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2015 (11) TMI 1205 - AT - Income TaxAddition under section 40A(2)(b) - CIT(A) deleted addition - Held that:- The assessee has failed to substantiate the work performed by Mr. Preetpal Singh. The ld. AR also could not controvert the argument of the ld. SR DR that the salary paid by the assessee company to Mr. Preetpal Singh for the post of Vice President Marketing was much higher than the salary paid by the sister concern of the assessee to him for the role of Director of that company. Thus, we find that payment of remuneration to Mr. Preetpal Singh was excessive having regard to the fair market value of services rendered by him. We also agree with the contention of the ld. Sr DR that the assessee failed to explain and substantiate the needs of the business of the assessee for hiring services of Mr. Peetpal Singh and the benefit accrued to the business of the assessee by inducting Mr. Peetpal Singh. The offer price in letter of ‘Swastik Outsourcing’, submitted by the assessee before the learned Commissioner of Income-tax is only an imaginary figure which never materialized. In our view, the assessee has failed in all tests laid down in decision of Spark Hotels (P) Ltd (2012 (6) TMI 689 - ITAT DELHI ) with regard to remuneration paid to Mr. Preetpal Singh. In view of the facts and circumstances of the case and we are of the opinion that allowance of salary/ remuneration to Mr. Preetpal Singh restricted by the Assessing officer to 50% of the amount paid is justified and therefore, the order that of passed by the learned Commissioner of Income-tax (Appeals) on this issue is reversed. Accordingly, the first ground of the Revenue is allowed. Addition under section 40(a)(ia) - commission paid of foreign agents - absence of deduction of tax at source - Held that:- AR has successfully demonstrated that the selling agents were located outside India and service of procuring orders and following payment from buyers etc was performed by them outside India. Once it is established that services are performed outside India, the provision of section 9 are not applicable in the case of foreign residents. The learned Commissioner of Income-tax (Appeals) has discussed the applicability of the circular of the CBDT and we are in agreement with the conclusion of the learned Commissioner of Income-tax (Appeals) on this issue as the assessee was not required to deduct tax at source on the payment made to foreign selling agents - Decided against revenue
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