TMI Blog2015 (7) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... y the A.O. As rightly contended by the Ld. CIT/DR, the exact nature of services rendered by the foreign agent was vital in this regard, but the A.O. failed to make any enquiry on this aspect. At the time of hearing before us, the Ld. Counsel for the assessee has failed to bring anything on record to show that any enquiry indeed was made by the A.O. on this aspect. In the absence of any such enquiry made by the A.O. on this vital aspect during the course of assessment proceedings, we find ourselves in agreement with the Ld.CIT that assessment made by the A.O. was erroneous as well as prejudicial to the interest of the Revenue calling for revision under section 263. We, therefore, uphold the impugned order passed by the Ld.CIT under section 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, (18 Taxmann.com 325 (AAR New Delhi) (2012), the AAR in the case of SKI Boilers Driers (P) Ltd., , has held that income arising on account of commission payable to agents outside India even on sales made outside, is deemed to accrue and arise in India and taxable in view of the provisions of section 5(2)(b) r.w.s.9(1)(i). 2.1. The Ld.CIT therefore issued a notice under section 263 requiring the assessee to show cause as to why the assessment made by the A.O. under section 143(3) should not be revised on account of the above error. In reply, the following explanation was offered by the assessee. At the outset, we respectfully submit that the original assessment proceedings for the A.Y. 2010-11 were completed with proper app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o not provide any support to tax department in disallowing such expenditure. The non-resident agent of Indian exporters operates in his own country and no part of his income arises in India and commission is usually routed to him through banking channels in India. Therefore the same is not received by him or on his behalf in India. Accordingly such a foreign agent is not liable to tax in India in view of the Supreme Court decision in the case of CIT versus Toshoku Ltd (125 ITR 525 ). Further the Supreme Court in the case of Ishikawa Jima Harima Heavy Industries Ltd versus DIT (288 ITR 408) held that in order to attract the provisions of section 195 of the Act the services rendered by non-resident should have been rendered in India and also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent, the A.O. had collected information regarding commission payments made to outside agents, the A.O. failed to enquire into the nature of services rendered by them. The record does not suggest that the A.O. had looked into the aspect of the eligibility of the nature of expenses claimed to come to a conclusion on its allowability under the relevant provisions of the Act. The A.O. has completed the assessment without any verification or basis for arriving at the conclusion that the expenditure claimed by the assessee is allowable under sections 37(1) or not hit by section 195 of the Act. The completion of the assessment in such a manner would render the order to be erroneous. While the contentions of the authorised representative may be per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rit by the decision of the Coordinate Bench of this Tribunal in the case of Euroflex Transmissions (India) P. Ltd., vs. ACIT, Circle-2(2), Hyderabad ITA.No.1773/Hyd/2014 dated 01.04.2015 wherein a similar issue was decided by the Tribunal in favour of the assessee holding that the provisions of section 195 would not be applicable to the commission payments made by the assessee to non-resident Indians as such income is not chargeable to tax under the provisions of the Act. The learned D.R. on the other hand, has contended that the error as pointed out by the Ld.CIT vide his impugned order is that the A.O. failed to enquire into the nature of services rendered before allowing the claim of the assessee for deduction on account of payment of co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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