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2010 (10) TMI 641 - AT - Income TaxAddition - DEPB - Commission as a sale - the ingredients of what is commission are contained in the Explanation to Sec. 194H - if at all such commission agent had rendered any service to the assessee then the assessee would have paid commission to such party directly through the banking channels with proper and prior approval of the RBI - once the genuineness of the commission payments as well as its justification of having been wholly and exclusively incurred for the purpose of assessee s business is established the same becomes admissible as deduction under section 37(1) of the I. T. Act - it is necessary for us to state that the assessee has accounted the export sales turnover at the net figure and claimed DEPB benefits on the gross amounts in accordance with the guidelines issued by the RBI in the light of the Export Import Policy of the Government of India - As the assessee has not paid to the foreign buyers any amount by way of commission but it was only adjustment through the export invoices by way of commission/discount Section 194H also had no role to play - Thus addition deleted Regarding deduction under section 80HHC - no such ground of appeal was raised and argued before Learned Commissioner of Income Tax (Appeals) - CIT(A) has held that the advance tax paid was less than 90% of the tax assessed and therefore the assessee was liable to pay interest under the said section - In the result the appeal of the Revenue as well as the cross objection of the assessee both are dismissed
Issues Involved:
1. Deletion of addition on account of disallowance of Foreign Buyer's Agent Commission under Section 37 (r.w.s. 93). 2. Deduction under Section 80HHC. 3. Interest charged under Section 234B. Issue-wise Detailed Analysis: 1. Deletion of Addition on Account of Disallowance of Foreign Buyer's Agent Commission under Section 37 (r.w.s. 93): The Revenue appealed against the deletion of an addition of Rs. 42,07,936/- made by the Assessing Officer (AO) on the grounds that the commission paid to foreign buyers/importers should be treated as income of the assessee. The AO argued that the commission paid formed part of the sales and thus, should be considered as income. The CIT(A) found that the commission was directly deducted from the export invoices and certified by the banks and the Reserve Bank of India (RBI). The CIT(A) referred to various legal definitions and principles, including the Explanation to Section 194H and the concept of agency, to conclude that the commission payments were genuine and wholly incurred for business purposes. The CIT(A) also noted that the method of accounting adopted by the assessee was in line with RBI guidelines and the Export Import Policy of the Government of India. The Tribunal upheld the CIT(A)'s decision, stating that the net amount received by the assessee was the actual income and there was no additional income to be received. The Tribunal dismissed the Revenue's appeal, emphasizing that the income attributable to the export sales was fully received and accounted for by the assessee. 2. Deduction under Section 80HHC: The assessee raised a cross-objection regarding the deduction under Section 80HHC, arguing that the CIT(A) erred in upholding the AO's working of the deduction at Rs. Nil. However, the Tribunal found that this ground was not raised or argued before the CIT(A). Consequently, the Tribunal dismissed this ground of the cross-objection, as it did not arise out of the order of the CIT(A). 3. Interest Charged under Section 234B: The assessee also contested the interest charged under Section 234B. The CIT(A) had upheld the interest charge on the basis that the advance tax paid was less than 90% of the assessed tax. The Tribunal noted that no material was brought on record to controvert the CIT(A)'s finding. Therefore, the Tribunal held that the charging of interest was consequential and dismissed this ground of the cross-objection. Conclusion: Both the appeal of the Revenue and the cross-objection of the assessee were dismissed. The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 42,07,936/- on account of the foreign buyer's agent commission and found no merit in the assessee's objections regarding the deduction under Section 80HHC and the interest charged under Section 234B. The order was signed, dated, and pronounced in the Court on October 22, 2010.
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