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2013 (10) TMI 873 - AT - Income TaxOverseas Commission Agent - Liability For TDS u/s 195 - Applicability of Section 194H – Held that:- The assessee has been exporting its goods to the non-residents introduced to it by local agents on commission basis - The modus of drawing invoices and recording the transaction in the books has been stated - the amount represents a discount given to the purchases and not a business commission - Once the export invoice is raised and the goods are delivered, the sale transaction is complete - These transactions are found to be on principal to principal basis - There is no element of 'agency' to attract the provisions of section 194H - The overseas parties do not sell the goods as agents of the assessee-company - The assessee is not crediting the personal accounts of the overseas parties - existence or absence of entries in the books of account is not a decisive or a conclusive factor in ascertaining the income or claiming the expenditure - Therefore, no such disallowance u/s 37(1) can be made without appreciating the real nature of the entries made in the books of account - the CIT (A) has correctly deleted the addition – Decided against Revenue. Deletion u/s 40A (2)(b) - There are no instances on similar market conditions for similar quality of the yarn, higher price has been paid to the sister concern than the outsiders - So, no adhoc disallowance in this account is sustainable - it cannot be held that assessee has paid higher price to its sister concern than what was the cost to the assessee for producing the similar quality of the finished fabric. The comparative chart of yarn purchased from M/s PSL International at an average rate of Rs. 125/- per kg is supported by copies of invoices - It is noticed that the purchases from M/s PSL International is at the prevailing market rate - the rate at which purchase of yearn is made from M/s PSL International P. Ltd is comparable to the rate at which purchases are made from third/other parties - The adhoc disallowance at the rate of 1% cannot be approved - The A.O. has not given a finding that the payment made by the assessee is excessive or unreasonable having regard to the fair market value of the goods - This opinion has to be framed before invoking section 40A(2)(a) of the Act – Relying upon Upper India Publishing House [P] Ltd Vs. CIT [1978 (12) TMI 2 - SUPREME Court] - Decided against Revenue. Disallowance of Excess Interest – Held that:- The assessee-company has explained that where payment is made within 30 days interest is paid @ 18% and in other cases, interest is paid @ 21% - This fact has not been disputed by the revenue - The rate of interest chargeable for delayed payments are mentioned in the invoices itself - this clearly established payment policy of the assessee-company – Decided against Revenue.
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