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2014 (6) TMI 1040 - AT - Income TaxPayment made as kickbacks to Iraqi authorities - illegal payment within the provisions of Section 37(1) and paid under the "Oil for Food Programme" of UNO and a CBDT Memorandum No.414/117/2005-IT (Inv,-1) dated 18.11.2005 read with Volcker Committee's Report which confirmed the illegality of the payments - nature of commission payment - HELD THAT:- As decided in case of TIL Limited vs. ACIT [ 2007 (3) TMI 404 - ITAT KOLKATA ] Volker Commission Report, so far as the same is offending to the interests of India, is mainly concerned about doling out permits to various parties including some Indian parties as well to procure oil from Iraqi oil fields at controlled/subsidized rates and have no direct connection with supply of tractors and allied materials to Iraq. Hence, in our view, there is no sound basis for connecting the appellant’s case to the Volker Commission Report. It is also apparent that neither the Assessing Officer nor the CIT(A) had access to the said Volker Commission Report. Hence, this particular allegation about the appellant’s name being mentioned in the Volker Commission Report cannot stand. Records show that even these contingencies also did not arise in this case as neither the name of appellant company has been proved to have figured in the Volker Commission Report nor has the payment been proved to be of the nature of a kick-back nor even it has been shown that the necessary permission from UN was not taken. So far as the nature of the payment is concerned, it has clearly been established that the payment was made purely for the purpose of procuring export order of Forklift Trucks to Iraq and also certain after-sales services performed by the Agent in Iraq and was of the nature of commission payment. As stand taken by the learned CIT(A) that in absence of deduction of tax at source from the payment, it is hit by the provisions of section 40(a)( i) of the Act, also is not tenable. There is nothing on record to show that any part of the activities of the Iraq; Agent was performed in India. The payment was also received by them in Jordan. Absence of any Permanent Establishment or Business connection of the Agent in India also takes the case out of the purview of the deeming provisions regarding accrual of income in India as envisaged in section 5(2) - in this case, neither was the Commission payment received by the non-resident Agent in India nor did any income accrue or arise nor is deemed to accrue or arise to it in India. Hence, there was no liability on the part of the appellant company to deduct any tax from the amount of Commission payment made by it to the Iraqi Agent in terms of the provisions of section 195 of the Act .- there is nothing on record to show that the full amount as claimed by the appellant company was not actually paid or that some part of it was routed back to the appellant company or its Directors in an indirect or underhand way. Therefore, there is no case for disallowing the Commission payment in this case from any angle whatsoever. Taking into consideration all these aspects, we hold the Commission payment under consideration is fully allowable. We therefore, reverse the orders of the lower authorities and delete the entire disallowance in this regard. - Decided in favour of assessee.
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