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B. MADANLAL Versus INCOME-TAX OFFICER

2015 (12) TMI 1233 - ITAT CHENNAI

Disallowance of commission payment under section 40(a)(i) to non-resident - whether there was no agreement to suggest the payment of sales commission? - Held that:- The assessee has not discharged the burden cast upon it to 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 .....

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ature of services rendered by the non-resident agent. Therefore, it is appropriate to remit the entire issue back to the file of the Assessing Officer with direction to the assessee to prove that it was sales commission towards procurement of orders from abroad. - I. T. A. Nos. 139 and 140 /Mds/ 2015 (assessment years 2004-05 and 2008-09). - Dated:- 16-10-2015 - CHANDRA POOJARI (Accountant Member) and V. DURGA RAO (Judicial Member) G. Baskar for the appellant. A. V. Sreekanth for the respondent. .....

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x (Appeals) erred in rejecting the contentions of the assessee on the issue relating to reopening of the assessment. 4. At the time of hearing, the learned authorised representative submitted that the assessee is not interested to press this ground. Accordingly, this ground is dismissed as not pressed. 5. The next grounds raised by the assessee are as follows : "3. The learned Commissioner of Income-tax (Appeals) erred in law in confirming the disallowance of interest paid to the Canara Ban .....

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on the grounds that there was no commercial expediency. The Commissioner of Income-tax (Appeals) ought to have seen that the reasoning of the Assessing Officer in disallowing the interest paid to the bank on the overdraft facility availed of is not sustainable and the said reason was only an assumption of the Assessing Officer. Besides the Commissioner of Income-tax (Appeals) erred in not appreciating the contention that the Assessing Officer has failed to establish any nexus to the said overdra .....

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draft to the extent of ₹ 2,74,165. Against this, the assessee went in appeal before the Commissioner of Income-tax (Appeals), who confirmed the order of the Assessing Officer. Aggrieved, the assessee is in appeal before us. 7. We have heard both sides and perused the material on record, Before us, the assessee has filed additional evidences accompanied by the petition stating that the assessee is having interest-free funds and advanced the same to others without charging any interest and t .....

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er 10, 2009. 8. Particulars filed before the Assessing Officer regarding commis sion payment and debit balances. 9. Copy of interest Income-tax issues relating to tax deduction in respect of payment made to or by foreign firms and copy of Circular No. 786. 10. Income-tax assessment order under section 143(3) dated December 29, 2009. 11. Copy of Form 35, statement of facts and grounds of appeal." 8. The learned authorised representative submitted that the above documents were filed before th .....

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ommission paid to non-resident. 10. The assessee has made the payment of ₹ 4,09,858 towards commission to non-resident. The Assessing Officer disallowed the same on the reason that no TDS was made in terms of section 195 of the Act. During the course of assessment, the assessee was asked to explain the details of payments made to non-residents. It was stated that the assessee was paid the said amount for arranging foreign business. However, the assessee has not produced any requisite evide .....

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der the Act. The learned authorised representative further submitted that the Commissioner of Income-tax (Appeals) failed to note that section 195(2) has to be read with the requirement that obtaining of such certificate is only when the payment is liable to charge under the Act in India and the said sub-section has to be read with section 195 of the Act. According to the learned authorised representative, the Commissioner of Income-tax (Appeals) has failed to note that the reasoning of the Asse .....

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is case. According to the learned authorised representative, the Commissioner of Income-tax (Appeals) has erred to note that the Board's Circular No. 786 dated February 7, 2000 ([2000] 241 ITR (St.) 132 ) is applicable at the relevant point of time and binds on the Department and accordingly the reasoning of the Assessing Officer in disallowing the payment made to the non-resident is not sustainable. 12. On the other hand, the learned Departmental representative relied on the orders of the l .....

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ia to a non-resident, not being a company or to a foreign company, on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid during the previous year, or in the subsequent year before the expiry of the time prescribed under sub-section (1) of section 200 :" 14. The aforesaid clause makes it clear that the disallowance shall be made in case of any payment made which is chargeable under this Act and is payable outside I .....

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income must be chargeable under the provisions of the Act. In the facts of the present case, the assessee has not produced the agreement entered into by the assessee with foreign agents to show that they were appointed to act as commission agents outside India in their respective countries. The Assessing Officer has disallowed commission payment under section 40(a)(i) of the Act, since, there was no agreement to suggest the payment of sales commission. 15. As seen from the orders of the lower a .....

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