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2014 (2) TMI 1384 - AT - Income TaxRevision u/s 263 - TDS deduction on foreign agent export commission - AO allowed assessee’s foreign agent commission payments as expenditure without deduction of any TDS - HELD THAT:- Admittedly, the assessee had made payment to its overseas export agent in lieu of getting export orders and did not deduct any TDS qua the said payments. Per Revenue, the assessee was supposed to deduct TDS in question. The assessee places reliance on the circulars of the ‘board’ bearing No.23 dated 23.7.1969, No.163 dated 29.5.1975 and No.786 dated 7.2.2000. In the first circular, the ‘board’ had clarified that a foreign agent of Indian exporter is not liable to pay any income tax in India. This position continued till the year 2009. It was only in the year 2009 i.e after the impugned assessment year 2008-09 that the ‘board’ decided to withdraw the circular on 22.10.2009. We notice that the hon'ble Delhi high court in the case of CIT vs Angelique International Ltd (supra) has held that the action of the ‘board’ in issuing withdrawal of earlier circulars with effect from 22.10.2009 is only prospective and not retrospective. As a result, we also observe that since the impugned assessment year is 2008-09 i.e well before 22.10.2009, the circular issued in the year 2009 did not have any effect in the assessee’s case. That being so, the Assessing Officer had rightly followed the circular in allowing the assessee’s foreign agent commission payments as expenditure without deduction of any TDS. Rather, in the case of Faizan Shoes Pvt. Ltd [2014 (1) TMI 440 - ITAT CHENNAI] the co-ordinate bench of the Chennai ‘tribunal’ holds that even in assessment year 2009-10, the circular dated 22.10.2009 does not apply. Thus, we hold that the Assessing Officer had taken the only possible view by following the circular issued by the ‘board’ which provided that in case of foreign agent commission payments the said income could not be taxed in India. In this manner, the argument of the assessee challenging the sole reason stated in the section 263 show cause notice succeeds. That leaves us with the latter reason in the impugned order that since the Assessing Officer did not carry out any investigation/ enquiry to determine nature of the commission payments and therefore, the CIT has only remitted the matter back to the Assessing Officer to re-examine the issue which causes no prejudice to the assessee. After considering this plea of the Revenue, it emanates from the case file that factually, the assertion is correct. However, in the show cause notice issued by the CIT, there is no such reason of lack of enquiry forthcoming. We make it clear that in section 263 proceedings, the jurisdiction of the CIT is confined to only those issues which form part of the show cause notice. In this manner, the order under challenge traverses beyond the show cause notice. Since we are dealing with a ‘fiscal’ statute, the powers of the Revenue have to be strictly interpreted. Assessee’s appeal is allowed.
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