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2014 (5) TMI 1072 - AT - Income TaxDisallowance u/s.40(a)(i) - non deduction of tax at source on the commission payments made to the nonresident u/s.195(2) - CIT(A) deleted the disallowance - Held that:- The assessee has paid commission to foreign agent M/s.Met-Tech International Pte, Singapore for procuring export orders for the assessee from companies located in Japan, Indonesia and UK. The Commissioner of Income Tax (Appeals) has given categoric finding that the foreign agent had not extended any technical services but had only procured export orders. The commission was paid by the assessee on various dates through banking channels for the services rendered outside India. The Commission has been remitted in foreign currency outside India. The findings of the Commissioner of Income Tax (Appeals) on the issue remain unrebutted. The Hon’ble Supreme Court in the case of GE India Technology Vs. CIT reported as [2010 (9) TMI 7 - SUPREME COURT OF INDIA ] has held that, if the income chargeable to tax is not assessable in India, there is no question of deduction of tax at source. No error in the findings of the Commissioner of Income Tax (Appeals) on the issue. - Decided in favour of assessee. Disallowance u/s.14A - CIT(A) deleted the disallowance - Held that:- The provision of Rule 8D cannot be applied in the assessment year under appeal i.e. 2007-08. However, reasonable disallowance has to be made for earning tax free income. The assessee has made additional investment of F1.33 Crores during the relevant financial year. Even if the investment is made from own funds, the assessee must have been spending some amount in managing its investment portfolio which is to the tune of F2.62 Crores. In our considered view, 5% of the dividend income earned is just and reasonable for making disallowance u/s. 14A. - Decided partly in favour of revenue.
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