2014 (4) TMI 1051 - AT - Income Tax

Disallowance u/s 80IB - deduction of TDS on payments of commission to foreign residents - Held that - CIT(A) has adjudicated the issue by holding that appellant was not required to deduct TDS u/s 195 of the Act in respect of commission paid to foreign agents. The CIT(A) has also taken note of the fact that in the immediately preceding year i.e. assessment year 2008-09 the similar view was taken by CIT(A) which was later on approved by the Tribunal. Deletion of addition of Rs. 2, 00, 000/- made by the Assessing Officer having considered the gross profit rate declared by the assessee at lower side. The Assessing Officer has made a test check of the books of account of the assessee and without pointing out any fault therein the ad hoc addition was made. The CIT(A) has deleted the addition having relied upon the case laws referred to by the assessee on the ground that no additions are possible on conjectures and surmises. - Since the addition was made on ad hoc basis without pointing out any fault in the maintenance of books of account the addition is not called for - Decided against Revenue.

Summary

Issues:
1. Disallowance of deduction claimed under section 80IB of the Act.
2. Disallowance of payment made to Non-residents without TDS on export sales.

Issue 1: Disallowance of deduction claimed under section 80IB of the Act:
The appeal by the assessee challenged the disallowance of a deduction claimed under section 80IB of the Act. The CIT(A) upheld the disallowance based on the judgment of the Hon'ble Apex Court in the case of Liberty India v. CIT [2009] 225 CTR 233, ruling that Duty Draw Back and other export incentives are not eligible for deduction under section 80IB as they are not considered income derived from industrial undertaking. The ITAT confirmed the CIT(A)'s order, citing the judgment and finding no infirmity in the decision.

Issue 2: Disallowance of payment made to Non-residents without TDS on export sales:
The Revenue's appeal contested the deletion of an addition made under section 40(a)(i) due to payments made to Non-residents without TDS on export sales. The CIT(A) ruled in favor of the assessee, stating that TDS was not required on commission paid to foreign agents, as per various Tribunal orders and circulars. The CIT(A) also noted that similar views were upheld in previous years and cited relevant judgments to support the decision. The ITAT upheld the CIT(A)'s order, finding it in line with Tribunal and High Court decisions. Additionally, the ITAT overturned the Assessing Officer's ad hoc addition of Rs. 2,00,000, as it was made without evidence of fault in the books of account. The ITAT dismissed both the assessee's and Revenue's appeals, confirming the decisions of the CIT(A) on both issues.

This detailed analysis of the judgment provides a comprehensive overview of the issues involved and the reasoning behind the decisions made by the authorities involved.