TMI Blog2015 (6) TMI 1196X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer can make disallowance if the assessee fails to produce the relevant evidence with respect to any particular expenditure, but the disallowance on ad-hoc basis is not permissible under the law. We, therefore, find no merit in these grounds of appeal - Decided in favour of assessee. - ITA No.636/LKW/2013 And C.o. No.42/LKW/2013 - - - Dated:- 18-6-2015 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. A. K. GARODIA, ACCOUNTANT MEMBER For The Department : Shri. Amit Nigam, D.R. For The Assessee : Shri. Ashish Jaiswal, Advocate ORDER PER SUNIL KUMAR YADAV: This appeal is preferred by the Revenue against the order of the ld. CIT(A), inter alia, on the following grounds:- 1. That the Ld. Commissioner of Income tax (Appeals)-II, Kanpur has erred in law and on facts in deleting addition of ₹ 24,84,645/- made by the assessing officer on account of non-deduction of TDS on payment of commission to Foreign Agent without appreciating, the facts brought on record by the Assessing Officer during the course of assessment proceedings. 2. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed and the order passed by the Assessing Officer dated 27.02.2013 to be restored. 2. In support of the order of the ld. CIT(A), the assessee has filed cross objection. We, therefore, heard the appeal as well as the cross objection together. 3. The main issue involved in the Revenue s appeal is with regard to the deletion of addition of ₹ 24,84,645/- made by the Assessing Officer on account of non-deduction of TDS on payment of commission to foreign agent. 4. The ld. counsel for the assessee has invited our attention to the order of the Tribunal in the assessee s own case for assessment year 2009-10 which is placed on record at pages 59 to 66 of the compilation of the assessee, in which identical issue was discussed and the Tribunal, having followed the judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. M/s Model Exims, 358 ITR 2 (Alld), decided the issue in favour of the assessee and the view taken by the ld. CIT(A) was confirmed. The ld. counsel for the assessee has further contended that since the issue is squarely covered by the earlier order of the Tribunal in the assessee s own case for the immed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act by the Finance Act, 2010, but this aspect has already been examined by the jurisdictional High Court in the case of CIT vs. M/s Model Exims (supra). Following the judgment of the Hon'ble jurisdictional High Court in the case of CIT vs. M/s Model Exims (supra), the Tribunal has concluded in the assessee s own case in the immediately preceding year that tax was not required to be deducted at source on commission payment to foreign agents who has rendered services outside India. The commission paid to foreign agents for procuring orders cannot be called either to rendering of technical services or managerial or consultancy services. These different types of services were examined by the Hon'ble Delhi High Court in the case of Director of Income-tax (International Taxation)-II vs. Panalfa Autoelektrik Ltd. (supra) and their Lordships have held that services rendered for procurement of export orders etc. cannot be treated as managerial services provided by the non-resident to the respondent assessee. Their Lordships further defined the consultancy services and technical services. For the sake of reference, we extract the relevant observation of the Hon'ble High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue nature of the transaction. The Assessing Officer in his order had not bothered to refer and to examine the relevant clauses, which certainly was not the right way to deal with the issue and question. [Para 17] Further, would be incongruous to hold that the non-resident was providing technical services. The non-resident had not undertaken or performed 'technical services', where special skills or knowledge relating to a technical field were required. Technical field would mean applied sciences or craftsmanship involving special skills or knowledge but not fields such as arts or human sciences. [Para 19] The moot question and issue is whether the non-resident was providing consultancy services. [Para 20] The word 'consultant' refers to a person, who is consulted and who advises or from whom information is sought. In Black's Law Dictionary, Eighth Edition, the word 'consultation' has been defined as an act of asking the advice or opinion of someone (such as a lawyer). It may mean a meeting in which parties consult or confer. For consultation service under Explanation 2, there should be a provision of service by the non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the immediately preceding year. The relevant observations of the Tribunal are extracted hereunder for the sake of reference:- 5. The ld. counsel for the assessee has contended that this issue is covered by the order of the jurisdictional High Court and various orders of the Tribunal, particularly in the case of ACIT vs. M/s Model Exims, Kanpur in I.T.A. No. 697/LKW/2013 in the light of CBDT circular and amendments. We find that the view taken by the Tribunal has been approved by the Hon'ble High Court of Allahabad in the case of CIT vs. M/s Model Exims, 358 ITR 2 (Alld). The relevant observations of the Hon'ble High Court are extracted hereunder:- We find that all the questions as framed by the department are covered by our judgment in CIT v. M/s Model Exims, Kanpur, Income Tax Appeal (Def.) No.164 of 2011, decided in favour of the assessee and against the revenue on 10.09.2013 and die judgment in CIT, Kanpur v. M/s Allied Exims, Income Tax Appeal No.313 of 2013 decided on 13.11.2013. In both these judgments we have held, that A.O. did not bring anything on record, which could demonstrate that non-resident agents were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same can be taken. It is a trite law that suspicion, no matter how grave, cannot take place of evidence. In this case, there is even no case of suspicion, leave aside any evidence to the effect that the agents were not only selling agents but also designers and technical advisers. The confirmation from the respective foreign agents that the foreign agents did not have any branch or PE in India further supports the case of the appellant. 5.3.3 The A.O.'s observation that as a selling agent, the agent has to have managerial acumen and, therefore, hit by the provisions of Section 9 (1) (vii), is baseless. The provisions of Section 9 (1) (vii) deals with fees for technical services and it has to be read in that context. Par that matter, everything in life requires managerial skills, like running the household, being an Assessing Officer, running a shop etc. Will that tantamount to providing managerial services in the context of Section 9 (1) (vii)? The answer is clear NO. Thus, the aforesaid payments do not fall within the meaning of FTS' as described in Section 9 (1) (vii) of the Act. 5.3.4 The income of the non-resident was not chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken in other cases of the Tribunal. Nothing has been brought on record by the Revenue in order to demolish the stand taken by the assessee and to establish that non-resident has ever rendered any technical services or consultancy or managerial services. Therefore, we are of the view that since the assessee has simply procured export orders through commission agent for which commission was paid, the assessee was not required to deduct tax at source on the commission paid to the foreign agent. Accordingly we confirm the order of the ld. CIT(A). 11. The other issue raised vide grounds No.6 to 8 relates to disallowances made by the Assessing Officer on ad-hoc basis without pointing out any specific defect in the accounts of the assessee and the ld. CIT(A) has deleted the same for the reason that the Assessing Officer has made ad-hoc disallowances. 12. During the course of hearing before us, similar is the position, as the Revenue could not point out any specific defect in the maintenance of accounts under different heads. No doubt the Assessing Officer can make disallowance if the assessee fails to produce the relevant evidence with respect to any parti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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