TMI Blog2014 (6) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... on the higher side – thus, there was no reason to interfere with the order of the CIT(A) in restricting disallowance to 50% of 15% - Decided against Revenue. Deletion of interest u/s 234B and 234C of the Act – Held that:- CIT(A) rightly held that charging of interest u/s 234A, 234B, 234C & 234D are mandatory and he has directed the AO to re-compute correct interest u/s 234B & 234C of the Act while giving effect to the order – Decided against Revenue. - ITA Nos. 84/Mds/2014, 85/Mds/2014 - - - Dated:- 10-4-2014 - Shri A. Mohan Alankamony And Shri Challa Nagendra Prasad,JJ. For the Appellant : Mr. Guru Bhashyam, JCIT For the Respondent : Mr. G. Baskar, Advocate ORDER Per Challa Nagendra Prasad, JM: Both these appeals are filed by the Revenue against the orders of Commissioner of Income Tax (Appeals)-IV, Chennai dated 05.09.2013 18.10.2013 respectively for the assessment year 2010-11. 2. The common ground in both these appeals of the Revenue is that Commissioner of Income Tax (Appeals) erred in deleting disallowance made under section 40(a)(ia) of the Act on account of non-deduction of tax at source on payment made to foreign commission agen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the case of M/s. Farida Shoes P.Ltd. in ITA Nos.190 191/Mds/2014 dated 28.03.2014, the co-ordinate Bench of this Tribunal decided the issue as under:- 5. Heard both sides. Perused orders of lower authorities and the case laws relied on. In all these appeals, Assessing Officer disallowed agency/sales commission paid by the assessee to the non-resident agents on the ground that assessee has not deducted TDS under section 195 of the Act and therefore sales commission paid by the assessee is not allowable expenditure under section 40(a)(i) of the Act. The Commissioner of Income Tax (Appeals) elaborately considered this issue and held that sales commission paid by assessees is not chargeable to tax in India as the services were rendered outside India by nonresidents and therefore, provisions of section 195 have no application so as to disallow commission payments under section 40(a)(i) of the Act. While holding so, the Commissioner of Income Tax (Appeals) considered various decisions on the issue including the decision of the Hon ble Supreme Court in the case of GE India Technology Centre P.Ltd. (supra). The Commissioner of Income Tax (Appeals) in one of the cases before us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s case. In the case of M/s. Prakash Impex vs AC!T ,(supra), the Coordinate Bench of !TAT Chennai has considered the very same issue and observed that the commission paid to non-resident agents for the services rendered outside India and such payments are not charqeable to tax India and therefore, the provisions of section 195 are not !applicable view of the decision of the Hon 'ble Supreme Court in the case of GE India Technology Centre P. Ltd. v. CIT (supra). 11. In the case of CIT v. EON Technology (P) Ltd., the Hon'ble Delhi High Court has also held that the commission payment to its British parent/ holding company ETUK could not said to have been accrued to ! ETUK in India and therefore, the assessee was not liable to deduct tax at source from payment of commission to ETUK. The head note of adder is reproduced hereunder: Section 9 of the Income-tax Act, 1961 - Income - Deemed to accrue or arise in India Assessment year 2007-08 - Assesseecompany was engaged in business of development and export of software - During. relevant assessment year, it had paid commission to its British parent/holding company ETUK on sales and amounts realized on export contracts proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is covered in favour of the assessee and section 195 have no application to assessee's case. Accordingly, the appeal of the Revenue is dismissed. I have considered the assessee's submissions as well as the orders of the Hon'ble ITAT in the case of M/s. Farida Shoes P Ltd (ITA No.159/Mds/2013 dated 11.04.2013 for A.Y. 2008-09). The assessee company is engaged in the business of manufacturing an export of leather goods. As explained by the assessee, it is availing the services of certain non-resident agents for procuring export orders for the assessee for which it is paying commission. Perusal of the assessee's submissions shows that the said non-resident agents have no business connection in India nor they have any permanent establishments in India. They are procuring export orders for the assessee. Thus, the said non-resident agents are operating outside the country and all the services are rendered abroad only. In other words, though the said non-residents are rendering services to the assessee (Indian company), these services are rendered totally outside the country. In such a situation the payments (commissions) made to such agents are not liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent appeals of the instant assessee for A.Ys. 2008-09, 2009-10 and 2010-11 under consideration. Therefore respectfully following the decision of ITAT in the case of M/s. Farida Shoes P.Ltd. (in ITA No.159/Mds/2013) dated 11.04.2013), I hold that the above transactions of commission payments to the non-residents for procuring export orders, are not assessable to tax in India and consequently the assessee company is not under any obligation to deduct the TDS on the above commission payments u/s.195 of the Act. Therefore, the provisions of sec.40(a)(i) have no application in the present case. Accordingly, the additions made by the Assessing Officer in all the three assessment years under consideration on account of disallowance of commission payments for nondeduction of TDS u/s.40(a)(i) r.w.s. 195 of the Act are not justified and deleted. 6. Similar issue has been considered by this Tribunal in the case of ITO Vs. Faizan Shoes (P.) Ltd (58 SOT 245), wherein co-ordinate bench of this Tribunal, to which one of us is a party, after considering the decision of the Hon ble Supreme Court in the case of GE India Technology Centre P.Ltd. (supra) held that sales commission paid by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal hearings and on a random test check on the same was largely found to be in order. As such, the ad-hoc addition made by the Assessing Officer of 15% of such expenses appears to be on the higher side. However, considering the nature of business as also the expenses claimed some of which is seen to be only evidenced by self-vouchers etc. I restrict the additions to fifty percent of that made by the Assessing Officer. 9. On going through the above order, we do not find any good reason to interfere with the findings of the Commissioner of Income Tax (Appeals) in restricting disallowance to 50% of 15%. Therefore, the grounds of appeal raised by the Revenue on this issue are rejected. 10. There is one more issue in the appeal of the Revenue in ITA No. 85/Mds/2014, wherein the Revenue is challenging the order of the Commissioner of Income Tax (Appeals) in deleting interest charged under section 234B 234C of the Act. On a perusal of the impugned order, we find that Commissioner of Income Tax (Appeals) had in fact held that charging of interest under section 234A, 234B, 234C 234D are mandatory and he has directed the Assessing Officer to recompute correct interest under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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