (SUPRA) WAS OVERRULED BY THE HON'BLE SUPREM E COURT IN THE CASE OF GE INDIA TECHNOLOGY CENTRE PVT. LTD. VS. CIT AND ANOTHER (32 7 ITR 456) AND IN GE INDIA TECHNOLOGY CENTRES CASE THE HONBLE SUPREME COURT EXPLAINED THE DECISION IN 239 ITR 587 (SUPRA) AND OBSERVED THAT IN THAT CASE, TH E NON-RESIDENTS HAD ENTERED INTO A COMPOSITE CONTRACT WHICH CONSISTS OF SUPPLY OF PLAN T AND MACHINERY AND EQUIPMENTS IN INDIA AND ALSO ITS INSTALLATION AND COMMISSION IN I NDIA AND ADMITTED THAT, THE ERECTION AND COMMISSIONING OF PLANT AND MACHINERY AND EQUIPM ENT GAVE RISE TO INCOME LIABLE TO TAX IN INDIA. IN VIEW THEREOF, IT WAS HELD THAT THE PAYMENT REQUIRED TO BE MADE TO THE NON-RESIDENTS INCLUDED AN ELEMENT OF INCOME AND ACC ORDINGLY SECTION 195(1) IS ATTRACTED AND IT IS NECESSARY FOR THE PAYER TO MAKE AN APPLIC ATION U/S 195(2) OF THE ACT TO THE 7 ITA NO.971KOL/2015 M/S GOODRICKE GROUP LTD A.YR.2007-08 7 INCOME TAX OFFICER AND OBTAIN HIS PERMISSION FOR DE DUCTING TAX AT SOURCE AT A LOWER AMOUNT. THE HON'BLE SUPREME COURT IN THIS CASE ALSO OBSERVED THAT THE DECISION IN TRANSMISSION CORPORATION CASE WAS MISUNDERSTOOD BY THE HONBLE KARNATAKA HIGH COURT TO MEAN THAT IT IS NOT OPEN FOR THE PAYER TO CONTEND THAT IF THE AMOUNT PAID BY HIM TO A NON-RESIDENT IS NOT AT ALL CHARGEABLE TO TAX I N INDIA, THEN NO TAX AT SOURCE IS REQUIRED TO BE DEDUCTED FROM SUCH PAYMENT. THE HON'BLE SUPRE ME COURT FURTHER OBSERVED THAT THE HONBLE KARNATAKA HIGH COURT COMPLETELY LOSES S IGHT OF THE PLAIN WORDS OF SECTION 195(1) WHICH IN CLEAR TERMS LAYS DOWN THAT TAX AT S OURCE IS DEDUCTIBLE FROM SUMS CHARGEABLE UNDER THE PROVISIONS OF THE ACT, I.E., CHARGEABLE UNDER SECTIONS 4, 5 AND 9(1) OF THE ACT. THE LD AR FURTHER SUBMITS THAT AN APPLICATION U/S 195(1) OF THE ACT WOULD ATTRACT IF AND ONLY IF THE PAYMENT TO A NON-R ESIDENT PARTAKES THE CHARACTER OF INCOME PAYMENT AND IF THE PAYMENT IS NOT IN THE NAT URE OF INCOME PAYMENT AT ALL, THEN SECTION 195(1) OF THE ACT DOES NOT OPERATE AS THE S AID SECTION SAYS SUM CHARGEABLE UNDER THE PROVISIONS OF THE ACT. IN THIS CONNECTI ON THE LD AR BY REFERRING TO SECTION 40(A)(I) SUBMITS THAT IT ALSO USED THE EXPRESSION SUMS CHARGEABLE UNDER THIS ACT, WHICH SHOWS THAT THE REMITTANCE GOT TO BE OF A TRAD ING RECEIPT WHICH IS LIABLE TO TAX IN INDIA. AS PER THE LD AR, IF THE TAX IS NOT SO ASSES SABLE THERE IS NO QUESTION OF TAX AT SOURCE BEING DEDUCTED. IN SUPPORT THEREOF, THE LD A R REFERRED TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF VIJAY SHIP BRE AKING CORPORATION AND OTHERS VS. CIT (314 ITR 309). SECTION 195 CASTS AN OBLIGATION THAT THE TAX IS TO BE DEDUCTED AT SOURCE TO BE PAID TO THE REVENUE BY THE PAYER WHO M AKES PAYMENT TO A NON-RESIDENT IF SUCH PAYMENT GIVE RISE TO AN INCOME CHARGEABLE TO T AX. THUS, THE SAID SECTION ACCORDING TO THE LD AR IS TO BE READ IN CONFORMITY WITH THE C HARGING SECTIONS I.E SECTIONS 4, 5 AND 9 AS BECAUSE OF THE WORDS SUMS CHARGEABLE UNDER TH E PROVISIONS OF THE ACT. IN VIEW THEREOF IF THE COMMISSION PAID TO THE EXPORT AGENT DOES NOT CONTAIN THE ELEMENT OF INCOME CHARGEABLE TO TAX IN INDIA, THE PAYER CANNOT BE MADE LIABLE TO DEDUCT TAX U/S 195 AND ACCORDINGLY SUCH PAYMENT CANNOT BE DISALLOWED UNDER CLAUSE