TMI Blog2014 (8) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... agent for his services rendered outside India is squarely covered in favour of the assessee by a recent Tribunal decision rendered in the case of Asstt. CIT v. Lohia Starlinger Ltd. [ 2014 (10) TMI 700 - ITAT LUCKNOW] the second amendment cited by Revenue being insertion of explanation 2 to section 195(1) of the Act, has no relevance because in the present case, payer is already resident of India and therefore, already within the purview of section 195 (1) and there is no need in the present case to extend or broaden the scope of the term any person responsible for paying to a non-resident appearing in sub section 1 to section 195 of the Act. But the requirement that the payee is liable to tax in India in respect of the impugned payment has to be there to attract the provisions of section 195 (1) but in the present case, this aspect is covered in favour of the assessee and against the revenue by the judgment of Hon'ble Allahabad High Court in M/S MODEL EXIMS [ 2014 (6) TMI 290 - ALLAHABAD HIGH COURT] wherein held payment of commission to foreign agents did not entitle such foreign agents to pay tax in India and thus the TDS was not liable to be deducted u/s 195 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law and on facts in deleting the addition of ₹ 2,50,000/- on account of low G.P, rate without appreciating the facts that the assessee was not maintaining stock register. 2.1 Learned D.R. of the Revenue supported the assessment order whereas Learned A.R. of the assessee supported the order of CIT(A). 3. We have considered the rival submissions. We find that this issue has been decided by learned CIT(A) as per para 4 5 of his order which are reproduced below for the sake of ready reference: 4. That regarding EEFC A/c. with State Bank of Patiala, Kanpur Learned ACIT [3] has alleged us that we have not withdrawn 90000 EUROS from this a/c. on 01.04.2003 as alleged ,when the rate was 1 EURO - ₹ 51, with an intention to park the funds in foreign currency in order to take the benefit on devaluation of RUPEES against EURO as and when it occurs. The Learned ACIT [3] further added that we have withdrawn 90000 EUROS on 31.12.2003 when the exchange rate was 1 EURO - ₹ 57 and has added ₹ 622130.00 as GAINS ON FLUCTUATION ON FOREIGN EXCHANGE. In this context we have to submit that the Learned ACIT [3] has completely ignored the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 167.21 where the partner had his meals. 3 04.11.03 350901 No tickets or even the bill of travel agent was produced It is totally a false allegation because we have got each and every supporting in respect of foreign travel undertaken by us. Further, the business generated because of this trip is amounting to ₹ 4813485.00 and a proposed business of another ₹ 50.00 lacs or so. 4 01.01.04 18147 Tour to SHARJAH has not generated any further business. It was further alleged that it was a Tourist Resort where assessee visited. Is it necessary that every foreign tour shall generate further business? We have to visit various prospective buyers wherever they are. And every meeting does not necessarily fetch business. This trip was undertaken by the partner Shariq Rasul to Sharjah/Dubai for sales promotion.Sharjah /Oubai are big saddlery centers having immense business potential. Besides, Sharjah is not only a tourist resort ,i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in law and on facts in deleting the addition of ₹ 14,69,163/- on account of disallowance of commission to a non-resident for the technical services rendered by him without appreciating the facts that there is no explicit provision under the Act for making a payment to non-resident without deduction of tax at source. 3. The learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the above addition without appreciating the Board's Circular No. 7 of 2009. 4. The learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the above addition without appreciating the settled principle in respect of interpretation of prospective or retrospective nature of amendment in the statute as laid down by the Hon'ble Supreme Court in the case of CIT v. Gold Coin Health Food Pvt. Ltd. (2008) 304 ITR 308 (SC) and CIT v. Moser Baer India Ltd. [2009] 315 ITR 460 (SC). 5. The learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in deleting the above addition without appreciating the fact that services rendered by the non-resident agent to procure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head Salaries . Explanation 2 to section 195(1) inserted by the Finance Act, 2012 with retrospective effect from 01/04/1962 Explanation 2.- For the removal of doubts, it is hereby clarified that the obligation to comply with sub-section (1) and to make deduction there under applies and shall be deemed to have always applied and extends and shall be deemed to have always extended to all persons, resident or non-resident, whether or not the non-resident person has- (i) a residence or place of business or business connection in India ; or (ii) any other presence in any manner whatsoever in India. 9.4 In this regard, we find that explanation 2 to section 9(1)(vii) has already been taken into consideration by CIT(A) as per Para 4.3 of his order and by following the Board's Circular No. 786 dated 07/02/2000, it was held by him that services rendered by LEG are not managerial services falling within Fees for Technical Services (FTS). We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es not render any help to the Revenue. We would also like to observe that the stand of the revenue is this that as per this explanation 2 to section 195 (1), TDS is to be deducted u/s 195 in all cases where payment is made to a non resident. But there is no force in this contention because this requirement has to satisfied that the amount being paid to the payee is liable to tax in India in the hands of the payee. As per this explanation, the amendment is this that if the payee is liable to tax in India in respect of the impugned payment than the payer cannot claim that he is not supposed to deduct TDS because the payer is neither a resident of India nor the payer has any place of business in India or business connection in India as it was in the much discussed case of Vodafone. Demand was raised in that case in spite of adverse judgment of Supreme Court on the basis of this Explanation. Although that demand in the case of Vodafone has not reached finality but the same has no relevance in the present case because the assessee deductor is resident of India and hence, no enlargement of scope as per this Explanation is required in the present case. But since as per Board Instruction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned A.R. of the assessee out of which two are Tribunal decisions and one is the judgment of Hon'ble Apex Court rendered in the case of National Thermal Power Co. Ltd. v. CIT (supra) which is in connection with admission of additional ground being legal issue. 9.9 We have already seen and discussed that the second amendment cited by Revenue being insertion of explanation 2 to section 195(1) of the Act, has no relevance because in the present case, payer is already resident of India and therefore, already within the purview of section 195 (1) and there is no need in the present case to extend or broaden the scope of the term any person responsible for paying to a non-resident appearing in sub section 1 to section 195 of the Act. But the requirement that the payee is liable to tax in India in respect of the impugned payment has to be there to attract the provisions of section 195 (1) but in the present case, this aspect is covered in favour of the assessee and against the revenue by the judgment of Hon'ble Allahabad High Court cited by the learned AR of the assessee. 10. In view of the above discussion, we do not find any merit in the case sought to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in para No. 11, we find that CIT(A) has examined the issue in detail and has given a finding that the assessee's business involves travelling outside India and visit to Europe and USA has been justified because exports were made by the assessee to these countries. He has also given a finding that the visit to UAE has not been substantiated for the purpose of business. He has confirmed the disallowance of ₹ 2 lac in respect to visit to UAE and in the facts and circumstances of the case and in view of this fact that learned DR of the revenue could not controvert these findings of CIT(A), we do not find any reason to interfere in the order of CIT(A) on this issue. This ground is rejected. 11. Ground No. 8 is as under: 8. The learned Commissioner of Income Tax (Appeals)-II, Kanpur has erred in law and on facts in restricting the addition of ₹ 57,656/- on account of disallowance of business promotion expenses to ₹ 10,000/- without appreciating the facts that the assessee failed to explain the exigency of the expenses under this head during the course of assessment proceedings. 12. On this issue also, Learned D.R. of the Revenue suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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