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M/s. Cotton Code Garments Versus The Income-tax Officer, Ward-II (3) , Coimbatore

2015 (10) TMI 532 - ITAT CHENNAI

Revision u/s.263 - AO failed to examine the relevant documents/agreement along with the correspondence and other evidences to determine whether the income is chargeable under the provisions of sec.9(1)(vii) read with relevant provisions of the DTAA and the Assessing Officer has not verified the purchase orders along with correspondences with M/s. Tarun Anvil Corporation, USA. - Held that:- Sec.195(1) prescribes that tax has to be deducted while making payment to non-resident, which is chargeable .....

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show the nature of services rendered by non-resident agent. If there are services rendered by non-residents, who have no permanent establishment in India or have any business connection in India, by virtue of which the payment of commission accrued or arose in India then, it is exempted, if the assessee is able to prove that the services were rendered by those non-residents at abroad. In the present case, the assessee has not established the facts on record that the non-resident has rendered se .....

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orders from abroad. Accordingly, the entire issue is remitted back to the file of the AO for fresh consideration and the AO is directed to make necessary enquiry regarding the nature of services rendered by the non-resident agent and the payments made thereof. - Decided in favour of assessee for statistical purposes. - ITA No. 848/Mds/2015 - Dated:- 28-8-2015 - SHRI CHANDRA POOJARI AND SHRI V. DURGA RAO, JJ. For The Appellant : Shri T. Vasudevan, Advocate For The Respondent : Shri Pathlavath Pee .....

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d other evidences to determine whether the income is chargeable under the provisions of sec.9(1)(vii) of the Act read with relevant provisions of the DTAA and the Assessing Officer has not verified the purchase orders along with correspondences with M/s. Tarun Anvil Corporation, USA. 3. The ld. AR submitted that the Commissioner of Incometax erred in his finding that the assessment order dated 27-03- 2013 passed under section 143 (3) by the Income-tax Officer, Ward 2 (3), Coimbatore was erroneou .....

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M/s. Tarun of Anvil Corp. USA and utilized the same in India for the manufacturing of specified garments, without even mentioning in his order as to what the services were and the services rendered by M/s. Tarun of Anvil Corp. USA falls within the scope of Explanation to section 9 (1) (vii) of the Income-tax Act, 1961 and that for the purpose of taxability in India there is no need that the non-resident should have PE or business connection in India and should have rendered services in India. T .....

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mmissioner of Income-tax failed to note that the Assessing Officer had issued a questionnaire through her letter dated 25-10-2012 in which she had specifically called for explanation from the assessee as to why tax was not deducted at source on overseas commission payment of ₹ 54,93,841. The ld. AR further submitted that the Commissioner of Income-tax also failed to note that in the said letter dated 25- 10-2012 the assessee had been called upon to produce the agreements, terms and conditi .....

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and also failed to note these issues were explained and the documents were furnished to the Assessing Officer by the assessee's authorized representative during hearing of the assessment. 3.3. The ld. AR further submitted that the Commissioner of Income-tax failed to note that the Assessing Officer had issued another letter dated 31-01-2013 in which she had called for original purchase vouchers for yarn, textile material, readymade garments, export invoices etc., and the details of out-sourc .....

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ioner of Income-tax failed to note that during the inspection, the assessee s records for the financial years 2007- 08 to 2012-13 were subjected to scrutiny by the Income-tax Officer (TOS) and on completion of the scrutiny, he had passed an order dated 6-3-2013 specifically stating that the payments made to M/s. Anvil Corporation USA had been verified and TOS provisions were not applicable on these payments. 3.4. Further, the ld. AR submitted that the Commissioner of Income-tax failed to note th .....

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paid locally were allowed by the Assessing Officer without calling for and verifying the facts and circumstances of the case, the agreement and correspondences for the work done etc., and that therefore the assessment order is erroneous and prejudicial to the interests of Revenue. Further, the ld. AR pointed out that CIT has not discussed the various judicial decisions brought to his notice and relied on by the assessee through written submissions in reply to the show cause notice, before conclu .....

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. 3.5. Further, the ld. AR relied on the order of the Tribunal, Chennai Bench in the case of Shri S. Rajagopal v. ITO in ITA No.1647/Mds/2014 dated 27th March, 2015, wherein the Tribunal observed that the order passed by the Assessing Officer becomes erroneous and prejudicial to the interests of the Revenue under sec.263 in the following cases: (i) The order sought to be revised contains error of reasoning or of law or of fact on the face of it. (ii) The order sought to be revised proceeds on in .....

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rror in the order of the AO, as the AO carried out detailed enquiry before coming to the conclusion that the provisions of TDS are not applicable to the payment made to M/s. Tarun Anvil Corporation, USA towards commission. He has also drew our attention to the order passed by the ITO, TDS, Ward-I(1), Coimbatore dated 6.3.2013, wherein it was observed in similar circumstances that foreign commission paid to M/s. Tarun Anvil Corporation, USA was verified and it is seen that TDS provisions were not .....

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he assessee has placed a letter of Anvil Corporation, without having no date, where it is confirmed that they procured orders from Billabong Group of Companies as an agent on behalf of the assessee. On the other hand, the contention of the ld. DR is that there is no need that non-resident should have PE or business connection in India and rendered services in India and it is enough that the services are utilized in India to assess the fees for technical services u/s.9(1)(vii) of the Act. Accordi .....

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ot liable for deduction of TDS in respect of payment of commission to M/s. Tarun Anvil Corporation, USA and he has not carried out any independent enquiry. The order of the ITO, Coimbatore has no basis on which he came to the conclusion that the payment made to M/s. Tarun Anvil Corporation, is not liable for TDS. Being so, the CIT assumed jurisdiction u/s.263 of the Act, to see whether the payment made to M/s. Tarun Anvil Corporation, USA is liable for TDS or not. The assessee has not placed any .....

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allowed. Sec.195(1) prescribes that tax has to be deducted while making payment to non-resident, which is chargeable under the provisions of the Act. Therefore, the condition precedent for deduction of tax is that the income must be chargeable under the provisions of the Act. In the present case, the assessee has not produced relevant agreement entered into with that foreign agent to show that they were appointed to act as commission agents outside India in their respective countries. 7. It is s .....

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