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2015 (12) TMI 1078 - BOMBAY HIGH COURT

2015 (12) TMI 1078 - BOMBAY HIGH COURT - [2016] 383 ITR 236 - Commission payments made to nonresident sales agents - disallowance u/s 40(a)(i) - Held that:- There was no occasion to deduct tax at source in respect of the payment made to the nonresident agent. The income of nonresident commission agent cannot be considered as income arising or accruing in India. Therefore, the provisions of Section 40(a)(i) would have no application for the two Assessment Years under consideration. Not only the e .....

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pondent-Assessee has interest free funds aggregating to ₹ 16.09 Crore. The advances and interest made to group companies by the Respondent-Assessee is to the tune of ₹ 26.55 lakhs. The amounts borrowed in the aggregate being to the extent of ₹ 6.81 lakhs i.e. both working capital and term loans. Thus, as held by this Court in CIT v/s. Reliance Utilities & Power Ltd. (2009 (1) TMI 4 - BOMBAY HIGH COURT ] that where both interest bearing funds and interest fee funds are available .....

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116 of 2013. 2 Both these appeals under Section 260A of the Income Tax Act, 1961 (the Act) challenge the common order dated 19th April, 2013 of the Income Tax Appellate Tribunal (Tribunal) for the Assessment Years 200708 and 200809. 3 Mr. Pinto, learned Counsel appearing for the Revenue urges the following common question of law in both the appeals for our consideration:S. (a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in holding that commissi .....

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t for the Assessment Year 200708, the Commissioner of Income Tax (Appeals) [CIT(A)] decided in favour of the Revenue while for the Assessment Year 200809 the very issue is decided by the CIT(A) in favour of the Assessee. 5 Re:Question (a):( a) For the subject Assessment Year, the RespondentAssessee had during two Assessment Years made payment of commission to nonresident agent in respect of sales made out side India. The Assessing Officer in both the Assessment Years passed an order disallowing .....

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CIT(A) upheld the order of the Assessing Officer on the same ground i.e. withdrawal of the earlier Circular Nos.23/1969 and 786/2000 by Circular No. 7 of 2009. So far as Assessment Year 200809 is concerned, the CIT(A) by order dated 10th October, 2009 allowed RespondentAssessee's appeal. The CIT(A) while allowing RespondentAssessee's Appeal for the Assessment Year 200809, inter alia held that the commission agent did not have any business connection in India as they had no permanent est .....

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gent; (c) Moreover, the order of CIT(A) also holds that the Circular No.7 of 2009 withdrawing the earlier Circulars will not have retrospective effect so as to render Circular No.23 of 1965 and 786 of 2000 inoperative for the Assessment Years; (d) Being aggrieved, the RespondentAssessee as well as Revenue preferred an Appeal to the Tribunal from the order of CIT(A). In respect of the order of CIT(A) for Assessment Year 200708 - RespondentAssessee's filed an appeal, while in respect of order .....

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ome arising or accruing in India. Therefore, the provisions of Section 40(a)(i) would have no application for the two Assessment Years under consideration; (f) The grievance of the Revenue is that the impugned order of the Tribunal merely reproduces the order of the CIT(A) for the Assessment Year 200809 which was in favour of the RespondentAssessee and approves the same. This without bestowing any consideration to the order passed by the CIT(A) in respect of Assessment Year 200708 which was in f .....

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Year 200708 are identical to the Assessing Officer's orders in both the Assessment Years i.e. the earlier Circular Nos.23 of 1969 and 786 of 2000 stand withdrawn by Circular No.7 of 2003. Therefore, the earlier Circular which cover the issue would not be applicable/ available for the Assessment Years 200708 and 200809. In fact, the CIT(A) in his order for Assessment Year 200809 while allowing the appeal of the RespondentAssessee places reliance upon the decision of the Tribunal in case of A .....

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ed the same even for Assessment Year 200708. In view of the fact that the issue sands concluded in favour of the RespondentAssessee by the decision of the Supreme Court in Toshoku Ltd. (supra). The Revenue has not shown any change in the law in the subject Assessment Years which would warrant our not following the Apex Court's decision; (h) Moreover, we find CBDT Circular No.23 of 1969 has been reproduced - in the impugned order and the relevant extract reads as under: Foreign agents of Indi .....

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in Circular No.786 of 2000 were withdrawn. However, such subsequent withdrawal of an earlier Circular cannot have retrospective operation as held by this Court in UTI v/s. P. K. Unny and Others 249 ITR 612. (i) In view of the above, not only the entire issue stands concluded in favour of the RespondentAssessee in the present facts by the CBDT Circular Nos. 23 of 2969 and 786 of 2000 which were in force during the subject Assessment Years but also by the decision of the Apex Court in Toshoku Ltd. .....

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unable to inform us in the absence of the instructions from the Officer even though sought for by Mr. Pinto whether or not any appeal has been preferred by the Revenue from the order of the Tribunal in M/s. Mohit Diamond (supra) and if no appeal has been preferred, therefrom the reason/justification for preferring the appeal against the impugned order; (c) We have in our order in DIT (I.T.) v/s. Credit Agricole Indosuez 377 ITR 102 have observed as under: Undoubtedly, an advocate has to fearles .....

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justification such as change in law or some later decision of an higher forum, etc., then in such cases appropriately the appeal memo itself must specify the reasons for preferring an appeal failing which at least before admission the officer concerned should file an affidavit pointing out the reasons for filing the appeal. It is only when the court is satisfied with the reasons given, that the merits of the issue need be examined of purposes for admission [please see I.T.A. No.37 of 2013 CIT v .....

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