A(I) OF SECTION 40 OF THE ACT. THE LD AR ALSO REFERRED TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE 8 ITA NO.971KOL/2015 M/S GOODRICKE GROUP LTD A.YR.2007-08 8 CASE OF CIT VS. TOSHOKU LIMITED (125 ITR 525 ) AND EMPHASIZED THE OBSERVATIONS OF THE COURT AT PAGE 531 WHICH IS AN UNDER: IN THE INSTANT CASE, THE NON-RESIDENT ASSESSEE DID NOT CARRY ON ANY BUSINESS OPERATIONS IN TAXABLE TERRITORIES. THEY ACT AS SELLING AGENTS OUTSIDE INDIA. THE RECEIPT IN INDIA OF THE SALE PROCEEDS OF TOBACCO REMITTED OR CAUSED TO BE REMITTED BY THE PURCHASER FORM ABROAD DOES NOT AMOUNT TO AN OPERATION CARRIED OUT BY THE ASSESSEE IN INDIA AS CONTEMPLATED BY CLAUSE (A) OF THE EXPLANATION TO SE CTION 9(1)(I) OF THE ACT. THE COMMISSION AMOUNTS WHICH WERE EARNED BY THE NON-RES IDENT ASSESSEE FOR SERVICES RENDERED OUTSIDE INDIA CANNOT, THEREFORE, BE DEEMED TO BE INCOME WHICH ARE EITHER ACCRUED OR ARISEN IN INDIA. THE HIGH COURT WAS, THE REFORE, RIGHT IN ANSWERING THE QUESTION AGAINST THE DEPARTMENT. THE LD AR SUBMITTED THAT AN IDENTICAL QUESTION OF D ISALLOWANCE OF COMMISSION PAID TO NON-RESIDENT AGENT WITHOUT DEDUCTION OF TAX AT SOUR CE CAME UP BEFORE THE LD CIT IN THE REVISION PROCEEDINGS U/S 263 OF THE ACT FOR ASST YE AR 2005-06 AND ON SIMILAR FACTS, THE LD CIT-II, DROPPED THE SAID ISSUE FROM HIS ORDER U/ S 263 OF THE ACT. WE FIND THAT THE CIRCULAR NO. 786 DATED 7.2.2000 HAS BEEN WITHDRAWN BY CIRCULAR NO. 7 OF 2009 BUT IN OUR CONSIDERED OPINION, SUCH WITHDRAWAL OF THE CIRC ULAR HAS NO EFFECT IN RESPECT OF THE YEAR UNDER APPEAL AS IT DID NOT HAVE RETROSPECTIVE EFFECT. THIS HAS BEEN ALREADY SETTLED IN FAVOUR OF THE ASSESSEE IN THE FOLLOWING DECISION S :- A) DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ANGELIQUE INTERNATIONAL LTD REPORTED IN 359 ITR 9 (DEL) B) DECISION OF HONBLE ALLAHABAD HIGH COURT IN THE CAS E OF CIT AND ANOTHER VS MODEL EXIMS REPORTED IN 358 ITR 72 (ALL) THE LD AR ALSO SUBMITTED THAT THE LD CITA HAD DULY TAKEN NOTE OF THE FACT THAT THE ASSESSEE HAD INDEED APPLIED FOR SEEKING EXEMPTION U /S 195(2) OF THE ACT FOR MAKING REMITTANCE OF COMMISSION OUTSIDE INDIA WITHOUT DEDU CTION OF TAX AT SOURCE TO ITS NON- RESIDENT EXPORT AGENTS FOR SUBSEQUENT YEARS AND THE SAID APPLICATION WAS APPROVED WITHOUT DEDUCTION OF TAX AT SOURCE BY ITO, INTERNAT IONAL TAXATIAON (1), KOLKATA. IN VIEW OF THE AFORESAID FINDINGS AND RESPECTFULLY FOL LOWING THE VARIOUS JUDICIAL PRECEDENTS RELIED UPON HEREINABOVE , WE FIND THAT THE DISALLOW ANCE OF OVERSEAS COMMISSION WHICH 9 ITA NO.971KOL/2015 M/S GOODRICKE GROUP LTD A.YR.2007-08 9 WAS DELETED BY THE LD CITA IS IN ACCORDANCE WITH LA W AND DOES NOT REQUIRE ANY INTERFERENCE. ACCORDINGLY, THE GROUND NO. 3 RAISED BY THE REVENUE IS DISMISSED. 6. THE GROUND NO. 4 RAISED BY THE REVENUE IS GENERA L IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 04.08.2017 SD/- SD/- [N.V. VASUDEVAN] [ M.BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 04.08.2017 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-4(1), KOLKATA, P-7, CHOWRINGHEE SQU ARE, KOLKATA-700069 2. M/S GOODRICKE GROUP LTD., CAMELLIA HOUSE, 14, GU RUSADAY ROAD, KOLKATA-700019 3..C.I.T.(A)-2, KOLKATA 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S